The Centers for Medicare & Medicaid Services (“CMS”) recently announced that 124 applicants have been provisionally approved to participate in the new Accountable Care Organization Realizing Equity, Access, and Community Health (“ACO REACH”) Program, beginning January 1, 2023. In addition, entities currently participating in the Global and Professional Direct Contracting (direct contacting entity or “DCE”) Program are allowed to transition to the ACO REACH Program without filing a formal application. All of these entities (“REACH ACOs”) are now facing the formidable challenge of preparing participation contracts (“Downstream Agreements”) for the service providers (“Providers”) who contract to work through them.

During the past few months REACH ACOs have been working feverishly to persuade Providers to participate in their accountable care organization in 2023 and beyond, often doing so without providing an actual written agreement for the Provider to sign. This is due in part because the form of the participation agreement between CMS and the REACH ACO is not yet published, and likely will not be until early December. The DCE Model participation agreement details extensive CMS requirements applicable to the Downstream Agreements in the DCE Program. Based on CMS statements, the ACO REACH Program participation agreement will be substantially similar to the DCE Program participation agreement, with some new requirements added.

Currently, in preparing their Downstream Agreements, REACH ACOs must rely for guidance upon the DCE Program participation agreement, the ACO REACH Request for Applications (the “RFA,” released February 24, 2022), and various CMS published documents. Almost certainly Downstream Agreements will need to be amended once the ACO REACH Program participation agreement is released.

The ACO REACH Program does differ in certain important respects from the DCE Program, such as the ACO REACH Program goal of advancing health equity. REACH ACOs need to draft their Downstream Agreements very carefully, navigating through numerous complicated requirements, and the need to satisfy the multitude of provisions set forth in the DCE Program participation agreement and, eventually, the ACO REACH Program participation agreement. Failing to do so carefully and thoroughly can cause significant problems for the offending REACH ACO. CMS has audited DCE Downstream Agreements for compliance with the DCE Program participation agreement standards. Further, it has announced that under the ACO REACH Program it will increase its monitoring and auditing initiatives. These audits typically will occur in the second or later year of an accountable care organization’s participation in the ACO REACH Program. From our considerable experience in representing a DCE client that was audited, we know that it can be expensive and time-consuming to amend Downstream Agreements. If there are deficiencies in the Downstream Agreements, it will likely require retroactive amendments for prior years and prospective amendments for subsequent years in the ACO REACH Program. By starting with carefully drafted, compliant agreements, REACH ACOs can avoid significant additional audit costs later.

We cannot overemphasize the need for REACH ACOs to create thorough, carefully researched and written Downstream Agreements. Failing to do so will almost certainly prove to be a very costly error.