The statements contained in this analysis are solely those of the authors and do not necessarily reflect the views or policies of CMS. The authors assume responsibility for the accuracy and completeness of the information contained in this document. 

PART 1: Understanding the programmatic health equity components 

As the CMMI (Center for Medicare & Medicaid Innovation) Direct Contracting Program transitions to the ACO REACH Model in PY2023, many in the market have asked: “what has changed?” One notable change is the inclusion of one of the core tenants of the CMMI Strategic Plan announced last year to have Health Equity as a central component of all future CMMI models.  

In Part One* of this two-part series, Lumeris and CareJourney have partnered to help current Direct Contracting Entities prepare for their transition to ACO REACH, as well as ACO REACH applicants planning to participate in 2023 gain a better understanding of the key Health Equity components in the ACO REACH Model.  These four components are summarized as: 

• Embed Health Equity into Benchmark: The Health Equity Benchmark Adjustment 
• Address Health Equity in Risk Adjustment: The Consideration of the Demographic Relative Factors Component of Risk Scores  
• Improve Data Collection across Communities: Collecting patient reported demographic and social determinants of health data to better understand beneficiaries and communities with more accurate data. 
• Ensure Accountability of Addressing Health Inequities: Develop and abide by Health Equity Improvement Plans 

While Part One is to help prospective REACH ACOs “Understand”, Part Two will be subsequently released to help “Plan” and take “Action” on addressing the needs of the disadvantaged or underserved populations that CMMI and the broader provider community is looking to serve. 

To begin, understanding how CMMI and CMS defines “Health Equity” and “Underserved Communities” will help ACO REACH participants prepare for the Health Equity components of the model.  

“As defined in the Racial Equity and Support for Underserved Communities Through the Federal Government Executive Order 13985, the term “equity” means “The consistent and systematic fair, just, and impartial treatment of all individuals, including individuals who belong to underserved communities that have been denied such treatment, such as Black, Latino, and Indigenous and Native American persons, Asian Americans and Pacific Islanders and other persons of color; members of religious minorities; lesbian, gay, bisexual, transgender, and queer (LGBTQ+) persons; persons with disabilities; persons who live in rural areas; and persons otherwise adversely affected by persistent poverty or inequality. The term “underserved communities” refers to populations sharing a particular characteristic, as well as geographic communities, that have been systematically denied a full opportunity to participate in aspects of economic, social, and civic life, as exemplified by [the aforementioned list.]” 

–CMMI Strategy Refresh, October 2021 

Embed Health Equity into Benchmark: The Health Equity Benchmark Addition 

Starting in PY2023, CMS will identify underserved beneficiaries using a composite measure comprised of both the Area Deprivation Index and Dual Medicaid Status, incorporating this into the ACO REACH benchmark methodology. 

Methodology Components

• Area Deprivation Index (ADI): ADI captures local socioeconomic factors correlated with medical disparities and being underserved (Income/Employment, Housing, Education, Household Characteristics). ACO REACH is utilizing ADI as a national percentile, scored 0-99 comparing census block groups to one another across the U.S. 
• Dual Medicaid Status: Whether or not a beneficiary has Dual Medicaid Status (dual-eligible) captures economic challenges directly affecting the individual beneficiaries’ ability to access care 

Individual Beneficiary Benchmark Calculation

• CMS will calculate the benchmark adjustment starting with the national ADI score for a beneficiary’s census block group and applying a 25-point increase for dual-eligibles 
  • • Ex: a dual-eligible beneficiary residing in a census block group in the 65th percentile would be calculated: 65 + 25 = 90 
• CMS then stratifies aligned beneficiaries based on the composite score, identifies the top decile (top 10%) for an upward adjustment ($30 PBPM) and bottom 5 deciles (bottom 50%) for a downward adjustment ($6 PBPM) 

ACO Net Benchmark Calculation

• Each ACO receives a net benchmark adjustment based on the number of aligned beneficiaries in each category 
  • • Ex: an ACO with 50 beneficiaries in the top decile and 250 beneficiaries in the bottom five deciles in a given month would receive [($30 PBPM x 50)] – ($6 PBPM x 250)] = 0 
• CMS suggests that most ACOs will be marginally affected by this adjustment; within +/- 0.2% impact on the PY benchmark** 

Utilizing a tangible, localized example of this Health Equity Benchmark Adjustment in action, Cincinnati, Ohio, is represented below. The map on the left shows ADI census block groups in the Cincinnati area color coded according to which decile they belong to, with the darkest red correlating to the most distressed areas. These areas are further highlighted in the top right-side map. The map on the bottom right illustrates the ACO REACH methodology by multiplying the percent of beneficiaries that are dual eligible times twenty-five and adding that product to the ADI score, again utilizing a heat map and the darkest red color to illustrate the tenth decile. The National ADI can be publicly observed for your community via the University of Wisconsin Center for Health Disparities Research Neighborhood Atlas.