Inside the LEAD Model Benchmarking Methodology
The Medicare payment landscape is shifting again, and for ACO leaders weighing whether to transition into the new LEAD model, the benchmarking methodology is where a large part of the decision lives.
LEAD is not simply an updated version of ACO REACH or MSSP. It is a structurally different bet on a longer time horizon, and the organizations that benefit most will be those who understand exactly how their benchmark is built, trended, and eventually replaced.
How Your Baseline Is Built — and Why It May Be Higher Than You Think
Historical Baseline Construction
CMS uses a fixed three-year baseline period (for PY 2027 entrants this is CY 2024, CY 2025, and CY 2026). This baseline does not change for the life of the ACO’s participation. However, it is recalculated each year by re-applying the claims-based alignment algorithm to that year’s current Participant TIN List against the same fixed base-year claims. This is an important note as it implies that changes from TINs are the only material way for an ACO to see their baseline be readjusted.
| Benchmark Considerations | MSSP | ACO REACH | LEAD |
| Rebasing | Every 5 years; prior savings absorbed into new baseline | Static; 6-year model | Static for full 10 years |
| Base year weighting (renewing) | Equal for 2nd+ agreement periods | 10% / 30% / 60% for all ACOs | Equal (1/3 each) for renewing ACOs |
| Base year weighting (new entrants) | No AHEAD overlap allowed (except primary care AHEAD in certain circumstances) | Upside-only → partial → full (Track A → ENHANCED) | Professional (partial) or Global (full) |
| Voluntary alignment benchmark | N/A — no voluntary alignment | Regional rate only for newly voluntarily aligned beneficiaries | Historical spending of current-PY voluntary beneficiaries; capped at ±10% vs. claims-aligned benchmark |
💡Equal base year weighting for renewing ACOs mirrors MSSP’s second+ agreement period, making the transition familiar. The critical difference: MSSP would rebase every 5 years, absorbing accumulated savings into the new baseline. LEAD locks your baseline through 2036. An ACO that has spent years driving down its MSSP baseline may find its 2024–2026 LEAD baseline is meaningfully higher than current spending — creating immediate headroom.
ACO-Specific Benchmark Adjustments
After baseline, CMS applies ACO-specific adjustments to develop the historical benchmark. The total is capped at 5% of risk-standardized USPCC for most ACOs, or 3% for lower spending ACOs where >40% of Participant TINs have been in MSSP within the prior 2 years. These adjustments include:
- Regional Efficiency Adjustment – Available for Global Risk only for ACOs where baseline spending below regional FFS average
- Prior Savings Adjustment – Renewing ACOs in either risk option adjusted
- 5% Administrative Add-On – Higher-spending ACOs (either risk option) with spending above regional FFS average have access to a 1.5% adjustment
💡The Regional Efficiency Adjustment and Prior Savings Adjustment are mutually exclusive — an eligible ACO receives the higher of the two, not the sum. The 1.5% Administrative Add-On is separate and additive. For a higher-spending Global ACO in PY 2027: the discount is 1.75% and the add-on is 1.5%, making CMS’s net effective benchmark retention approximately 0.25% — compared to ACO REACH’s flat 3.5–4.0% discount.
Trending Benchmarks to the Performance Year
CMS trends the adjusted historical benchmark forward using a three-way blended update factor, similar to MSSP but with key differences on ACPT guardrails. This adjustment includes a two-thirds national/regional FFS growth blend and a one-third Accountable Care Prospective Trend (ACPT), a fixed, prospectively set growth rate from the CMS Office of the Actuary, established at the start of the agreement period.
The national-regional weight within the two-thirds blend varies by an ACO’s market share: ACOs with lower regional alignment share receive more weight on regional trends; those with higher share receive more national weight, preventing large ACOs from having their own performance affect their own benchmark.
ACPT Guardrail Limits by Performance Year
| Performance Year | Upper Guardrail | Lower Guardrail |
| PY 2027 (Year 1) | +0.3% | −0.2% |
| PY 2027 (Year 2) | +0.6% | −0.4% |
| PY 2027 (Year 3) | +0.9% | −0.6% |
| PY 2027 (Year 4) | +1.2% | −0.8% |
| PY 2027 (Year 5) | +1.5% | −1.0% |
💡ACO REACH applied a Retro Trend Adjustment (RTA) that retroactively corrected benchmarks when the prospective USPCC trend diverged from observed spending by more than 1%. LEAD eliminates the RTA entirely. This makes LEAD benchmarks more predictable as the trend component is known at the start of the year, but if actual spending growth far exceeds the ACPT, ACOs bear the full impact with no retroactive correction. In early years when guardrails are tight this risk is limited and as guardrails widen the ACPT’s upside compounds.
Risk Adjustment
CMS then applies risk adjustment by beneficiary category after trending.
| Beneficiary Category | Model Used | Key Change from ACO REACH |
| Aged & Disabled (A&D) | CMMI HCC Prospective V1 (modified 2024 CMS-HCC Version 28) | Recalibrated to remove High Needs population — avoids overpredicting risk for non-High Needs beneficiaries |
| ESRD | 2023 CMS-HCC ESRD Risk Adjustment Model | Unchanged from prior models |
| High Needs | CMMI HCC Concurrent V2 — applied to ALL ACOs, not just designated High Needs ACOs | Updated to V28 architecture; recalibrated to High Needs population only; concurrent model better captures current-year complexity |
Risk Score Growth Cap: There is a 3% cap (measured against Base Year 3) for A&D and ESRD populations. High Needs cap has not been finalized but is anticipated between 3%–8%.
CMS also plans a phase in to AI Risk Adjustment in future years with shadow testing starting in PY2028 for the Aged and Disabled population. Starting PY 2029 CMS plans to use a one third blend of AI Risk Score, elevating this to a two third blend in PY 2030 and transitioning to a full 100% AI inferred risk score by PY 2031.
💡The AI-inferred risk adjustment model will fully replace HCC-based risk scoring for the A&D population by PY 2031. This is a significant methodological change mid-model. ACOs with coding-intensive populations should monitor CMS shadow testing results closely once published.
Applying Discount, Quality Withhold, and Retention Incentive
After building the baseline benchmark, CMS applies key discounts and withholds for ACOs including:
Benchmark Discount (Applicable to Global Risk Option only)
This discount reduces the benchmark before Shared Savings/Losses are calculated. No discount applies to Professional Risk ACOs. For comparison, ACO REACH applied a flat 3.5% (PY2025) and 4.0% (PY2026) discount to all Global ACOs
Higher spending ACOs are given a glidepath into the applied discount starting at 1.75% discount in PY2027 and gradually increasing to a 3% discount by PY2032 with the discount increasing by a quarter percent per year.
Quality Withhold (All ACOs)
A 3% quality withhold (this had gone up to 5% in the last year of ACO Reach) is applied to all ACOs’ Performance Year benchmark calculations in LEAD. ACOs earn back some or all of this withhold based on their Total Quality Score, applied after the discount and retention incentive. High-performing ACOs may earn above 3% via the High Performers Pool (HPP), funded from unearned withholds of lower-performing peers.
Retention Incentive (New in LEAD)
ACO Commitment is being priced into the model with LEAD. A 2% benchmark reduction is applied at Final Settlement for PY 1 if the ACO terminates after only one Performance Year. This is earned back by remaining through Year 2. Applied after discount, before quality withhold. There is no Termination Without Liability (TWL) date in an ACO’s first Performance Year.
The Long-Term Horizon — Regional Rate Book Transition
The benchmarking structure described above governs years one through five. After that, LEAD begins a phased transition toward a regional rate book-based benchmark that will ultimately replace the historical-expenditure-based benchmark by the end of the 10-year model.
This transition is region-specific and will not begin before year six. CMS will assess three criteria per region before initiating it: the proportion of beneficiaries aligned to ACO models, cumulative savings generated, and the proportion of participating ACOs that remain higher-spending. High-penetration markets like Massachusetts and Minnesota may see the rate book earlier than rural or low-penetration regions.
For ACO executives making the LEAD decision today, the rate book transition is the variable that most requires modeling. Lower-spending ACOs that are already significantly below regional averages face a different risk profile in years six through ten than higher-spending ACOs still working toward convergence. The organizations that reduce spending fastest in years one through five will be best positioned when regional comparison becomes unavoidable.
Strategic Decision Framework — MSSP vs. REACH vs. LEAD
Who is well positioned for LEAD?
NOTE: Attractiveness notes below reflect benchmarking considerations only — not operational, risk tolerance, or contractual factors.
| ACO Profile | Key Benchmarking Consideration | LEAD Attractiveness |
| Experienced MSSP ACO, consistently saving Facing imminent rebasing after years of cost reduction | MSSP rebasing would strip accumulated savings into the new baseline. LEAD locks in the pre-savings 2024–2026 baseline for 10 years. Note: 3% adjustment cap applies if >40% of TINs are MSSP-origin. | Locking in the pre-savings baseline is a compounding advantage. Primary risk: the 3% adjustment cap. |
| Higher-spending ACO, new to value-based care Baseline spending above regional FFS average | 1.5% Admin Add-On (not in expenditures; not repayable) provides immediate cash flow. Discounted discount ramp (1.75% → 3.0%) gives 5 years to transform. No negative regional efficiency adjustment. | Maximum runway before rate book introduction. |
| ACO REACH ACO transitioning to LEAD Established infrastructure; prior REACH participation | REACH’s 10/30/60 weighting disadvantaged recently improving ACOs. LEAD’s equal weighting for renewing ACOs eliminates this. Quality withhold drops from 5% to 3%. No RTA means more predictable mid-year benchmark. Valid REACH voluntary alignment attestations carry over. | Meaningful structural improvements on all dimensions. Transition burden reduced by carryover policies. |
| Lower-spending ACO, efficient baseline At or below regional FFS average; strong prior savings | Regional Efficiency Adjustment (Global Risk) provides a benchmark uplift worth 50% of the gap vs. regional spending. No rebasing protects accumulated efficiency. However, model years 6–10 need to be assessed carefully as the rate book converges benchmarks to regional rates, | Strong in years 1–5. Rate book transition may narrow advantage in years 6–10 depending on CMS’ application of “portion of ACOs savings’ impact to rate book |
| ACO with significant High Needs population (>40%) Complex, frail, or seriously ill patient panel | Separate High Needs benchmark category with concurrent risk adjustment that better captures actual current-year complexity. Lower alignment minimums available. High Needs spending does not drag down the A&D benchmark. | Dedicated risk adjustment infrastructure directly addresses REACH feedback that High Needs beneficiaries were underfunded. |
| Small or rural independent practice ACO Limited admin infrastructure; concerned about financial risk | Lower alignment minimums (1,000 in PY1) for Newly Entering ACOs. Professional Risk limits downside to 50%. No MSR/MLR = first-dollar savings. Stop-loss option available. Extended Repayment Option for losses. 10-year stable benchmark removes need to re-qualify. Potential for 1.5% Admin Add-On (not in expenditures; not repayable) to support infrastructure build | Depends on whether the 10-year commitment and first-year retention incentive fit organizational risk tolerance. |
Contact info@copehealthsolutions.com to schedule a briefing to get started.