In early September, the Center for Medicare and Medicaid Innovation (CMMI), also known as the CMS Innovation Center, announced a new total cost of care (TCOC) model for states, the States Advancing All-Payer Health Equity Approaches and Development (AHEAD) Model. The AHEAD Model will operate for 11 years (2024-2034) and the model’s overarching goals include: 1) curbing health care cost growth; 2) improving population health (on a statewide or regional basis); and 3) advancing health equity.
The AHEAD Model is the newest iteration of the Centers for Medicare & Medicaid Services’ (CMS) health care system transformation. It includes four main components:
- Cost growth and primary care spending targets
- Hospital global budgets
- Primary care delivery and payment reform
- Health equity planning
It builds on existing payment and delivery system reform efforts in Maryland, Pennsylvania, and Vermont. States pursuing the AHEAD Model can choose to implement the model statewide or on a regional basis.
On November 16, CMS issued a Notice of Funding Opportunity (NOFO) that offers two application periods for states. Eligible applicants for the model are state agencies that have the ability and authority to enter into an agreement with CMS on behalf of the state (e.g., state Medicaid, public health, or insurance agencies, or other entities with rate-setting or budget authority). State Medicaid agencies have a crucial role in the AHEAD Model as it requires Medicaid participation across all aspects of the model. In total, CMS anticipates awarding cooperative agreements to a maximum of eight states to participate in the AHEAD Model, with the initial cohort’s first performance year starting in 2026 and continuing through 2034, and subsequent cohorts beginning in 2027. Selected states can receive up to $12 million to support their model implementation efforts. All cohorts will participate in a pre-implementation period.
On October 26, NASHP hosted a webinar for interested parties to hear from federal officials about the AHEAD model’s hospital global budget design and from Vermont and Maryland on their longstanding experiences with hospital payment reforms. Some of the key components of the AHEAD Model and considerations for states are noted below.
Hospital Global Budgets
One of the main elements of the AHEAD Model are hospital global budgets, a financing strategy intended to minimize avoidable hospitalizations, enhance care coordination across providers, shift hospital-based care when appropriate to primary care and/or community-based settings, and reduce hospital spending growth. Within a global budget model, instead of receiving fee-for-service (FFS) payments that encourage utilization, hospitals receive a pre-established amount of revenue for the year that is determined according to prior Medicaid and Medicare revenue amounts. The global budget in the AHEAD Model will be adjusted annually based on various economic and demographic factors as well as model-specific adjustments, and it covers both inpatient and outpatient facility costs for services associated with a hospital. While hospitals are not required to participate, states considering the AHEAD Model will need to assess hospital readiness for global budgeting, because at least ten percent of Medicare FFS net patient revenue within the state (or sub-state region if the model is not implemented statewide) must be under a hospital global budget by the start of the first performance year. This requirement increases to 30 percent by the start of the fourth performance year of the AHEAD Model.
The global budget’s set amount of funding is intended to provide hospitals with financial predictability and the ability for hospitals to share in any savings from reduced avoidable utilizations and benefit financially from quality and equity improvements. The AHEAD Model includes federal investments to participating hospitals in the first two years of the model to support transformation and incentivize participation. Both Maryland and Pennsylvania have had success implementing hospital global budgets through their existing models, with Pennsylvania focusing specifically on rural hospitals.
Primary Care AHEAD Program
The AHEAD Model includes a strong focus on strengthening advanced primary care, promoting behavioral health integration, and improving care coordination. Primary care practices, federally qualified health centers, and rural health centers in the states participating in the AHEAD Model can choose to participate in the model’s Primary Care AHEAD program, through which they can receive Enhanced Primary Care Payments (EPCP). These practices must be participating in the state’s Medicaid patient-centered medical homes or another primary care alternative payment model and must meet certain care transformation requirements that will be aligned across Medicaid and Medicare. Participating practices will receive an average of $17 per beneficiary per month for attributed beneficiaries, and the EPCP can be used for investments in infrastructure or staffing (e.g., care coordinators, behavioral health staff, or community health workers) to promote advanced primary care. Also, practices will need to meet certain performance goals on identified quality measures.
Financial and Primary Care Investment Targets
In addition to meeting certain quality and population health outcome targets, states participating in the AHEAD Model will be responsible for meeting defined cost growth targets. Specifically, there will be Medicare FFS TCOC targets, and CMS will work with states during the pre-implementation period to set these targets. Each state will be expected to generate savings relative to what the state’s projected cost growth would be without the AHEAD Model. While the same overall approach will be used in each state for setting the targets, CMS will negotiate the savings component on state-by-state basis. Participating states will also need to meet all-payer cost growth targets. In contrast to the Medicare targets, states will be able to determine the specific methodology and benchmarks for these targets, as CMS wants to allow states to build off any current innovations they may have related to cost growth benchmarking. Importantly, states do not need to have pre-existing cost growth targets to apply for the AHEAD Model, but one key consideration for states is that a state statute or an executive order providing authority for the establishment of these targets must be in place by the first performance year of the model. CMS will provide states lacking experience in cost growth benchmarking with technical assistance and other learning supports, and if a state misses its TCOC targets, CMS will request that the state develop a corrective action plan.
The AHEAD Model also contains both Medicare FFS and all-payer primary care investment targets. For the Medicare targets, CMS will use a standard definition for measuring primary care spending, and for the all-payer target states can use the CMS definition or use their own state-specific definition. In combination, these targets are intended to increase investments in primary care, and — along with the hospital global budget approach and the efforts to transform service delivery through the Primary Care AHEAD program — the overall goal is to deliver services through primary care and community-based providers rather than in acute care settings while also not increasing overall health care spending.
Statewide Health Equity Plan
Another key component of the AHEAD Model is that participating states will need to develop a statewide health equity plan along with quality targets, with the goal of reducing disparities and improving population health. States will be required to set at least one behavioral health-specific equity goal within their plan. The health equity plan should also include strategies to increase safety net provider recruitment and use social risk adjustment of provider payments to address the needs of vulnerable populations. The plan should also seek to promote health-related social needs screening among hospitals and primary care providers so that patients can be connected to necessary community resources. Participating hospitals will also need to develop their own health equity plans in alignment with the state’s health equity priorities.
Next Steps
States will have two opportunities to apply to participate in the AHEAD Model, with the first two cohorts’ applications due on March 18, 2024. While the pre-implementation period for both Cohort 1 and Cohort 2 begins on July 1, 2024, Cohort 2 states will spend 30 months in the pre-implementation period, whereas Cohort 1 states will have 18 months for pre-implementation work. States interested in the third cohort have an application deadline of August 12, 2024, and will begin their pre-implementation period on January 1, 2025.
States will need to carefully assess their readiness to pursue the model and determine whether they have the capacity, appropriate infrastructure, and policymaker, provider, and payer support in place. Given the comprehensiveness of the model and the approaching application deadlines, the AHEAD Model will likely be a better fit for states that have already begun payment and delivery system reform efforts to some degree and that have state leadership that is actively invested in pursuing care transformation efforts.
For more information about the AHEAD Model, please see the following resources:
- Slides and transcript from CMS’ 9/18/23 webinar providing an overview of the AHEAD Model
- Milbank Memorial Fund’s 10/17/23 webinar, “Considering the AHEAD Model: Lessons from States with Health Care Cost Growth and Primary Care Investment Targets”
- NASHP’s 10/26/23 webinar, “Considering the AHEAD Model: Lessons from States on Hospital Global Budgets and Investing in Primary Care”
Additionally, NASHP plans to provide more information about the details included in the recently released NOFO.
