On September 5, 2023, the Centers for Medicare & Medicaid Services (CMS) announced the establishment of the States Advancing All-Payer Health Equity Approaches and Development (AHEAD) Model, in an effort to support health equity within states.¹ The goal of the new voluntary total cost of care model is to reduce disparities in health outcomes by advancing health equity, curb the growth in healthcare costs by collaborating with states, and improve population health.² This Health Capital Topics article will discuss the new AHEAD Model and its implications for the healthcare industry.

CMS will support states that participate in a variety of AHEAD Model components, with a focus on providing financial stability for hospitals, increasing investment in primary care, and supporting the connection of Medicare and Medicaid beneficiaries to resources within the community.³ The model will include streams of payment for primary care practices and hospitals, while patients will also be able to obtain more referrals and screenings for community resources (e.g., housing and transportation).⁴

Participating states will have to meet total cost of care targets in the AHEAD Model, which will be determined by CMS prior to implementation.⁵ By meeting the targets, participating states will be incentivized to control unnecessary spending by providing care in the safest settings and reorienting care to focus on prevention.⁶  States will also set a shared expectation for healthcare cost growth, encouraging alignment with payor efforts to deliver transformative change while slowing the cost of healthcare.⁷ 

States that apply for the AHEAD Model will have to select one of three cohorts depending on how quickly they can implement the model.⁸ The three cohorts are as follows:

• Cohort 1: States may select this cohort if they can implement the AHEAD Model as soon as possible. The performance year for Cohort 1 will begin in January 2026, with nine total years of performance.
• Cohort 2: States may select this cohort if they are ready to apply, but need more time to prepare for the model implementation, such as: (1) developing Medicaid components; (2) developing data infrastructure; and/or (3) recruiting providers to participate. The second cohort’s performance year will begin in January 2027, with eight total years of performance.
• Cohort 3: States that need more time to apply for the AHEAD Model would select this cohort. The first performance year for this cohort would also be January 2027, with a total of eight years of performance.⁹

The AHEAD Model will operate for a total of 11 years, from 2024 through 2034, with CMS providing cooperative agreement funding to selected states for six years to support their participation in the model.¹⁰ States can receive a maximum of $12 million in funding, with performance years slated to begin either in January 2026 or January 2027.¹¹ States will have 90 days from CMS’s announcement to apply, with another application window opening in the spring of 2024.¹²

States have implemented similar programs over the past decade, with goals of limiting unnecessary healthcare spending, incentivizing preventative care to keep patients out of the hospital, and buoying rural hospitals with low patient volumes.¹³ The AHEAD Model was based partially on models from Pennsylvania, Maryland, and Vermont.¹⁴ Examples include the following:

• Maryland added a global budget to its long-standing hospital all-payor payment system in 2014. With this provision, the state set the fixed payment amount based on the historical net revenue of hospitals, changes in the population of patients, and services provided. The model, which also updated rates to reflect inflation, helped cut the spending of hospitals by more than $781 million from 2019 through 2021.
• Vermont designed their voluntary all-payor accountable care organization (ACO) model based on Maryland’s program for global budgeting. Vermont’s ACO covers Medicare, Medicaid, and commercial payors, and requires all model participants to pay standardized rates for all services provided.
• The Center for Medicare and Medicaid Innovation (CMMI) piloted a program for hospitals in rural Pennsylvania, in which Medicare, Medicaid, and commercial insurers paid a fixed amount to hospitals to cover both inpatient and outpatient hospital-based services. Between 2019 and 2021, the program resulted in lower costs of care per beneficiary, with 83% of participating hospitals reducing the frequency of hospital acquired infections, and another 80% improving spending which was avoidable.¹⁵

Overall, the model is designed to test the accountability of states in controlling healthcare expenditure growth while simultaneously improving the health of the overall population and investing in primary care.¹⁶ CMS administrator Chiquita Brooks-LaSure stated in a press release that “the AHEAD Model is a critical step toward addressing disparities in both healthcare and health equity while improving overall population health.”¹⁷