CMMI resets value-based care landscape

Value‑based care is entering its next phase as the Trump administration seeks faster and firmer accountability across the Medicare, Medicaid and commercial markets.

The Centers for Medicare & Medicaid Services (CMS), via the Center for Medicare and Medicaid Innovation (CMMI), has begun consolidating its model portfolio, tightening risk and benchmarks, expanding mandatory models and advancing state‑level payment alignment. 

As legacy models phase out and new models seek to shift and modify expectations, the demand for quality data and seamless care coordination increases, concurrently making operational simplification and targeted infrastructure investment near-term priorities. Backed by broad statutory authority under the Affordable Care Act and a funding commitment of US$10 billion per decade, CMMI continues to reshape and mature the landscape for value‑based care.

What’s changing: Directional themes

CMMI currently operates more than 20 payment and service delivery models, reflecting adaptability but also prompting oversight bodies to call for a more focused portfolio. Congressional leaders have urged fewer, simpler models with standardized methods for evaluating quality and cost that extend beyond model-specific expenditures. Stakeholders emphasize transparency, deeper engagement and targeted support for rural communities.

In March 2025, CMMI announced the early termination of four models: Maryland Total Cost of Care, Primary Care First, End-Stage Renal Disease Treatment Choices and Making Care Primary, to streamline and standardize the portfolio. In the press release, CMMI stated that:

Innovation Center Models are time-limited experiments that provide a controlled environment to determine, through rigorous evaluation, what approaches should be expanded nationwide, what specific components of an approach need further testing in successor models and what approaches are not viable for expansion. As is the nature of innovation, not every model will work, and the Center must be efficient and effective in its response…The CMS Innovation Center determined its other active models can meet the Center’s statutory mandate — either as is or with future modification — and therefore will continue moving forward.

CMS also withdrew the Medicare Two Dollar Drug List initiative and is considering scaling back or adjusting Integrated Care for Kids. These moves mark CMMI’s pivot toward fewer, more rigorous models with clearer expectations and greater comparability across programs.

New and emerging initiatives

CMMI’s next phase, outlined in its May 13, 2025, white paper, rests on three strategic pillars:

• Promoting evidence-based prevention
• Empowering individuals to achieve their health goals
• Driving choice and competition within the healthcare system

Guided by these priorities, CMMI is refining existing models and launching new ones to improve efficiency, promote innovation and achieve a broader impact.

MSSP refinements and ACO REACH tightening

CMMI is also moving accountable care organizations (ACOs) toward two‑sided risk, with clearer rules and narrower corridors.

In the Medicare Shared Savings Program (MSSP), the BASIC track’s one‑sided risk will be capped at five years beginning in 2027, signaling firmer expectations that ACOs transition to downside risk. Catastrophic event policies now explicitly include cyberattacks, equity terminology in benchmarking has been modernized and the health equity adjustment will be removed from quality scoring starting in Performance Year (PY) 2026. These changes aim to enhance predictability in attribution and benchmarking for participants. Stakeholders caution, however, that tighter timelines may strain smaller ACOs.

In the ACO REACH Model (Realizing Equity, Access and Community Health), CMMI will cap cumulative risk-score growth and lower regional weights in benchmarks to temper aggressive coding and local market effects. Quality withholds will increase from 2 percent to 5 percent, high‑performer pools will expand and the global first corridor will narrow from 25 percent to 10 percent, raising both the stakes and the potential rewards. Transparency and equity safeguards remain areas of close watch, especially for smaller entrants.

Mandatory bundles and ambulatory expansion

CMMI is expanding mandatory episode‑based and specialty‑care arrangements to sharpen accountability for surgical and outpatient services.

The Transforming Episode Accountability Model (TEAM) will launch a mandatory five‑year bundled payment program beginning January 1, 2026. Hospitals will be financially responsible for the cost and quality of surgery through 30 days post-discharge, covering five procedures: lower extremity joint replacement, surgical hip/femur fracture, spinal fusion, coronary artery bypass graft and major bowel procedures. The model relies on target‑price reconciliation and quality‑adjusted payments. Success will depend on surgical standardization, efficient post‑acute pathways and careful management of care leakage. CMS projects US$481 million in Medicare savings and expects TEAM to advance a broader adoption of two-sided risk in hospital payments.

The Ambulatory Specialty Model (ASM) will be a mandatory five‑year program starting January 1, 2027, with payment adjustments beginning in 2029. It targets outpatient specialties (cardiology, anesthesiology, neurosurgery, orthopedic surgery, pain management, and physical medicine and rehabilitation) with episode‑based incentives for prevention, efficiency and care coordination. In year one, adjustments will range from −9 percent to +9 percent and will be assessed in lieu of the standard Merit-based Incentive Payment System (MIPS).

Technology‑enabled prior authorization

The Wasteful and Inappropriate Service Reduction (WISeR) Model will begin January 1, 2026, introducing prior authorization for certain Medicare services in six states to reduce unnecessary care: New Jersey, Ohio, Oklahoma, Texas, Arizona and Washington. The model leverages technology-enabled prior authorization and prepayment review and aligns with practices seen in Medicare Advantage. Participating organizations, including technology firms, can share in the cost savings. The model excludes Medicare Advantage and is anticipated to run through 2031.

Outcome‑linked payments

The Increasing Organ Transplant Access (IOTA) Model, a six-year mandatory program that began July 1, 2025, ties hospital payments to transplant outcomes through asymmetric risk and phased downside exposure. Patients on waitlists and transplant recipients are attributed across hospitals, and the model authorizes broad patient supports, including transportation, mental health services, in-home care, and relief from Medicare Parts B and D cost‑sharing. The aim is to improve access and post-transplant outcomes through aligned incentives and wraparound supports.

Drug payment innovation

CMS is piloting novel approaches to high‑cost therapies and Medicaid drug spending.  

The CGT (Cell and Gene Therapy) Model is a voluntary, state-based initiative designed to improve Medicaid patient access to high-cost therapies by establishing outcomes-based agreements that tie payments to patient health results. Initially focused on gene therapies for sickle cell disease, the model supports states in standardizing access and managing costs through negotiated pricing and manufacturer rebates. As of July 15, 2025, 33 states, the District of Columbia and Puerto Rico had joined the CGT Model.

The GENEROUS (GENErating cost Reductions fOr U.S. Medicaid) Model, launching in 2026, aims to reduce Medicaid drug costs using international reference benchmarks and supplemental rebates for high‑cost drugs. Participation is voluntary for states and manufacturers and requires standardized, transparent coverage criteria across participants. The approach tests whether reference pricing and uniform rules can curb spending without undermining access.

State and multi-payer alignment

The AHEAD (Healthcare Efficiency through Accountable Design) Model extends total cost of care alignment across Medicare, Medicaid and commercial payers at the state level. CMMI has extended AHEAD through 2035. Beginning in 2026, participating states must adopt at least two market reforms and submit population health accountability plans. Two additional states will join in 2026, with performance beginning in 2028-2029. The design emphasizes competition reforms, standardized measures and population-level outcomes across payers, accelerating harmonization and reducing fragmentation.

Operational trends shaping value‑based success

Across models, several themes are converging for health systems and providers. Downside risk is arriving earlier and more broadly, shortening one-sided periods and tightening corridors. Benchmarks and risk scores face new guardrails, including caps on risk score growth and refined regional weights, raising the importance of coding integrity and proactive care management. Quality and equity expectations persist even as terminology and mechanics evolve, with increased emphasis on measurable outcomes, data completeness and person-centered care.

Multi-payer alignment and state-level accountability are deepening through AHEAD and related initiatives, standardizing measures and reforms. Episode and specialty care redesign is taking center stage, promoting standardized protocols, team-based coordination and leakage control across surgical and ambulatory settings. Technology-enabled oversight is expanding with analytics-driven reviews and prior authorization pilots increasing documentation demands and workflow integration.

Strategic implications and outlook

As health systems and providers operate under ever-tightening financial conditions, there will be an acceleration toward outcomes-based reimbursement and innovative payment models not only in Medicare and Medicaid, but also in commercial markets. To succeed in such an environment, providers must implement and operationalize improved data sharing, robust performance tracking and effective contract management across programs.

Health systems and providers should be actively testing readiness across governance, analytics, care model design, physician alignment and revenue cycle operations. Priority areas include accurate model attribution, risk adjustment integrity, total cost-of-care levers, post‑acute strategy and contracting flexibility to layer ACOs, bundles and specialty models without adverse interactions.

Safety net and rural providers should evaluate tailored tracks and pursue partnerships that provide infrastructure for risk management, quality reporting and needs support. Over the next 24-36 months, expect accelerated shifts toward mandatory participation and earlier downside risk in episode‑based and specialty models, alongside tighter benchmarking and larger quality withholds in accountable care. State‑based, multi-payer alignment will deepen, and drug payment innovation will broaden value‑based contracting beyond traditional medical services. Organizations that invest now in data infrastructure, care redesign, physician engagement, appropriateness oversight and equity‑informed population health strategies will be positioned to outperform as the value‑based care portfolio consolidates and scales.

The Norton Rose Fulbright team continues to monitor developments in value-based care. If you have any questions, please don’t hesitate to contact us.