ACO REACH

9 Months Ended

Sep. 30, 2024

We participate in the CMS ACO REACH Model with three REACH ACOs participating through the global risk arrangement and assuming full risk for the total cost of care of aligned beneficiaries. As part of our participation in the ACO REACH Model, we are guaranteeing the performance of our care network of participating and preferred providers. The intention of the ACO REACH Model is to enhance the quality of care for Medicare FFS beneficiaries while reducing the administrative burden, supporting a focus on complex, chronically ill patients, and encouraging physician organizations that have not typically participated in Medicare FFS programs to serve Medicare FFS beneficiaries.

Key components of the financial agreement for the ACO REACH Model include:

•Performance Year Benchmark: The target amount for Medicare expenditures on covered services (Medicare Part A and B) furnished to a REACH ACO’s aligned beneficiaries during a performance year. The Performance Year Benchmark will be compared to the REACH ACO’s performance year expenditures. This comparison will be used to calculate shared savings and shared losses. The Performance Year Benchmark is established at the beginning of the performance year utilizing prospective trend estimates and is subject to retrospective trend adjustments, if warranted, before the Financial Reconciliation.

•Risk-Sharing Arrangements: Used in determining the percent of savings and losses that REACH ACOs are eligible to receive as shared savings or may be required to repay as shared losses.

•Financial Reconciliation: The process by which CMS determines shared savings or shared losses by comparing the calculated total benchmark expenditures for a given REACH ACO’s aligned population to the actual expenditures of

that REACH ACO’s aligned beneficiaries over the course of a performance year that includes various risk-mitigation options such as stop-loss reinsurance and risk corridors.

•Risk-Mitigation Options: For the 2024 Performance Year, all of our REACH ACOs elected to participate in a “stop-loss arrangement”. For the 2023 Performance Year, two of our REACH ACOs elected to participate in a “stop-loss arrangement” offered by CMS, while one REACH ACO elected third-party coverage. The “stop-loss arrangement” and third-party coverage are designed to reduce the financial uncertainty associated with high-cost expenditures of individual beneficiaries. Additionally, CMS has created a mandatory risk corridor program that allocates the REACH ACO’s shared savings and losses in bands of percentage thresholds, after a deviation of greater than 25.0% of the Performance Year Benchmark.

Performance Guarantees

Through our participation in the ACO REACH Model, we determined that our arrangements with the providers of our REACH ACO beneficiaries require us to guarantee their performance to CMS. At the beginning of the performance year, we recognized the ACO REACH estimated performance year obligation and receivable for the duration of the performance year. This receivable and obligation are measured at an amount equivalent to the estimated Performance Year Benchmark per CMS that is representative of the expected Medicare expenditures for beneficiaries aligned to our REACH ACOs. As we fulfill our obligation, we amortize the guarantee on a straight-line basis for the amount that represents the completed portion of the performance obligation. The receivable is reduced as we receive payments from CMS for in-network claims or receive CMS reporting detailing out-of-network claims paid by CMS on behalf of our aligned beneficiaries. At the end of each reporting period, we estimate both in-network claims and out-of-network claims incurred by beneficiaries aligned to our REACH ACOs but not yet reported and record a reserve for the estimated amount which is included in medical costs payable on the Condensed Consolidated Balance Sheets. For each performance year, the final consideration due to the REACH ACOs by CMS (shared savings) or the consideration due to CMS by the REACH ACOs (shared loss) is reconciled in the year following the performance year. On a periodic basis CMS adjusts the estimated Performance Year Benchmark based upon revised trend assumptions and changes in attributed membership. CMS will also estimate the shared savings or loss for the REACH ACO on a quarterly basis based upon the estimated Performance Year Benchmark, changes to membership, payments made to the REACH ACO for in-network claims, out-of-network claims paid on behalf of the REACH ACO and various other assumptions including incurred but not reported reserves. The estimated Performance Year Benchmark is our best estimate of our obligation as we are unable to estimate the potential shared savings or loss due to the “stop-loss arrangement”, risk corridor components of the agreement, and a number of variables including but not limited to risk ratings and benchmark trends that could have an inestimable impact on estimated future payments.

The tables below include the financial statement impacts of the performance guarantee at September 30, 2024 and December 31, 2023 and for the three and nine-month periods ended September 30, 2024 and 2023 (in thousands):


	September 30, 2024		December 31, 2023
ACO REACH performance year receivable(1)	$	261,215	$	115,878
ACO REACH performance year obligation	161,855		—

(1) As of September 30, 2024, we estimate there to be in-network and out-of-network claims incurred by beneficiaries aligned to our REACH ACOs but not reported of $96.9 million related to performance year 2024; this is included in medical costs payable on the Condensed Consolidated Balance Sheets.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Amortization of ACO REACH performance year receivable(1)	$	160,526	$	223,363	$	502,085	$	648,334
Amortization of ACO REACH performance year obligation	159,967		200,024		485,566		674,724
ACO REACH revenue(2)	149,477		200,044		471,090		676,845

(1) The amortization of the ACO REACH performance year receivable includes $115.9 million and $99.2 million related to the amortization of the prior year receivable for the nine months ended September 30, 2024 and 2023, respectively.

(2) ACO REACH revenue is reflective of a $14.5 million reduction relating to the 2023 performance year.

For the nine months ended September 30, 2024 and 2023, respectively, there is $1.6 million and $1.2 million reported within ACO REACH revenue on the Condensed Consolidated Statements of Income (Loss), that is related to our NeueCare clinics that are participating providers within our REACH ACOs. This revenue is presented gross in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts With Customers (“ASC 606”).