What CMS's July 14 Proposed Rule Means for ACO Risk Adjustment Strategy in 2027
3Gen Consulting, Content TeamAugust 01, 2026
CMS's proposed rule arrives against a backdrop of sustained program success.
MSSP Performance Year 2024 [1]
- 75% of participating ACOs earned shared savings payments
- $4.1 billion in total shared savings paid
- $2.5 billion in net savings to the Medicare Trust Funds
- Eight consecutive performance years of savings
The program is working. The proposal is designed to build on that record by drawing more organizations into risk – which raises the stakes for every ACO's ability to accurately capture patient complexity.
What CMS Proposed – The Key Changes
The proposed rule targets two areas.
For the Medicare Shared Savings Program:
- Increase the shared savings rate for BASIC Level E ACOs from 50% to 60% (ENHANCED track remains at 75%) [2]
- Modify benchmark risk adjustment methodology to better reflect actual patient population complexity
- Establish stronger financial incentives for organizations joining the program for the first time
- Create more predictable spending targets to support planning and participation
- Allow ACOs with approved applications beginning April 1, 2027 to reduce or eliminate beneficiary out-of-pocket costs for certain items and services – extending an approach already used in the ACO REACH Model
- Reduce administrative burden through simplified technology requirements
For physician payment:
- Propose CY 2027 conversion factors: $33.17 for qualifying APM participants (−1.19% from 2026) and $32.84 for non-qualifying participants (−1.68%) [2]
- Introduce a new E/M modifier for MSSP and LEAD Model ACO participants: a 32% payment increase for qualifying evaluation and management visits, recognizing the additional resources of longitudinal accountable care [3]
- Better align payments with the time, resources, and complexity involved in delivering care
Comment period closes: September 14, 2026. Submit comments at regulations.gov – reference file code CMS-1848-P.
Why ACO Risk Adjustment Accuracy Just Got More Consequential
ACOs don't compete on fee-for-service rates. They compete on the gap between their benchmark (what CMS expects them to spend) and their actual spending.
That benchmark is risk-adjusted. Which means this:
If your HCC coding doesn't fully capture your patient population's complexity, your benchmark is set too low – and you'll struggle to earn shared savings even when you're delivering efficient care.
The proposed modifications to benchmark risk adjustment methodology make this even more critical. As CMS refines how patient complexity is reflected in spending targets, ACOs with accurate, complete diagnosis capture are better positioned for shared savings. Those with documentation gaps are not.
Three things that directly affect your ACO's financial performance:
- Under captured diagnoses: HCCs not documented lower your benchmark, making savings harder to achieve
- V28 transition gaps: CMS-HCC V28 (now fully implemented) restructured which conditions carry risk weight. Outdated coding workflows may be missing diagnoses that matter under V28
- Prospective gap identification: identifying under documented conditions before the encounter allows physicians to verify and document them, rather than trying to capture them retrospectively
What This Means for ACO REACH and Value-Based Organizations
The proposed rule is explicit: out-of-pocket cost waivers for MSSP ACOs starting April 2027 will extend an approach already in use in the ACO REACH Model.
This signals the direction of travel. ACO REACH has always required more sophisticated risk adjustment infrastructure – prospective population analysis, concurrent gap closure, and documentation governance that holds up under CMS scrutiny.
As MSSP adopts more REACH-like features, organizations that have already built that infrastructure will have a structural advantage. Those entering the program for the first time – which the new entrant incentives are designed to encourage – need that infrastructure in place before they take on risk, not after.
Questions Worth Asking Before the Comment Period Closes
Whether your organization is in MSSP, evaluating entry, or participating in ACO REACH, these questions are worth raising internally now:
- Is our HCC coding workflow aligned to V28? Or are we still operating on V24-era documentation standards?
- Do we have visibility into which patients have under documented conditions that carry risk weight?
- Are our prospective and concurrent risk adjustment processes as strong as our retrospective review?
- If MSSP benchmark methodology changes, how does it affect our financial projections for 2027?
- Is our risk adjustment documentation defensible under the OIG's MA compliance guidance – the same standards are increasingly relevant to ACO audits?
How 3Gen's Risk Adjustment Solutions Support ACO Performance
At 3Gen Consulting, we work with ACOs, ACO REACH participants, Medicare Advantage plans, and provider groups across the full value-based care spectrum. Our risk adjustment solutions are built around the accuracy requirements that shared savings programs reward.
What we provide for ACO risk adjustment:
- Prospective gap identification: surfacing under documented conditions before encounters so physicians can verify and document them contemporaneously
- Concurrent HCC coding: capturing diagnosis codes at or near the point of care, aligned to CMS-HCC V28
- RAF performance analytics: real-time visibility into risk score accuracy, gap closure rates, and benchmark trajectory
- Documentation governance: audit-ready records that support both shared savings performance and OIG compliance standards
Whether your organization is already in MSSP, evaluating entry under the new incentives, or operating under ACO REACH, accurate MSSP risk adjustment is the foundation that shared savings performance is built on.
The comment period closes September 14. The 2027 program year is the planning horizon. Talk to 3Gen's ACO risk adjustment specialists about where your program stands.
[1] RISE, “CMS proposes to expand ACOs and recalibrate physician payment,” 15 July 2026. Available: https://www.risehealth.org/insights-articles/article/cms-proposes-to-expand-acos-and-recalibrate-physician-payment/?utm_source=Marketo&utm_medium=email&utm_campaign=20260718-RISENews&mkt_tok=OTM2LUZSWi03MTkAAAGjFBNE5CbavrY917UulfZ4cd9oeAqGrXkcEsWFqk-lezZm.
[2] U.S. Centers for Medicare & Medicaid Services, “Calendar Year (CY) 2027 Medicare Physician Fee Schedule Proposed Rule (CMS-1848-P) — Medicare Shared Savings Program Proposals,” 14 July 2026. Available: https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2027-medicare-physician-fee-schedule-proposed-rule-cms-1848-p-medicare-shared.
[3] J. F. Hananoki, L. D. Bucshon and M. A. Franco, “CMS Issues CY 2027 Medicare Physician Fee Schedule Proposed Rule,” Holland & Knight, 20 July 2026. Available: https://www.hklaw.com/en/insights/publications/2026/07/cms-issues-cy-2027-medicare-physician-fee-schedule-proposed-rule.
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CMS's CY 2027 PFS Proposed Rule (CMS-1848-P) includes proposed modifications to the Medicare Shared Savings Program's benchmark risk adjustment methodology, designed to better reflect actual patient population complexity and encourage participation by ACOs with higher-risk and higher-cost populations. The rule also proposes increasing the BASIC Level E shared savings rate from 50% to 60%, creating first-time entrant incentives, and extending beneficiary out-of-pocket cost waivers – an approach already used in ACO REACH – to MSSP ACOs beginning April 1, 2027.
ACO spending benchmarks are risk-adjusted – if diagnoses that reflect patient complexity aren't captured, the benchmark is set lower than it should be, making it harder to earn shared savings even when care delivery is efficient. Under the proposed benchmark methodology changes, organizations with accurate and complete HCC capture are better positioned to receive credit for managing genuinely complex populations.
V28, now fully implemented across Medicare Advantage and applicable to risk-adjusted ACO programs, restructured which diagnosis categories carry risk weight and how conditions are grouped into Hierarchical Condition Categories. ACOs still operating on V24-era documentation workflows may be missing conditions that carry weight under V28 – resulting in undersupported risk scores and benchmarks that understate patient complexity.
ACO REACH has historically required more sophisticated prospective risk adjustment infrastructure – population-level gap identification, concurrent coding, and documentation governance – while MSSP has primarily relied on retrospective approaches. The proposed rule signals MSSP moving toward REACH-like features, including beneficiary out-of-pocket waivers, suggesting that the risk adjustment infrastructure requirements for MSSP will continue to converge with those of REACH.
ACO administrators should assess whether their benchmark risk adjustment methodology accurately reflects patient complexity under V28, model how the proposed financial methodology changes affect their shared savings projections and evaluate whether their prospective and concurrent risk adjustment infrastructure is strong enough to perform well if benchmark modifications are finalized as proposed. The comment period closes September 14, 2026 – strategic questions raised now inform both comment submissions and 2027 planning.
3Gen provides prospective gap identification, concurrent HCC coding aligned to CMS-HCC V28, RAF performance analytics, and documentation governance for ACOs, ACO REACH participants, and provider groups entering value-based care – all designed to close the gap between a population's actual clinical complexity and what the risk score reflects. For MSSP organizations navigating the 2027 proposed rule's benchmark changes, 3Gen's risk adjustment solutions provide the accuracy foundation that shared savings performance depends on.