CMS-Administered Risk Arrangements (CARA): A New Horizon for Specialty Value-based Care

Background: The Challenges of Specialty VBC

Episode-based payment (also known as “bundled payments”) has long been seen as a promising lever for driving value in Medicare, and the Centers for Medicare & Medicaid Services (CMS) has spent years testing the concept—from multiple innovation center models, like the recently launched Comprehensive Care for Joint Replacement (CJR) Model or the Transforming Episode Accountability Model (TEAM), to the “shadow bundles” data initiative that gave accountable care organizations (ACOs) episodic cost and utilization reporting. Yet specialists remain among the hardest providers to bring meaningfully into value-based care (VBC). ACO REACH’s “Preferred Provider” construct offered a pathway, but uptake was uneven. Most ACOs lacked the administrative infrastructure or contractual leverage to negotiate meaningful arrangements with specialists.

Other structural and clinical reasons for limited historical specialist participation in VBC include, but are not limited to, those described in Figure 1 below.  

Figure 1. Structural Reasons for Limited Historical Uptake of Specialty VBC

As a result, while specialists account for a large share of Medicare spending, they still remain outside accountability frameworks. While the new CMS-Administered Risk Arrangements (CARA) initiative may not address some of the underlying ideological or care delivery-related factors contributing to specialist resistance to VBC, it is directly aimed at solving the more administrative factors limiting participation today.

What Is CARA?

CARA is a voluntary component of the new LEAD Model open to ACOs in the Global Risk Option. CARA’s core innovation is structural: CMS itself serves as the intermediary, administering episode-based payments according to terms negotiated between the ACO and specialists (specifically “Preferred Providers” in the LEAD context). This removes an enormous barrier: the expectation that ACOs would stand up the contracting, data and payment infrastructure for downstream episode-based arrangements on their own. CARA builds off the shadow bundles data initiative, which since 2024 has provided ACOs in REACH, the Shared Savings Program and the Kidney Care Choices model with episode and pricing data for their beneficiaries.

CARA’s episode framework covers acute medical, procedural and chronic condition episodes, drawing on methodologies already familiar to specialists through existing CMS programs (e.g., Episode Based Cost Measures (EBCMs), or EBCMs currently used in MIPS, will be foundational to CARA episodes). ACOs and their specialists have two options for structuring arrangements:

• A “Default Approach,” which allows them to adopt existing episode definitions essentially off the shelf, or a
• “Max Flex” option, which lets them tailor certain episode parameters, like trigger codes, episode length and other components, to fit their clinical context. ACOs can work with external vendors to help construct alternative methodologies in this option.

The entire workflow—episode design/selection, data sharing and performance reporting—runs through a centralized digital platform maintained by CMS (the 4innovation system familiar to REACH participants), further reducing the operational lift.

CARA also includes an interesting new episode called the “RISE to Age in Place Initiative.” This episode delivers time-limited, home-based interventions (coordinated by occupational therapists and nurses) to reduce fall risk. Unlike other episodes, RISE to Age in Place will not have a target price structure but rather a risk-stratified prospective payment to cover relevant services, including home modifications.

How Will CARA Work Financially?

Financial accountability flows in both directions. If a Preferred Provider’s fee-for-service payments come in below the target price, they may receive reconciliation payments; on the flip side, exceeding the target price may require repayment. CARA also allows for quality measures to be integrated into the performance adjustments, creating an important link between the episode payments and actual outcomes, not just cost.

CARA reconciliation will happen at the same time as the ACO LEAD reconciliation, which is typically in Q2 following the performance year. For episodes occurring in the early part of the performance year, this is a long timeline; however, specialists will still be paid in an fee-for-service manner for claims that are submitted, even if they are in risk-based arrangements, mitigating cash flow concerns.

Notably, while participation in a LEAD ACO must be at the TIN level, individual Preferred Providers can participate in CARA.

CARA will feature a wide variety of inpatient, chronic and procedural episodes with the intention of catering to a wide variety of specialists (see list of conditions and procedures considered in the Appendix). Because the episodes are based on an existing MIPS-based framework, they are likely familiar to providers; however, the intention if the program is to yield more “skin in the game” across cost, quality and performance.

Figure 2. Comparison of Episodic Payment Arrangements Across Key Structural Considerations

Is CARA the New Path for Specialist Participation in VBC?

The design is worth watching for reasons beyond LEAD itself. By having CMS administer the payment mechanics, CARA offers a materially easier on-ramp for specialist engagement than anything previously available in total cost of care models. Its architecture is explicitly built for potential expansion to other accountable care models if CARA is deemed successful. Specialists may also now be more likely to enter similar agreements with commercial and Medicare Advantage plans. Furthermore, CMS has signaled that the episode selection patterns that emerge from CARA, like which episodes ACOs and specialists actually choose to build arrangements around, could inform future bundled payment policy more broadly. Though some questions exist regarding potential uptake of this voluntary payment layer, CARA represents the clearest signal yet that CMS sees episode-based specialist accountability not as a standalone model, but as a necessary layer within population-based care.

When compared directly to other CMMI and private payer episodic payment arrangements that are available to specialists (see Figure 3), CARA represents the best of all worlds: transparency through data sharing, control over the bundle design and expansive inclusion across settings of care with eventual application to other payer populations.

Specifically, CARA provides:

• Transparency and consistency in the definition of the bundles. Not knowing the inclusion and exclusion criteria can be of great frustration to providers and cause technical challenges when predicting performance against a benchmark, so having a known set of codes and methodology against which to structure actuarial modeling creates greater trust and predictability.
• Room to craft your own financial relationships. Whereas Bundled Payments for Care Improvement (BPCI) and other government programs are quite prescriptive about how providers can participate in a program, in CARA, the specialists and PCPs can set their own terms, creating a more “fair” environment and increasing buy-in.
• Opportunity for site-of-care optimization. Whereas historical CMMI models have been exclusively focused on hospital-based settings, the flexibility inherent to the CARA model means not only that any Preferred Provider in an ACO can participate, including community-based or independent provider groups, but also that specialists may be incentivized to select the lower-cost setting of care (e.g., an ASC) for an included procedure as a means to generate cost savings, where clinically appropriate. This is a critical improvement over models like BPCI-Advanced, where surgical providers reported losing lower-acuity episodes to ASCs in the recently released .
• ACO-level buy-in: Despite numerous benefits, the secondary nature of the relationship between the specialist and the payor—in this case, CMS—require additional buy-in at the ACO level to ensure that financial arrangements with specialists have sufficient incentives to steer behavior without over-diluting its own savings opportunities. Contracts must consider how to weigh the specialist contribution to the ACO’s overall savings potential, both historically (to set a benchmark) and into the future.

What Comes Next?  

While ACO LEAD begins January 1, 2027, CARA is currently scheduled to begin in 2028. CMS has indicated it will begin packaging and pricing acute medical and procedural episodes using existing, slightly modified EBCM methodology in early 2027 to allow providers time to negotiate target prices ahead of the 2028 performance period. The chronic condition episodes will be phased in shortly thereafter.

While many operational details remain outstanding, ACO participants should be preparing for future participation now. This includes:

• Identify specialty areas with greatest opportunities for improvement from today’s baseline. If the ACO has historically been strong in managing diabetes care, then a specialist-focused intervention among that population may be less impactful than an episodic model focused on colonoscopy outcomes, orthopedic site of care optimization or fall reduction. Based on an honest assessment of remaining improvement areas, narrow the set of episodic arrangements to pursue.
• Assess performance of current Preferred Provider specialist network using historical claims data. Should the ACO make changes to its Preferred Provider list ahead of the 2028 performance year? Are there high-performing specialists in the ACO’s region that are not currently participating in an ACO?
• Initiate conversations with specialists early. Assess the varying levels of readiness and openness to engaging in risk-bearing contracts. Understand existing barriers and long-held beliefs and work to cultivate a VBC-oriented mindset among specialists, if not imbedded already.
• Identify champions and contracting specialists to bring to the table. The way to make CARA successful will be early and high-touch collaboration on the design of the bundles. This requires expertise and open-mindedness on both sides of the table.

CARA presents an exciting shift away from the historical top-down, episode-based payment approach from CMS, enabling specialists to form their own relationships with PCPs and ACOs to engage in risk arrangements. While these relationships may already be in place institutionally (i.e., part of the same health system, which is participating in an ACO), specialists who have typically avoided risk-based arrangements may be starting “from scratch” when it comes to meaningfully engaging in the design and success of VBC models. With an intentional, proactive and data-driven strategy, ACOs can unlock new savings opportunities and enhance their relationships with network specialists and, in turn, the beneficiaries they serve.

Appendix

Figure 3. Current Conditions/Procedures Being Considered for CARA