CARA

CMS-Administered Risk Arrangements (CARA)

CARA is a voluntary initiative exclusively available to Global Risk ACOs that enables downstream episode-based risk arrangements (EBRAs) between ACOs and their Preferred Providers (specialists). CARA represents CMS’s most significant step toward bringing MA-style downstream risk into Original Medicare. (RFA §X.C)

CARA builds upon the existing shadow bundles data initiative, which has provided episodic data and pricing information to ACOs in ACO REACH, MSSP, and KCC since 2024. Shadow bundles are informational only; no financial risk is attached. CARA operationalizes this data by enabling actual financial accountability. (RFA §X.C)

Two Participation Options (RFA §X.C, Appendix E §E.2)

Default Approach:

• ACOs select from CMS-constructed Episode-Based Cost Measures (EBCMs)
• Predicated on CMS methodology with slight modifications for the LEAD performance year
• ACOs may not customize episode construction (trigger codes, episode length, etc.)
• ACOs can: specify discounts/premiums to target prices, select quality measures for performance adjustment, and define performance adjustment specifications
• Best for ACOs new to episode-based contracting

Maximal Flexibility (“Max Flex”) Option:

• ACOs select one or more existing EBCMs and customize the episode(s)
• Modifications can include: trigger codes, episode length, and other construction parameters
• ACOs may partner with external vendors for alternate episode construction methodologies
• All parameters subject to CMS review and finalization through the CMS 4i platform
• Best for ACOs with sophisticated data analytics and existing episode-based experience

Episode Types Available in CARA

CARA draws its episode definitions from CMS’s Episode-Based Cost Measures (EBCMs), the same measures used in the MIPS cost category under the Quality Payment Program. CMS chose EBCMs over the BPCI Advanced clinical episode groups used in the shadow bundles initiative because Preferred Providers are already familiar with EBCMs from MIPS reporting. (RFA Appendix E §E.2)

EBCMs are constructed using comprehensive Medicare Parts A and B claims data with risk adjustment for patient age and disease complexity. They fall into three categories, with acute medical and procedural episodes available at LEAD launch (PY 2027) and chronic condition episodes phased in early in the initiative. (RFA Appendix E §E.2)

Acute Inpatient Medical Episodes

These address urgent clinical conditions requiring immediate hospital-based intervention. The specialist (hospitalist, intensivist, or relevant subspecialist) is accountable for the cost of the inpatient episode from trigger through a defined post-discharge window.

Episode	Clinical Context	Likely Trigger
Sepsis	Systemic infection requiring inpatient management, often ICU-level care	Inpatient admission with sepsis diagnosis
Psychoses and Related Conditions	Acute psychiatric hospitalization	Inpatient admission with psychosis/schizophrenia diagnosis
Intracranial Hemorrhage or Cerebral Infarction	Stroke (hemorrhagic or ischemic)	Inpatient admission with stroke diagnosis
Respiratory Infection Hospitalization	Pneumonia, influenza, and other acute respiratory infections requiring inpatient care	Inpatient admission with respiratory infection diagnosis
Inpatient COPD Exacerbation	Acute worsening of chronic obstructive pulmonary disease	Inpatient admission with COPD exacerbation diagnosis
Lower Gastrointestinal Hemorrhage	Acute lower GI bleeding requiring hospitalization	Inpatient admission with lower GI hemorrhage diagnosis
Inpatient Percutaneous Coronary Intervention (PCI)	Emergent or urgent cardiac catheterization with stenting	Inpatient admission with PCI procedure code

Procedural Episodes

These encompass surgical and interventional procedures with defined start and end points. The specialist performing the procedure is accountable for the episode cost, including pre-operative workup and post-operative recovery within the episode window.

Orthopedic Procedures

Episode	Clinical Context	Notes
Knee Arthroplasty	Total or partial knee replacement	One of the highest-volume Medicare procedures. Well-tested in BPCI Advanced with established savings opportunity.
Elective Primary Hip Arthroplasty	Total hip replacement (elective, non-fracture)	Similar savings profile to knee arthroplasty. Excludes hip fracture (which is acute, not elective).
Lumbar Spine Fusion for Degenerative Disease (1–3 levels)	Spinal fusion surgery for degenerative conditions	High cost variability driven by device selection, post-acute care utilization, and complication rates.

Cardiovascular Procedures

Episode	Clinical Context	Notes
Elective Outpatient PCI	Planned cardiac stenting performed in outpatient setting	Distinguished from inpatient PCI (which is in the acute medical category). Lower cost, different risk profile.
Non-Emergent CABG	Planned coronary artery bypass graft surgery	High-cost episode with significant post-acute and readmission cost components.
Revascularization for Lower Extremity Chronic Critical Limb Ischemia	Vascular procedures to restore blood flow in severe peripheral artery disease	Complex patient population, often with diabetes and renal disease comorbidities.

General Surgery Procedures

Episode	Clinical Context	Notes
Melanoma Resection	Surgical removal of melanoma	Episode includes pathology, imaging, and post-surgical follow-up.
Colon and Rectal Resection	Partial or total colectomy/proctectomy	High variability in length of stay and complication rates.
Femoral or Inguinal Hernia Repair	Surgical repair of groin hernias	Common, relatively lower-cost procedure. Savings opportunity primarily in site-of-service (inpatient vs. outpatient).
Lumpectomy, Partial Mastectomy, Simple Mastectomy	Breast cancer surgical procedures	Three related episodes covering the spectrum of breast cancer surgery.

Other Procedural Episodes

Episode	Clinical Context	Specialty
Renal or Ureteral Stone Surgical Treatment	Lithotripsy or surgical stone removal	Urology
Cataract Removal with IOL Implantation	Cataract surgery with intraocular lens	Ophthalmology (highest-volume Medicare procedure)
Screening/Surveillance Colonoscopy	Preventive or follow-up colonoscopy	Gastroenterology
Hemodialysis Access Creation	AV fistula or graft placement for dialysis access	Vascular surgery / nephrology
Acute Kidney Injury Requiring New Inpatient Dialysis	New-onset dialysis during hospitalization for AKI	Nephrology / hospital medicine

Chronic Condition Episodes Phased In After Launch

These capture the ongoing management of long-term conditions requiring sustained specialist involvement. Unlike acute and procedural episodes (which have defined start and end points), chronic condition episodes measure cost over a defined period (typically 12 months) for patients with an established diagnosis. These will be phased in early in the initiative and are not available at PY 2027 launch.

Episode	Clinical Context	Managing Specialty
Diabetes	Ongoing management of Type 1 or Type 2 diabetes	Endocrinology / primary care
Heart Failure	Chronic heart failure management including medication optimization and monitoring	Cardiology
Chronic Kidney Disease (CKD)	Progressive kidney disease management (pre-dialysis)	Nephrology
End-Stage Renal Disease (ESRD)	Dialysis-dependent kidney failure management	Nephrology
Asthma / COPD	Ongoing management of chronic respiratory disease	Pulmonology
Depression	Chronic depression management	Psychiatry / behavioral health
Low Back Pain	Chronic low back pain management (non-surgical)	Orthopedics / pain management / rheumatology
Rheumatoid Arthritis	Autoimmune joint disease management including biologic therapy	Rheumatology
Prostate Cancer	Ongoing prostate cancer management (active surveillance, treatment, monitoring)	Urology / oncology
Kidney Transplant Management	Post-transplant immunosuppression and monitoring	Nephrology / transplant surgery

RISE to Age in Place Episode (Falls Prevention)

RISE (Resilience and Independence in a Safe Environment) to Age in Place is a falls prevention episode provided in addition to EBCMs. Structurally distinct from the EBCM episodes above, it is a bundled payment for a time-limited home-based intervention, not a cost measure with a target price. (RFA §X.C)

Component	Detail
Initial evaluation	Paid through standard FFS. Screening assessment to determine eligibility and care needs.
Bundled payment	Covers an interdisciplinary care team (OTs and RNs) delivering: risk assessments, medication management, strength training, balance exercises, and provider communication plans.
Home modifications	Up to $2,500 for structural improvements (grab bars, ramps, lighting, non-slip surfaces) when warranted. Funded by the ACO, not Trust Fund dollars.
Target price	None. Unlike EBCM episodes, RISE to Age in Place does not have a target price or reconciliation against a benchmark.
Payment mechanism	CMS establishes Level II HCPCS (non-payable zeroed-out G-codes) for RN and OT services. Episode costs flow into the ACO’s PY expenditures.
PQP credit	ACOs implementing this episode may satisfy the Prevention and Quality Plan requirement.

How Episode Pricing Works

ACOs do not calculate target prices themselves. Here is the process: (RFA Appendix E §E.4–E.5)

1. CMS delivers episode reports (2027): After the ACO signs the LPACA and submits a HIPAA-Covered Data Disclosure Request Form, CMS delivers annual reports through the 4i platform containing target prices for each available episode, specific to the ACO’s patient population. These reports are similar to the shadow bundles data already provided to REACH and MSSP ACOs.
2. ACO identifies specialists: Using the episode data, the ACO identifies which Preferred Providers have significant episode volume and cost variability; these are the best candidates for EBRAs.
3. ACO and specialist negotiate: The parties negotiate a discount or premium to the CMS-provided target price, select quality measures (default: Q484, risk-standardized hospital admission rates for MCC patients, or a custom MIPS-comparable measure), and agree on a performance adjustment (10%–100% range). (RFA Appendix E §E.9.5–E.9.7)
4. Parameters submitted to CMS: The ACO enters the negotiated episode risk parameters into the 4i platform. CMS reviews for clinical appropriateness and operational feasibility. (RFA Appendix E §E.3)
5. Episodes trigger in the next PY: Once approved, episodes begin triggering. CMS provides quarterly performance reports starting tentatively Q1 2028. (RFA Appendix E §E.5)
6. Settlement: At LEAD Final Financial Settlement, CMS compares actual FFS payments for each episode against the risk-adjusted target price. Preferred Providers receive reconciliation payments (if FFS < target) or owe repayments (if FFS > target). Episode costs are included in the ACO’s PY expenditures. (RFA Appendix E §E.9.8)

Settlement Mechanics (RFA §X.C)

CARA episode costs are factored into the ACO’s expenditures during LEAD financial settlement. CMS calculates payments based on each Preferred Provider’s performance against the target price:

• Preferred Provider FFS payments < target price: Provider may be eligible for a reconciliation payment (savings sharing)
• Preferred Provider FFS payments > target price: Provider may owe a repayment

This creates dual accountability: the ACO is accountable for total cost of care through LEAD settlement, and the specialist is accountable for episode-specific performance through CARA.

Key Rules

• CARA is exclusively for Global Risk ACOs (RFA §X.C)
• Only Preferred Providers (not Participant TINs) can participate in CARA (RFA Table 1)
• Providers that elect NPCC or APO may not participate in CARA simultaneously (RFA §X.A.3)
• Episode risk parameters are subject to CMS review through the 4i platform (RFA Appendix E §E.3)