Now is the time to prioritize care redesign and patient engagement over coding initiatives. Risk adjustment was always supposed to make the playing field fair, it was never supposed to be the game. And CMS is now enforcing that distinction directly, across Medicare Advantage, ACO REACH, and the new LEAD Model.
Key takeaways
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Risk adjustment was never supposed to be the game
For years, ACO performance improved in two ways: capture the disease burden more completely, or actually reduce the cost of caring for the population. The industry got very good at the first one: coding, suspecting, chart review, and HCC recapture because risk scores move benchmarks, and benchmarks decide whether there are savings to share. Accurate coding isn't the problem; a benchmark should reflect how sick a population really is. But leaning on risk-score growth to carry your economics is a different thing from coding accurately, and CMS is now pulling the two apart with enough specificity to plan against.
“Risk adjustment was always supposed to make the playing field fair. It was never supposed to be the game.”
— Nicole Bradberry, Operating Partner, Empactful Capital, Author of The Execution Gap
LEAD caps risk-score growth at 3% for Aged/Disabled and ESRD populations and 4% for High Needs. ACO REACH added its own 3% cap for 2026, measured back to 2019 and Medicare Advantage excluded audio-only encounters and unlinked chart reviews from risk-adjusted diagnoses starting CY2027 (CMS estimates that piece alone at -1.78%). Three programs, three mechanisms, one message: the revenue lever is getting smaller.
What gets less attention is that the lever eventually leaves your hands entirely. Starting in 2028, LEAD shadow-tests risk scores generated by an AI-inferred model for the Aged/Disabled population; by PY2031, that model sets 100% of those scores, with High Needs likely to follow. Right now, your risk score is largely a product of work your organization does. Under a fully AI-inferred model, CMS infers disease burden from data it already has. The caps limit how fast you can move the lever, and the AI model takes your hand off it entirely. Data integrity still matters, since a model can only read the data it's given, but it stops being a growth lever.
There is a counterweight. LEAD also removes the benchmark ratchet, no rebasing for ten years, so savings an ACO creates aren't clawed back the following cycle. For the first time, care redesign gets a decade to pay back.
Coding CHF doesn't keep the CHF patient out of the hospital
An Annual Wellness Visit and another HCC were never going to prevent a $40,000 hospitalization. Coding congestive heart failure tells you the patient is sick, it doesn't tell you why she was admitted three times in six months. That requires a different kind of work entirely: Did we know she was discharged yesterday? Did we call within 48 hours? Did we reconcile her medications and get the follow-up scheduled? Did she fill the prescription? Did the cardiology appointment actually happen?
A hospitalization is the loudest thing in the data, but the failure that caused it usually started days or weeks earlier, a medication never filled, a referral that didn't close, discharge instructions nobody explained clearly. Everybody did their own job reasonably well, and the system still failed her. Managing medical cost, as opposed to managing a benchmark, means asking what happened to the patient and whether the pathway that produced the cost can actually be changed.
Not all spend is addressable
If the revenue lever is constrained, the cost lever has to carry more weight, but not every expensive patient is an opportunity. A patient can run up $80,000 in a year from a car accident or a cancer treatment no care-management program could have prevented. Another patient hits the same $80,000 through missed follow-ups, failed transitions, and repeat ED visits that better execution really could have changed. Same dollars, completely different opportunity.
“The opportunity is not the spend. It is the portion of the spend that survives investigation.”
— Nicole Bradberry, Operating Partner, Empactful Capital, Author of The Execution Gap
That gap between what looks addressable and what's actually influenceable, given a specific patient, physician, and contract, is where most value-based care programs quietly underperform. The business case gets built on addressable spend; the program gets staffed for a fraction of it.
CARA creates a buyer that didn't exist before
Primary care has always been the center of accountable care, for good reason. But the PCP doesn't control most of the medical expenses for an attributed population. Most spending happens downstream, in cardiology, orthopedics, oncology, and post-acute care, in decisions the ACO is accountable for but has no authority over. LEAD's new CMS-Administered Risk Arrangements (CARA) start to close that gap. CMS supplies the episode data, target pricing, and contracting scaffolding for an ACO in LEAD’s Global Risk track to put a specialist group into real two-sided risk on an episode of care beginning in 2028, with reconciliation running alongside LEAD settlement.
This is the same conclusion we reached about networks in Vol. 3, arriving from the payment side instead of the referral side: if you're accountable for total cost of care, you eventually have to manage total cost of care, and CMS is now building the plumbing for it. It also creates a buyer that hasn't existed before, a cardiology or orthopedics group that suddenly owns real financial risk needs episode cost analytics and post-acute management capability it has never had to build. ACOs and health plans spent a decade building that muscle; a forty-physician specialty group has none of it. The caution: Bundled Payments for Care Improvement created a similar convener opportunity, and more than a few businesses built on a generous benchmark didn't survive CMS tightening it later. This category deserves the same scrutiny.
Someone has to price the risk
CARA standardizes the contract, but it doesn't set the price. The ACO and the specialist still have to agree on a target, and most specialty groups have never priced risk. On the ACO side, giving up revenue it considers its own is a hard sell until someone shows the math. Ceding a slice of spend to a cardiology group that bends the curve beats doing nothing and missing the benchmark.
The first step is usually simpler than any contract, find the two or three specialists and facilities where an ACO's spend actually leaks, and start the conversation there. Health plans have had actuaries, stop-loss, and contracting teams for decades. Providers taking risk are now starting to need them.
Where technology fits
The Execution Gap describes this as a five-phase operating loop: identify the opportunity, engage the patient, execute the intervention, measure what actually happened, and learn from it. Compare that to the five-step closed loop from Vol. 3, the same discipline, applied to a population instead of a referral. Four of our portfolio companies sit at different points in that loop.
“The intervention is not sacred. The result is.”
— Nicole Bradberry, Operating Partner, Empactful Capital, Author of The Execution Gap
ThoroughCare handles the care-management layer via Chronic Care Management, Transitional Care Management, Remote Patient Monitoring, and related workflows in one structure instead of as disconnected point programs. Its analytics work like an inverted triangle: AI-driven identification narrows a whole population down to who can actually generate an outcome. Then it narrows the population down further to who needs high-touch care in the home, the tier you can't afford to spread across everyone, which is exactly why knowing who genuinely needs it is worth more than a tool that just enrolls whoever it can reach.
Care Continuity closes the loop on the network side: cross-system patient matching and navigation that catches a leakage event fast enough to still act on it, a referral that doesn't close, a patient who shows up at an outside facility, and feeds that same infrastructure back as a running diagnosis of where a network actually breaks. Under CARA, that visibility is what tells an ACO which downstream specialists are worth putting into an episode arrangement in the first place.
Clutch Health addresses the step after the plan exists: a routing decision or care plan only becomes care if the patient acts on it. Clutch combines behavioral segmentation, compliant financial incentives, and gamification to drive the kind of sustained engagement that telephonic outreach can't scale to.
Reema Health engages the members the other three can't reach through an app or a call center: the highest-cost, hardest-to-reach patients, disproportionately dual-eligible and Medicaid, where behavioral health and unmet social needs including food, housing, transportation, and isolation are often the real barrier to care. Reema pairs local Community Care Workers, hired from the same neighborhoods they serve, with an in-house behavioral health team, so first contact comes from a trusted person rather than a platform before handing off to clinical care. It's the plainest example in our portfolio that the "engage" step of the loop is sometimes a person, not a product, and Reema reports the kind of outcome the next section argues vendors should have to show: 53% fewer inpatient hospitalizations and a 23% lower total cost of care against a matched control.
Special considerations for investors
Three things deserve real scrutiny underwriting this category. First, the addressable market for pure revenue enablement via coding, suspecting, chart retrieval, and HCC capture, is now on a published schedule of decline. The capability is still necessary, but caps and an AI-inferred model compress its ceiling, and treating that revenue as durable growth rather than a maturing line is underwriting the last decade. Second, the bar for operational-enablement vendors has to rise from "how many opportunities did the platform identify" to "what happened because the technology was there": did referrals close, did readmissions drop, did the medical expense actually move. Third, CARA's new specialist buyer is real, but how big the opportunity gets turns on one unanswered question: if most ACOs simply take CMS's default episode construction, the vendor opportunity is thin, if Maximal Flexibility sees real adoption, it's substantial. Diligence here should be built around that question, not around an assumption either way.
Where this leaves us
None of this means risk adjustment goes away, and it shouldn't, a sicker population should look different on a benchmark than a healthier one. But risk adjustment was always supposed to make the playing field fair. It was never supposed to be the game. CMS is now capping how fast the score can grow, tightening what counts toward it, and preparing to calculate it without you entirely, while handing ACOs the infrastructure to push accountability downstream to where the money is actually going. Read together, that's not a coding story, it's a statement about where CMS expects value to come from.
This is the same argument we made about networks in Vol. 3, applied one level up, at the payment model instead of the referral. Either way, the loop is the asset, and it's the foundation under the two shifts we keep returning to in this series: the move to value-based payment, and the full integration of physical and behavioral health, both in service of what we believe is healthcare's biggest pool of unrealized potential: Whole Person Care. The payment model creates accountability. Risk adjustment makes the starting line fair. Neither one creates the outcome. Someone still has to do the work.
About Empactful Capital
Empactful Capital is a venture capital firm that specializes in early- and growth-stage healthcare opportunities, with a focus on whole-person care, including the technology that enables the shift to value-based models, the full integration of behavioral health, and healthcare consumerism. Established in 2016 by seasoned healthcare operators and investors, Empactful deploys targeted funds and leverages industry expertise to rapidly scale innovative companies. Through our pre-investment working engagement model, we identify areas of strength and development to ensure alignment and set a path to each company’s value creation and long-term success. Empactful is committed to transforming the healthcare industry through sustainable investments.
https://www.empactfulcapital.com/
About Empactful Partners
Empactful Partners is a healthcare advisory firm that helps incumbents drive strategic transformation and develop their leaders, and helps early- and growth-stage businesses with strategy and company building. Rather than handing over slide decks full of recommendations, the team embeds alongside a company’s own leaders to accelerate strategy toward better outcomes, stronger margins, and greater capacity. Operating as a complementary partner to Empactful Capital, Empactful Partners also works with leading healthcare organizations and private equity firms pursuing growth, diversification, leadership development, and company-building initiatives.
https://empactfulpartners.com/