AHEAD States

AHEAD replaces fee-for-service hospital payment with a fixed annual revenue target. For hospitals in participating states, this is a fundamental restructuring of the financial model. Under fee-for-service, revenue increases with volume: more admissions, more procedures, more services generate more payment. Under a global budget, revenue is fixed in advance. The hospital receives the same amount whether utilization increases or decreases. The financial incentive inverts: eliminating avoidable hospitalizations, reducing readmissions, and managing chronic disease in the community protect revenue that would otherwise be consumed by the cost of delivering unnecessary care.

Six states have signed on to AHEAD: Maryland began its performance period in January 2026, with Connecticut, Hawaii, Vermont, Rhode Island, and specific New York counties preparing for performance periods beginning in 2027 or 2028. CMS has extended the model through December 31, 2035, for all cohorts and will offer the opportunity for up to two additional states to join beginning in 2028 or 2029. For hospitals in these states, the strategic question is not whether global budgets will affect their operations but how to build the care delivery infrastructure that succeeds under fixed revenue.

The AHEAD Model Mechanics

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Global budgets provide hospitals with a prospective fixed revenue amount for the upcoming year. CMS sets each hospital’s budget based on historical spending with adjustments for population health targets, quality performance, and regional factors. The budget covers Medicare fee-for-service beneficiaries, with the expectation that participating states will align Medicaid and commercial payers under similar arrangements.

The population health incentive is the mechanism that distinguishes AHEAD from simple revenue caps. Budget adjustments are tied to chronic disease prevention, avoidable utilization reduction, and community health outcomes. A hospital that invests in ambulatory care, care coordination, and population health infrastructure can retain revenue that would otherwise fund avoidable inpatient episodes. The model creates financial alignment between hospital financial performance and community health improvement.

Market shift adjustments account for changes in patient volume from market dynamics rather than hospital behavior. If a Medicare Advantage plan exits a county or a new hospital opens, the budget methodology accommodates these external factors. The design prevents hospitals from being penalized for enrollment shifts they do not control while maintaining accountability for the care delivery patterns they do influence.

Out-of-area patient considerations address the reality that not all patients served by an AHEAD hospital come from participating counties. Patients who travel from non-AHEAD regions for specialty care are handled separately from the global budget calculation. This prevents distortion when hospitals serve as regional referral centers for services that draw patients from beyond the AHEAD geographic scope.

September 2025 policy changes introduced Geo AHEAD, a geographic-based accountable care structure that engages Medicare beneficiaries not otherwise attributed to an ACO. Geo Entities will be selected through competitive bidding and will be accountable for total cost of care and quality outcomes for attributed beneficiaries. Hospitals participating in AHEAD global budgets can participate in Geo AHEAD, creating a layered accountability structure that connects hospital-level revenue management with population-level cost accountability.

The Maryland Precedent

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Maryland has operated under regulated hospital payment since the 1970s, initially through all-payer rate regulation and subsequently through models that added total cost of care accountability. The state’s experience provides the longest domestic evidence base for understanding how global budgets affect hospital behavior.

The Maryland All-Payer Model, which ran from 2014 through 2018, introduced all-payer global budgets for general hospitals. Although participation was voluntary, every hospital found reasons to join. The model achieved Medicare savings while maintaining quality performance. However, non-hospital spending rose faster than hospital spending during this period, leading CMS to expand the model’s scope.

The Total Cost of Care Model, which ran from 2019 through 2025, added statewide and hospital-specific targets for total Medicare spending per beneficiary. This addressed the concern that hospital global budgets alone could shift costs to post-acute care, physician services, or other settings without reducing total spending. The TCOC Model made Maryland accountable for spending across all care settings, not just hospitals.

All 43 general hospitals in Maryland operate under rate regulation by the Health Services Cost Review Commission. The HSCRC sets annual patient revenues for each hospital based on global budget methodologies that incorporate historical utilization, case mix adjustments, and population health factors. This infrastructure, developed over decades, is what enables Maryland to implement models that other states lack the regulatory capacity to administer.

The Maryland transition to AHEAD represents continuity rather than disruption. The state applied to move into AHEAD to maintain its all-payer rate setting authority under federal partnership. The AHEAD framework allows Maryland to continue its existing model structure while integrating with CMS Innovation Center evaluation and support.

Participating States

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Connecticut, Hawaii, and Vermont signed on for Cohort 2, with performance periods now set to begin in 2028 following the September 2025 timeline adjustments. Rhode Island and specific New York counties joined as Cohort 3. Each state brings different health system market structures, Medicaid configurations, and regulatory capacities.

Connecticut has been pursuing statewide healthcare cost containment through its Office of Health Strategy. The state views AHEAD as an opportunity to collaborate with CMS on hospital payment transformation while advancing its goals for primary care investment, health equity, and cost growth reduction. Connecticut hospitals will be offered global budgets covering Medicare, Medicaid, and commercial payers.

Vermont has operated an all-payer ACO model for several years, creating experience with statewide accountability structures. AHEAD provides new tools for hospital payment transformation that complement the ACO infrastructure Vermont has already built. With Medicare covering 21 percent of Vermonters, federal participation in the payment model addresses a major payer that the state cannot regulate directly.

Hawaii’s participation reflects the state’s concentrated health system market and history of managed care integration. The state’s unique geographic isolation and health system structure create conditions where statewide coordination is more feasible than in larger, more fragmented markets.

The New York participation covers downstate counties including the Bronx, Kings, Queens, Richmond, and Westchester. This sub-state regional approach allows testing AHEAD in a densely populated, complex market while avoiding the challenge of implementing statewide changes in a state with vastly different health system dynamics across regions.

CMS will accept applications from up to two additional states to begin performance in 2028 or 2029. States considering participation must assess their hospital regulatory infrastructure, Medicaid managed care alignment capacity, and political feasibility of statewide cost growth accountability.

Hospital Strategy Under AHEAD

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The financial model shift from volume to value is not abstract policy. It requires operational changes in how hospitals manage admissions, discharges, care transitions, and community relationships.

The avoidable utilization imperative means hospitals gain financially by preventing hospitalizations. A readmission that would generate revenue under fee-for-service consumes budget under global payment. Investment in care coordination, transitional care management, and chronic disease programs becomes revenue protection rather than cost center. Hospitals that build this infrastructure before global budgets take effect will outperform those that wait.

Post-acute care referral incentives change under global budgets. Under fee-for-service, hospitals discharge patients quickly to reduce length of stay costs, often to skilled nursing facilities where Medicare’s separate prospective payment system covers the next phase of care. Under total cost of care accountability, the downstream spending affects the hospital’s performance. This creates incentive to invest in home-based recovery support that reduces SNF utilization while maintaining patient outcomes.

Care coordination, chronic disease management, and population health analytics become core hospital functions rather than optional investments. Hospitals need visibility into which patients are at risk for avoidable admissions, what conditions are driving ED utilization, and where community-based interventions could prevent acute episodes. The analytics infrastructure that ACOs have built for population health management becomes essential for hospitals operating under global budgets.

The home-based care opportunity connects global budget strategy to workforce and partnership decisions. Avoiding hospitalizations means investing in home health, remote patient monitoring, and community-based care. Hospitals can build these capabilities internally, acquire home health agencies, or partner with existing home-based providers. The strategic choice depends on market position, capital availability, and competitive dynamics with other systems pursuing similar strategies.

Competitive Dynamics

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AHEAD changes the hospital-plan relationship in participating states. Under fee-for-service, hospitals and MA plans are in an adversarial negotiation over rates and utilization management. Under global budgets, the financial pressure shifts. A hospital receiving fixed revenue is less concerned about MA plan rate negotiations and more concerned about whether the plan’s care management supports or undermines the hospital’s population health strategy.

Whether global budgets reduce or increase MA plan interest in AHEAD markets is uncertain. Plans may find that working with hospitals under global budgets simplifies network management and aligns incentives. Alternatively, plans may find that the reduced negotiating leverage over hospitals makes AHEAD markets less attractive. The competitive dynamics will depend on how state regulatory structures interact with MA plan economics.

The payvider angle is strategic. Health systems in AHEAD states that also own or operate MA plans are positioned for comprehensive geographic total cost of care accountability. The plan manages the premium and benefit structure while the delivery system operates under global budgets. The combination creates alignment between plan-level and hospital-level incentives that independent plans and hospitals cannot replicate. Systems considering payvider strategies should evaluate whether AHEAD participation amplifies the integration advantage.

Rural and safety-net hospitals face specific considerations. The AHEAD model includes provisions to protect rural hospitals, including payment floors that prevent global budgets from falling below sustainable levels. Safety-net hospitals serving high-acuity, socially complex populations may need risk adjustment methodologies that account for their patient mix. CMS has stated that global budgets give rural and urban safety-net hospitals financial stability and flexibility, but implementation details will determine whether this promise is realized.

Related Reading

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MCR-01_08 AHEAD and Geo AHEAD: Geography as a Cost Control Lever MCR-06_04 Remote Patient Monitoring and the AHEAD/ACO Value Stack MCR-11_06 Ohio, Pennsylvania, and Michigan: The Rust Belt Medicare Reality