Overview
MassHealth develops sub-capitation per-member, per-month (PMPM) rates that are unique to each group of practices that correspond to a single tax identification number (TIN) and are enrolled in a MassHealth Accountable Care Organization (ACO). For each TIN, Primary Care Sub-Capitation (Sub-Cap) Program PMPM rates are based on a defined set of primary care services, set annually, and remain consistent throughout the year.
Rate Development Approach
1. Practice Type Classification: Assign each TIN a practice type
Each TIN with a primary care panel is assigned to one of three practice types: Group Practice Organization (GPO), Community Health Center (CHC), or Outpatient Hospital (OH). These practice types are used to develop the base rate for each TIN using the underlying fee schedule for that practice type.
2. Population-Level Historical Base Rates: Define population-level primary care costs by using a set of historical claims for MassHealth members and MassHealth primary care claim logic.
MassHealth uses historical monthly primary care costs by practice type to calculate rates. MassHealth determines the historical monthly primary care costs in three steps:
- MassHealth creates a claim set using only claims for MassHealth members attributed to a TIN with a primary care panel during the historical base period. For more details on this process, see the section Member Attribution.
- MassHealth then limits the claim set to services with primary care-related service codes, based on the CPT codes included in the current primary care sub-capitation service code set. For a detailed list, see the section Service Code Set.
- MassHealth further limits the claim set based on the rendering provider’s specialty, using MassHealth’s primary care sub-capitation specialty logic. Claims are included only if the rendering practitioner has at least one “included” specialty and does not have any “excluded” specialties. Practitioners who meet both criteria are deemed primary care providers for this purpose.1 For more details, see the section Included and Excluded Provider Specialties.
1This step does not apply to community health centers (CHCs). For CHCs, all claims with primary care-related service codes are included, regardless of the rendering provider’s specialty.
After creating the filtered claim set, MassHealth groups each practice type’s historical base claims into four population categories based on the age and disability status of the attributed members who received care: adults with disabilities, adults without disabilities, children with disabilities, and children without disabilities. For each category, MassHealth then calculates a per-member per-month (PMPM) amount by dividing the historical primary care sub-capitation dollars by the attributed member months for the same practice type and population category. This is the population level historical-base rate.
3. Prospective Adjustments: Adjust rates to reflect future changes in primary care costs and utilization
After determining the population-level historical base rate, MassHealth and its actuaries apply adjustments to estimate how future primary care costs would differ from historical ones. Adjustments are based on expected market changes and follow standard actuarial principles. The adjustments seek to do the following:
- Set unit costs of claims to the standard, most recently available MassHealth fee schedule.
- Account for year-over-year growth in medical expenditures (both unit costs and utilization).
- Account for any changes to the program, services, or unit costs that occurred after the historical period.
- Minimize revenue volatility for a subset of TINs that have a low number of claims or attributed members over the historical period.
These adjustments can vary by practice type and population category, but they do not vary by individual member or TIN.
4. Share of Care Adjustments: Adjust rates to reflect how much primary care is delivered within a TIN
After applying prospective adjustments to the population-level historical base rates, MassHealth develops individual rates for each TIN to ensure certain TIN-specific variability is captured.
For each TIN, MassHealth adjusts the relevant population-level base rates based on two TIN-specific factors:
- Percent Internal: This measures the share of attributed members’ primary care services that are delivered within the TIN. In other words, it reflects how much primary care the TIN “keeps” within its own practice or provider network.
- Percent Primary Care: This measures the share of the TIN’s primary care-related services that are delivered by providers who meet MassHealth’s definition of a primary care provider under the primary care sub-capitation claims logic. For more details, see Included and Excluded Provider Specialties List.2
2For CHCs, the share of primary care-related services is 100%.
5. Primary Care Risk Adjustment: Adjust for member acuity differences
Once individual TIN rates are developed, MassHealth applies risk adjustment to account for differences in member acuity across TINs in the same practice type. The purpose of this risk adjustment is to match funding with the expected level of primary care need. As a result, TINs whose attributed members are expected to require more primary care-related effort receive, on average, higher payments than TINs whose attributed members are expected to require less effort. This risk adjustment is budget neutral. It does not increase or decrease total funding overall. Instead, it redistributes funding across TINs within the same practice type and population category.
For more details on the variables that drive primary care-related clinical acuity and how the risk adjustment model is applied, see the section Primary Care Effort Model.
6. Final Rate Comparison: Ensure revenue stability
While the program is shifting away from a standard historical fee-for-service methodology to a population-level methodology for rates, MassHealth continues to prioritize year-over-year revenue stability for its participating ACOs. Therefore, MassHealth has implemented policies to minimize rate volatility year-over-year. For example, in 2026, the final sub-capitation rate for TINs was set as the higher of: (1) the prior year’s contracted rate and (2) the current year’s population-based, risk-adjusted rate capped at 110% of the prior year’s contracted rate. The only exceptions were instances of practice mergers that greatly affected the practice’s underlying rate drivers.
Going forward, MassHealth will evaluate the approach on an annual basis but will continue to prioritize a policy that minimizes sub-cap rate volatility each year.
7. Clinical Tier Enhanced Payments: Incentivize care delivery transformation
After the individual TIN specific sub-capitation PMPM rate is set, MassHealth adds a clinical tier enhanced payment to support increased investment in primary care and encourage practices to transform their care delivery capabilities. Each practice site attests to a clinical tier (Tier 1, Tier 2, or Tier 3) based on whether it meets a defined set of clinical criteria. Clinical tier enhanced payments vary by tier and by member age, as shown in the table below.
Because a single TIN may include multiple practice sites with different clinical tiers, MassHealth calculates the TIN-level clinical tier enhanced payment as a weighted average of the enhanced payments for the practice sites associated with that TIN weighted on practice site member attribution. This weighted average is then included in the overall TIN-level PMPM rate.
For more details, see the section Care Delivery Transformation.
| 2026 Clinical Tier Enhanced Payments (component of PMPM rate) | Pediatric Members | Adult Members |
|---|---|---|
| Tier 1 | $5.20 | $4.16 |
| Tier 2 | $7.28 | $6.24 |
| Tier 3 | $13.52 | $10.40 |
Putting It All Together
Together, these steps are intended to balance three goals: moving toward a population-based methodology, accounting for meaningful differences across TINs and attributed members, and maintaining predictable primary care revenue for participating ACOs.
