CMS Announces A New Value-Based Direct Contracting Model

A new direct contracting model from CMS will test whether a geographic-based approach to value-based care can improve quality of care while reducing costs for Medicaid beneficiaries in a specific region.

The Geographic Direct Contracting Model is a voluntary opportunity for healthcare providers and other entities in a region to coordinate the care of Medicare beneficiaries as Direct Contracting Entities (DCEs), CMS explained in an announcement earlier today.

DCEs will take responsibility for the total cost of care for Medicare fee-for-service beneficiaries in their community while implementing region-wide care delivery and value-based payment systems, including capitation payments.

That means, DCEs take full financial risk with 100 percent shared savings and shared losses for Medicare Parts A and B services furnished to beneficiaries in a defined region.

However, providers will also be able to leverage flexibilities unavailable to Medicare providers outside of the DCE, including vouchers for over-the-counter medications, access to meal programs, and other beneficiary incentives. DCEs will also qualify for waivers for the 3-Day Skilled Nursing Facility Rule, home visit rules, and telehealth coverage.

But it is the regional component to the new model that makes it unique compared to other direct contracting opportunities offered by CMS’ Innovation Center (CMMI).

“This model allows participating entities to build integrated relationships with healthcare providers and invest in population health in a region to better coordinate care, improve quality, and lower the cost of care for Medicare beneficiaries in a community,” CMS Administrator Seema Verma said in the announcement.

CMS launched its first direct contracting models in April of last year to provide a wider range of organizations the opportunity to deliver value-based care to patient populations.

At that time, the agency announced two of the three available voluntary risk-sharing payment models – a professional payment option with 50 percent shared savings/losses professional payment and a global payment option with 100 percent shared savings/losses.

The third payment option announced earlier today completes the series of voluntary direct contracting models by adding a geographic-based payment with full financial risk. Under the model, DCEs will take full financial risk for a portion of all the Medicare fee-for-service beneficiaries living in a geographic area rather than only the beneficiaries seeing providers within the DCE.

CMS believes the direct contracting models will lead to more significant cost savings compared to its predecessor, the accountable care organization (ACO).

The direct contracting models build on CMS’ accountable care initiatives, including the Shared Savings Program and the Next Generation ACO Model, but the models are designed to appeal to a broader range of physician practices and other organizations with experience taking on financial risk, such as  Medicare Advantage plans, and Medicaid managed care organizations.

The models also up the financial risk involved compared to most ACO models run by CMMI, which CMS believes will be the key to direct contracting’s success, particularly with the latest payment option.

“The Geographic Direct Contracting Model is part of the Innovation Center’s suite of Direct Contracting models and is one of the Center’s largest bets to date on value-based care,” CMMI Director Brad Smith said earlier today. 

“The model offers participants enhanced flexibilities and tools to improve care for Medicare beneficiaries across an entire region while giving beneficiaries enhanced benefits and the possibility of lower out-of-pocket costs. By initially testing the model in a small number of geographies, we will be able to thoughtfully learn how these flexibilities are able to impact quality and costs,” Smith stated.

CMS plans to launch the Geographic Direct Contracting Model in 2022, with two three-year performance periods. Applications for the model’s first performance period should be available in January 2021.

Providers in 15 major core-based statistical areas are encouraged to apply. Those areas include Atlanta, Dallas, Denver, Detroit, Houston, Los Angeles, Miami, Minneapolis, Orlando, Phoenix, Philadelphia, Pittsburgh, Riverside, San Diego, and Tampa.

Participants in the model, including health plans, must be covered entities under the Health Insurance and Portability Accountability Act (HIPAA).