When the pandemic hit in the spring of 2020, patient volumes for healthcare providers dropped dramatically and, along with it, fee-for-service (FFS) revenue. A recent study in Health Affairs estimates that, in 2020, primary care practices will lose nearly $68,000 in gross patient revenue per full-time equivalent physician because of COVID-19.1
“We anticipate large, meaningful reductions in revenue for primary care practices as a result of COVID-19, which may result in financial adversity sufficient to threaten practice viability, should practices be unable to secure adequate funding,” the study’s researchers concluded.
In a recent Perspective in JAMA Internal Medicine, Jennifer DeVoe, M.D., a family practitioner who runs a primary-care clinic affiliated with the Oregon Health & Science University in Oregon, broke down how FFS reimbursement handcuffs her ability to provide proper care to her patients.2 “Healthcare providers should be trusted with a predictable, prospective budget that makes it easier for them to listen to patients and implement plans that include doing less and doing more at the same time,” she said.
What healthcare providers and their patients need is a reimbursement system that rewards physicians for keeping their patients as healthy as possible. CMS’ new Direct Contracting payment models aim to address this dynamic specifically for Medicare FFS beneficiaries.
Medicare Initiates Direct Contracting Payment Models for Medicare FFS beneficiaries
On October 30, CMS announced that 51 Direct Contracting Entities (DCEs) are participating in the first Implementation Period for its new Direct Contracting models. These new DCEs serve Medicare beneficiaries in 39 states, the District of Columbia and Puerto Rico. The October 1, 2020 through March 31, 2021
Implementation Period provides an opportunity for DCEs to prepare for the first Performance Year (PY1) of Direct Contracting, which begins on April 1, 2021.3
Through prospective, capitated population-based payments, these new payment models focus on transforming Medicare FFS, allowing healthcare providers to take greater control of managing the costs of care for an aligned population.1 The payment model options create opportunities for a broad range of organizations to participate, including existing Accountable Care Organizations (ACOs) and providers currently in risk-based contracts with Medicare Advantage (MA).
There are two risk-sharing payment models available:
- Professional Population-Based Payment (PBP), an arrangement which offers lower risk-sharing of 50 percent of savings or losses for enhanced primary care services.
- Global PBP, an arrangement which offers higher risk-sharing of 100 percent of savings or losses, through one of two payment options – one that covers only enhanced primary care services, and another that covers the total cost of care for all services provided by participating and preferred providers with whom the DCE has an agreement.
The primary difference between the two models—Professional or Global—is the amount of risk the provider organization is willing to accept. Both require a minimum number of aligned Medicare beneficiaries, between 1,000 and 5,000 depending on the organization’s experience serving Medicare populations.
As with most value-based payment models, CMS’ goal is to improve the beneficiaries’ quality of care and overall experience. A critical success factor in managing value-based payment arrangements is reducing the administrative burden on physicians, so that they can focus on what is most important-spending time with patients.
If you missed the opportunity to enroll in the PY1 of the Direct Contracting program, the next application period will occur during the first quarter of 2021, for physician organizations that want to join the program on January 1, 2022.
If your organization is considering participation in CMS’ Direct Contracting models, you may need to evaluate your ability to reconcile prospective payments, administer payments to other providers, engage with beneficiaries and measure quality of care, which combined are both an art and a science.
Four Essential Operational Competencies Needed to Manage Risk
The science of succeeding as a DCE requires successful management of your financial risk, which centers around four core disciplines: