Realizing Value: CMS Direct Contracting Can Improve the Health of Your Patients and Your Practice

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

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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

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The science of succeeding as a DCE requires successful management of your financial risk, which centers around four core disciplines:

Expertise in CMS benchmarking, capitation and risk adjustments will inform not just how to manage changes in revenue under a prospective model, but also how your DCE partners with downstream providers and assesses investments to enhance beneficiary engagement and better coordinate the cost and utilization of care.
While claims will continue to be submitted to CMS in Direct Contracting, DCEs are also required to determine and administer payments appropriately to their downstream providers and suppliers.4  Leveraging the proper people, processes and technology to accurately compensate your downstream providers can reduce administrative burden.
In a volume-based payment model, you may not see patients until they’re sick, or when it’s time for their annual physical or to refill maintenance medications. In a value-based payment model like Direct Contracting, proactive outreach to beneficiaries will help you monitor their health status, support them in getting the right care at the right time and potentially reduce fragmented or excess utilization of healthcare resources.
While Direct Contracting will require tracking of a smaller set of quality measures than other value-based programs, to be successful in these models, DCEs must continue to demonstrate improvements in quality of care and health outcomes. The proposed set of core measures include Consumer Assessment of Healthcare Providers and Systems (CAHPS®) surveys for ACOs, as well as claims-based measures related to unplanned admissions for patients with multiple chronic conditions and re-admissions for all conditions.5 Since CMS will withhold a portion of your prospective payments until after the performance year has ended, you will want to track your performance against these measures throughout the performance year.

Importance of Patient Engagement, Care Management and Physician Engagement

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Like the science, the art of succeeding as a DCE centers around four core disciplines: patient engagement; care management; network management; and physician engagement.

As you evaluate your ability to succeed under these payment models, if your organization doesn’t possess these four competencies, you may choose to partner with someone who has experience and knows how to successfully manage the financial risk inherent in all types of value-based payment models.

The payment model options under Direct Contracting emphasize voluntary alignment, empowering beneficiaries to choose the health care providers with whom they want to have a care relationship. Patients aren’t required to use your practice. So, it’s up to you to engage patients in their care and ensure the best possible experience.
For the patients your organization serves, it’s up to you to provide the right level of care in the right setting at the right time. You want to provide care to your patients that leads to the best health or clinical outcomes at the lowest cost.  Proactive care management will be critical to engage each beneficiary in their care plans. With patients and providers actively engaged, your organization will have the greatest opportunity to manage the cost and quality of their overall care.
As a DCE, you’re accountable for the cost of care for your Medicare FFS patients. For those participating in the Global payment model, effective governance across your network is critical to appropriately managing the health of your beneficiaries across the covered continuum of care. You must be extremely deliberate in building and managing your DCE and choosing the best partners as your participating and preferred providers.
Physician alignment on the clinical and financial objectives of your DCE is important to keep beneficiaries as healthy as possible while proactively and effectively managing the utilization of high-cost medical care.


Positioning your Organization for Value-Based Care Success
Organizations that master the art and science of becoming a successful DCE will position themselves for success in other risk-based programs, including those models offered by commercial health plans in the private sector.

Your patients’ health and the health of your physician organization will depend on your success in managing care in risk-based models, as the delivery system continues its slow but steady and necessary progress toward value-based reimbursement.

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