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An Introduction to Direct Contracting, One of CMMI’s New Programs

The Direct Contracting Model is a new six-year value-based payment program from the Center for Medicare & Medicaid Innovation (CMMI), which builds on Medicare Advantage, ACOs and commercial best practices, and allows for providers that have historically been excluded from value-based payment programs to participate. Kicking off April 1, 2021 and ending December 31, 2026, Direct Contracting offers a variety of pathways for providers to take on financial risk while being supported by enhanced flexibilities. Organizations that can participate include ACOs, independent practice associations (IPAs), integrated delivery systems, health systems, managed care organizations (MCOs), skilled nursing facilities (SNFs) and health plans. The program ultimately aims to lower annual total costs of care for Medicare and dually-eligible beneficiaries while improving outcomes. 51 DCEs are participating in Performance Year 1 (PY1), which begins today, April 1, 2021.

Below, we provide a high-level overview of the Direct Contracting Model. In our upcoming blog posts, we’ll share what organizations need to succeed in Direct Contracting, and will also answer some frequently asked questions regarding this new program.

Direct Contracting risk options

Risk-based payment models aim to hold providers accountable for better, more efficient care while reducing costs. By taking on more risk and therefore more accountability for a patient’s care, provider profit becomes directly tied to quality of care. The Direct Contracting Model currently has two risk options, and allows for 100% risk sharing – both upside and downside – which is new for CMS and demonstrates CMS’s commitment to the shift to value-based care. In the first risk model, Professional, 50% of savings (upside risk) or losses (downside risk) are shared with CMS. In the second option, Global, 100% of savings or losses are shared with CMS. A third option, Geographic, or “Geo,” has been proposed for inclusion in 2022 but is currently under review.

Ultimately, Direct Contracting offers providers and organizations economic incentive to take care of patients holistically, because they’re not only managing care but are also responsible for the costs associated with that care.

Direct Contracting and ACOs

As the highest risk-sharing program to come from CMS to date, Direct Contracting is an innovative, logical next step on the risk continuum following the NextGen ACO Model. Similar to existing ACO models, Direct Contracting expands the ways in which providers can engage and care for patients outside of pure FFS reimbursement structures. Direct Contracting improves upon the NextGen ACO Model’s benchmarking methodology and risk adjustment. Under the ACO model, top-performing ACOs become the following year’s benchmark – and thus ACOs have to compete against themselves, as well as the top-performing ACO – which is disincentivizing and also draws industry criticism. Direct Contracting incorporates lessons learned, and implements modifications to get away from that dynamic.

Direct Contracting and Medicare Advantage

Direct Contracting encourages more providers to take on increased risk without the red tape, complexities and infrastructure required for a Medicare Advantage plan – while still incorporating some of the best aspects of a Medicare Advantage plan, such as supplemental benefits. Under Medicare Advantage, a beneficiary chooses to join the Medicare Advantage plan, and so can only seek care from providers within that network. Under the Direct Contracting Model, however, the beneficiary is not choosing to leave traditional Medicare, so can seek care from any Medicare provider – not just those in a certain network.

In case you missed it, listen to CarePort CEO and Founder Lissy Hu discuss Direct Contracting in this interview with Managed Healthcare Executive. To learn how CarePort can help your organization succeed under Direct Contracting, please contact us.

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