The Center for Medicare & Medicaid Innovation designed its direct-contracting program to attract providers that didn’t take part in its accountable care models. Experts predicted the model’s financial terms would entice new provider organizations.
The Medicare Shared Savings Program “had a core problem: If you did not have an established patient base, you could not be an ACO,” said former CMS official Travis Broome, now senior vice president for policy and economics at consulting firm Aledade. Direct contracting appears to solve that problem.
Direct contracting is an evolution of the Innovation Center’s ACO models and offers new waivers, beneficiary engagement tools and other flexibilities. Its participants will be called direct contracting entities instead of ACOs.
But many ACOs could opt out of direct contracting or wait to see how the first group performs before making a decision. The model kicks off in April 2021 and could give Next Generation ACOs somewhere to go after that model sunsets next year.
However direct contracting’s financial terms may not be as rewarding for ACOs that have done well in the Medicare Shared Savings Program or NextGen. Pulling in “new entrants was a big goal of the program, so it’s not shocking to me that it ended up favoring new entrants,” Broome said.
Direct contracting doesn’t give existing ACOs credit for cost savings they created in MSSP or NextGen. “I don’t think (CMS) leadership cares about legacy ACOs with respect to this model,” said former Innovation Center official David Ault, an attorney at law firm Faegre Drinker Biddle & Reath.
The Innovation Center won’t lower spending targets for new providers during the demonstration. Experts said that will allow them to adopt and develop many of the care-coordination techniques before the agency holds them accountable.
The agency would use a similar approach to set benchmarks for an ACO’s voluntarily aligned beneficiaries. And it will rely on a rate book, usually used with Medicare Advantage plans, to list rates for separate regions. This benchmarking approach could be more transparent than the Innovation Center’s standard approach, said former CMS Chief Innovation Officer Dr. Mai Pham, now CEO of the Institute for Exceptional Care.
Experts said provider organizations should consider a wide range of factors when deciding whether to take part in direct contracting, including: their ability to manage risk; their ability to engage beneficiaries; market competitiveness; performance relative to other providers in their region; and alternatives to direct contracting.
Providers with significant Medicare Advantage experience and existing ACOs are well-prepared to manage risk under direct contracting because they already use care-coordination and care-management strategies. Large providers and health plan-affiliated providers could also do well because their size and structure make it easier to manage risk than smaller, more fragmented organizations.
“Those with salaried physicians may have an easier time adopting these direct-contracting cash flow mechanisms,” said Jill Donovan, a principal at consulting firm Leavitt Partners.
She said organizations with strong brands and large populations could use their market position to get traditional Medicare beneficiaries to sign up with them.
“Voluntary alignment pays off big time,” Donovan said. “If you can do that, you can set yourself up for some really strong success in this model.”
A key for providers will be assessing how competitive their market is before deciding whether to join the model. Providers in markets with substantial Medicare Advantage penetration or several competing ACO-like organizations could struggle if their populations overlap with other providers, said Dr. Joshua Liao, medical director of payment strategy for UW Medicine. Those organizations could have trouble engaging their populations and coordinating their care.
“There are some pretty big overlap issues that (the Innovation Center) needs to address,” said Kim Kauffman, direct-contracting project lead at Cano Health, a regional group practice. “For example, I’m standing up this global (direct-contracting entity) with a group in Miami, and I don’t know if there’s (another one) standing up a high-needs model.” That could cannibalize their shared savings.
Groups with recent organizational changes should also proceed cautiously since direct contracting uses recent claims data to prospectively assign beneficiaries to existing ACOs. “If there’s a merger, an acquisition, a splitting out of (tax identification numbers), etc. The past may not predict the future,” Liao said.
Participants might also struggle if they meaningfully over- or under-perform compared to their region because the Innovation Center blends historical and regional performance to set benchmarks under direct contracting.
After providers decide whether they could succeed with directing contracting, they should compare it to their other options, experts said.
Health plan-affiliated providers could use direct contracting as an opportunity to market their Medicare Advantage offerings to traditional Medicare beneficiaries, Pham said. But it’s a bit of a gamble since the Innovation Center caps risk score growth at 3% under the model. Medicare Advantage experience might not translate to direct contracting either. Provider organizations that succeeded in Medicare Advantage often “come into a Medicare fee-for-service ACO program thinking they’ve got it all figured out,” Pham said. “It takes them a while to understand that traditional beneficiaries are (different because) there’s self-selection there. It can be a disaster.”
LegacyNextGen ACOs will likely stay in the program through 2021 since the Innovation Center extended that model by a year due to the COVID-19 pandemic.
Ault said it’s “more of a sure thing.”
The Shared Savings Program could also be a better bet for many providers interested in direct contracting. Pham said direct contracting is a “fine program to hang out in” for some legacy ACOs that have had modest or mixed success because its risk methodology is more generous than shared savings. But the discount is less generous in the later years. “When you get to a 4% or 5% discount, you would have to generate a 20% savings to do better than you would in” shared savings, Pham said. “That’s insane.”
The Innovation Center would like to expand direct contracting long term, Deputy Administrator and Director Brad Smith said at a National Association of ACOs conference in September.
But legacy ACOs need to join to make that dream a reality because direct contracting’s finances could fall apart without them. The Innovation Center would have to “make major changes to the model or kill the model,” if it doesn’t save enough money within the first couple of years, Ault said.
They could be lured in by direct contracting’s flexibilities, like waivers for post-discharge home visits, disease management rewards, cost-sharing support and homebound requirements for certain conditions, said Allison Brennan, NAACOS senior vice president of government relations.
But there’s some question about how and if ACOs could generate additional cost savings. “When you look at ACOs and their year-on-year savings … it doesn’t follow a nice, linear path. You can have savings one year and not the next. I’m not even sure we’ve picked all the low-hanging fruit there,” Liao said.
He added that while existing ACOs have significantly reduced primary-care or non-surgical care costs, many haven’t focused on surgical care. It’s an example of how provider organizations could use direct contracting to focus on new goals rather than continually improve in areas where they’ve already made significant changes, and more investment is likely to create fewer and fewer savings.
The Innovation Center could do several things to make direct contracting more attractive, including: rely more on regional rates to set benchmarks for existing ACOs; reweight historical expenditures; add in cost savings from the MSSP or NextGen; increase the opportunity for shared savings under the professional option; or apply high-needs risk scoring to existing ACOs’ high-needs beneficiaries.
Multiple sources said the details buried in the Innovation Center’s direct-contracting model point to a larger goal to upend fee for service. The Trump administration is less concerned about the “down-in-the-weeds” implications of the model, Ault said. But many experts are optimistic about direct contracting’s future, despite the practical concerns.
“I am bullish on the model,” Cano Health’s Kauffman said.
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Direct contracting favors new entrants over existing ACOs - Modern Healthcare
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