November 27 2019 Erik Fiske

Direct Contracting: CMS takes its next bold step in value-based care, but the clock is ticking

After months of waiting, the Center for Medicare & Medicaid Innovation (CMMI) released details on the Direct Contracting Payment model options on Monday via a Request for Application. The 100-page document tells us many details about the model but leaves several key questions unanswered. Below, we share a summary and first reactions. We’ll be following up in the coming days with additional perspectives as we more thoroughly interpret the details. Join us online next Tuesday, December 3rd to discuss the details and strategic implications of the models.

Key Takeaways:

  • Details of the Professional and Global Model options released, but not Geographic
  • There are Two Application Windows: (1) Implementation: Optional. It begins now and closes on February 25, 2020. (2) Performance: Application in the spring of 2020. This application applies to the 2021-2025 performance period.
  • Program Parameters Differ depending on an organization’s designation into ‘Standard’, ‘New Entrant’ or ‘High Needs Population’ Contracting entities. Beneficiary alignment, benchmarking methodology, and payment mechanisms differ for each type of entity.
  • Competition is more center-stage than in previous models, including both voluntary beneficiary alignment and extra incentives for high performers.
  • Capitation Payment and Benchmark amounts are determined by methodologies that differ based on patient types and an organization’s designation. CMS has a reconciliation period after each performance year, similar to shared savings. Global Participants must choose their capitation structure.
  • Progressive improvement is expected, as benchmarks and capitation payment parameters ramp over the five performance years.
  • Risk Adjustment details have not yet been released, CMMI assures us these details will be released in a more detailed financial methodology document prior to the end of 2019.
  • “Withholds” from monthly capitation amounts and reconciliation create complexity in forecasting performance and financial administration.
  • 14 Quality Measures that are mostly CAHPS measures, including one new measure focused on days-at-home for entities with high-needs populations. Pay-for-reporting in year 1.

The Direct Contracting model represents an exciting step in CMS’ progression towards value-based care. It builds on the momentum of and applies lessons learned from the shared savings programs. It intends to promote the delivery of integrated care for patients and a better professional experience for providers. It allows the ACO community to continue pushing the envelope in innovative care models.

However, the permutations of Direct Contracting broaden the range of decisions that organizations have before them and the level of risk magnifies the ramifications of these decisions. These decisions should therefore increasingly rely on precise analysis rather than approximations.

The clock is ticking. ACOs, Risk-Bearing Entities, providers must convene their governing bodies and make participation decisions by April of next year. The decision is most acute for current NextGen ACOs, as they will need to decide between Direct Contracting and Pathways.

Did CMS get it right? Join us online on December 3rd and December 19th to get questions answered, hear our interpretation, and discuss your thoughts.

This article was originally published on LinkedIn on November 27, 2019, by Erik Fiske. You can find the article here.

Erik Fiske

Erik is an Associate Director on the Clinical Transformation & Implementation team.

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