Direct Contracting is a healthcare purchasing strategy that goes back several decades. Large employers with self-funded health entered into agreements with health systems and clinicians to provide healthcare services for their employees and families under prenegotiated (generally with discounted rates) arrangements. Today it has become a widely utilized strategy for many large companies while it is also growing in popularity with more medium and even smaller employers. Direct Contracting is really about value not just price, as it often involves the use of high performing networks and centers of excellence. Large employers such as Walmart and Boeing have contributed much to the profile of this strategy.
Accountable Care Organizations (ACOs) have gained popularity as a leading value based initiative particularly with high needs populations. Medicare ACOs came into being in 2011 as part of the Affordable Care Act. While there are some overlap in strategies with direct contracting (i.e. high performing networks), ACOs have focused more on minimizing utilization through improving outcomes. Pricing with traditional Medicare beneficiaries is fixed through established fee schedules. There are roughly 500 Medicare ACOs in the country who collectively save the nation billions while improving the health of the populations for which they are responsible.
Medicare DIrect Contracting (MDC) is the next evolution of value driven healthcare programs. In simplist terms MDC combines price negotiation of direct contracting with the outcomes driven initiatives of ACOs. Medicare has equipped these Direct Contracting Entities (DCEs) who are namely ACOs and similar organizations with new tools that allow for price negotiation, new payment models and beneficiary enhancements to incentivize behaviors leading to improved outcomes. Through capitation for primary care participating providers and negotiated reductions for preferred providers, Medicare hopes to expand on the successes of the ACO program. The "Global" and "Professional" models began on April 1, 2021, while a large scale regional "Geographic" model is currently being evaluated.
Total care capitation is available with the Global model. It enables DCEs to create their own payment arraagements and rates with its participating and preferred providers.
Primary Care Capitation, available with the Professional model, allows DCEs to develop unique payment arrangements or discounts with their physicians and preferred providers.
DCEs can negotiate discount with preferred providers or unique payment methodologies. Beneficiaries are free to use any provider, but DCEs can offer in-network enhancements.
Beneficiary enhancements include: expanded telehealth, post-discharge & care management home visits, 3-day SNF waiver, rewards, cost sharing, NPP certification, homebound waiver and concurrent care.
Beneficiaries may select inclusion through voluntary alignment, which takes precedent over passive enrollment. We foresee competition for traditional beneficiaries much like the Medicare Advantage program.
The "Geo" DC model will include the passive enrollment of traditional beneficiaries in select regions. These DCE which will include MCOs and Helath Plans are likely to accellerate the evolution of the DC Model.
This is the most authoratative site for up-to-date information about the program. It includes numerous documents and presentations about the DC model.
CMS recently introduced its Geographic "Geo" model. The program is currently being evaluated for its eventual launch.
" CMS Administrator Seema Verma said the model should give participants strong financial incentives to cut costs and boost quality. Unlike the global and professional options, participants would accept full financial risk for all traditional Medicare enrollees in their region. "
"The need to strengthen the Medicare program by moving to a system that aligns financial incentives to pay for keeping people healthy has long been a priority," said CMS Administrator Seema Verma. "This model allows participating entities to build integrated relationships with healthcare providers and invest in population health in a region to better coordinate care, improve quality, and lower the cost of care for Medicare beneficiaries in a community."
CMS to allow managed care organizations to participate in direct contracting
CMS laid out some examples of how an MCO could use the voluntary direct contracting model, including:
CMS Administrator Seema Verma: " The model, which will allow providers to form networks to care for enrollees "
Under the model, healthcare providers -- which CMS calls "direct contracting entities," or DCEs -- will competitively bid to manage 100% of the Medicare Part A and Part B costs for a certain number of Medicare beneficiaries within a geographic region, starting at a minimum of 30,000 enrollees.