Direct Contracting Gains Attention: Sg2 Answers Your Questions on the New CMS Model
Editor’s Note: Sg2 Associate Principal Kristin Oberfeld contributed to this post.
Direct Contracting, one of the newly released CMS payment models, has set the health care provider space abuzz. This comes during a time of many other new and active payment models (which you can read about in my previous post):
- Bundled Payment for Care Improvement Advanced application cycle for the last opportunity to enter has passed.
- Medicare Shared Savings Program (MSSP) Pathways to Success notice of intent to apply is closed for this year.
- New mandatory models have been proposed (Radiation Oncology and End-Stage Renal Disease Treatment Choices).
- Other potentially revolutionary models (Emergency Triage, Treat and Transport) were announced.
And we expect more to come. Yet, Direct Contracting is still all the rave with our members, along with other organizations we speak to—it is a topic everyone is interested in. Since this new model is on everyone’s radar, we decided to share the questions we are receiving and Sg2’s insights on the model. Here goes!
What is Direct Contracting?
Direct Contracting is a Shared Savings model designed after the Next Generation Accountable Care Organization (ACO) model while integrating attributes of Medicare Advantage. Most importantly, to be eligible to apply, a nonbinding letter of intent (LOI) must be submitted by August 2, 2019.
Right now, there are 2 track choices for Direct Contracting (more on a third track later below). Both tracks are an ACO structure using a TIN/NPI combination (which is like Next Generation ACO but differs from MSSP). This structure is very important related to MACRA Qualifying Participant thresholds, as well as to your general strategy. Both tracks also generally require a minimum of 5,000 beneficiaries (which is less than the 10,000 required in Next Generation ACO and the same as the 5,000 required for MSSP).
Professional Population-Based Payment (PBP) Track
– 50% shared savings/losses
– Primary care provider capitation set at 7% of total cost of care
Global Population-Based Payment Track
– 100% shared savings/losses
– Choice between 2 levels of capitation: total care or primary care
How does it differ from CMS’s other ACO models?
We don’t have all the model details yet (we expect more with the request for applications), which means we can’t provide a comprehensive list of how Direct Contracting differs from the MSSP and Next Generation ACO models. We do know, though, that this is now CMS’s highest risk-and-reward, population-based model given that Next Generation ACO is no longer accepting new participants. It also requires capitation, which is different from any other CMS ACO model. However, we’ve seen many of the described mechanics of the model before.
And for those of you who got scared when you saw “capitation,” take a deep breath—this is not the capitation we saw in the 1990s! We’ll get to that in a moment, but with this model, CMS is also building on prospective attribution with enhanced voluntary alignment, which appears to correct a few of the challenges faced with ACO attribution in the past.
Isn’t there a third option/track?
Yes, but the Geographic Population-Based Payment option is currently in the request for information stage and is not open for letters of intent. We have fewer details about this option, but CMS says it will be open to health systems and alternative companies from industries such as insurance and technology. It sounds a lot like Medicare Advantage for Medicare fee-for-service (FFS) beneficiaries right now, but potentially without many of the Medicare Advantage mechanisms to control costs (eg, health maintenance organization structure, benefit design, network controls). No matter what, it could be a game changer: just imagine if [enter the name of a major insurance company in your market] is now controlling Medicare Advantage and Medicare FFS in your region, among other things…
Okay, but don’t forget—you said “capitation”?!
Yes, we said it. And that’s what CMS is calling it. But for those who have worked with capitation over the course of your career, this really doesn’t feel like capitation, assuming CMS structures it the way that it sounds. We do have history to base some of this on, but what it ultimately looks like is still unclear until CMS provides more information.
That said, the “total care capitation” offered in the Global PBP track looks and feels like Next Generation ACO’s all-inclusive PBP (AIPBP), which became available in 2017 as an alternative payment mechanism in that model. This is where it gets tricky, though. We’ve talked with many Next Generation ACO participants—some ACOs we actively work with and some we tapped for information—and as of 2018, only 2 Next Generation ACO participants haven taken advantage of the AIPBP. Thus, while we know how it works, there aren’t many organizations that actually have experience with it. Here’s the deal on capitation as it is used in the Next Generation ACO AIPBP:
- This is not an actuarially based, age/sex-adjusted per member per month. This is more of a “get a stable revenue stream” model ultimately reconciled to actual FFS. Think training wheels for capitation. Here’s how it works: based on your ACO participants and optionally preferred providers where you have agreements for this arrangement, CMS calculates payments made for a calibration year (the previous year). This amount is paid out to your ACO (or in the Direct Contracting model, your Direct Contracting Entity [DCE]) in the form of capitation-like payments. Those payments are then reconciled to actual FFS. If CMS underpaid you based on your actual claims submission, they will owe you additional money; if they overpaid you, you owe them. This is in addition to your shared savings reconciliation.
- You still have to submit claims.
- The structure of your ACO in terms of participants determines and provides flexibility for the degree of capitation you will receive. If you do not want “institutional cap,” don’t include institutions (eg, hospitals) on your participant list.
- In addition, CMS has said that they will allow DCEs to negotiate discounted rates with preferred providers, and the difference will be paid to the DCE. This is also similar to a current Next Generation ACO alternative payment mechanism and offers benefits that are not available in MSSP.
We’re interested—do we have to terminate our current MSSP or Next Generation ACO?
Yes, eventually. Due to the financial structures involved in these programs, you can’t really be in both at once (unless you are going to operate 2 separate ACOs with different primary care physicians, etc). However, you have time—and we advise you to be thoughtful.
The Direct Contracting model will use 2020 as an attribution year. Therefore, there is no risk and no “capitation” in 2020. It will not qualify as an advanced alternative payment model (aAPM) until 2021. So, those of you in MSSP or Next Generation ACO, you will need 2020 to qualify for aAPM or MIPS APM status. That said, CMS has not provided full information of how it could work for those looking to make the change and still keep existing ACOs for 2020.
So, what do we do next?
In a conversation this week, a current Next Generation ACO participant said “We like Next Gen, but we just finished our application for Pathways (MSSP) to start January 1, 2020, and we already submitted our LOI for Direct Contracting.” In other words, a good way of thinking right now is to keep your options open until we have the information to develop a full picture of options and formulate the best strategy.
Thus, if you’re interested in Direct Contracting, submit your LOI by August 2. You can also download our exclusive resources on Direct Contracting, as well as other aAPMs, by filling out the form below, and reach out to us for help.
Meanwhile, send us an email with your questions and insights—we’d love to hear from you about your interest/plans related to this model. Plus, we have many other thoughts we couldn’t fit in this post!
Fill out the form below to download exclusive resources on Direct Contracting and other aAPMs.