DIRECT CONTRACTING FAQs

WHAT IS DIRECT CONTRACTING?

For the last decade, the Centers for Medicare and Medicaid Services (CMS) has been developing different ways to transition from fee-for-service (FFS) reimbursement to value-based care (VBC) models. Now, CMS has accelerated this transition by introducing a new model, Direct Contracting, with the explicit goal of furthering the “triple aim” of VBC: improving outcomes, decreasing costs, and increasing patient satisfaction. With this, CMS has committed to moving $1 trillion from FFS to VBC by 2025.

The primary characteristics of the Direct Contracting model are capitation payments that are based on the whole patient rather than on a specific disease state or procedure, simplified quality reporting criteria based on population health measures, and the ability of non-traditional healthcare companies to participate. This model allows DCEs to align their incentives and goals with those of their participating providers: high quality care at sustainable rates.

WHAT IS A DIRECT CONTRACTING ENTITY (DCE)?

A DCE is any organization that is approved by CMS to bear financial responsibility for a population of patients under Direct Contracting rules. DCEs may be insurance companies, healthcare systems, large physician practices, and healthcare services companies.

The DCE bears responsibility for keeping the aggregate healthcare costs of the population of patients at or below what it was predicted to be in an FFS environment. The DCE accepts capitated payments based on total cost of care (TCC) from CMS and distributes payments to participating providers. If the actual TCC is lower than predicted, the DCE receives a percentage of the savings. If the TCC is higher than predicted, the DCE reimburses a percentage of those extra costs to CMS.

This model gives DCEs a powerful incentive to partner closely with participating providers to expand their focus on prevention, overall wellness, and population health. WiseCare will deliver on this partnership by supporting patients outside the provider’s office, giving providers data they need to make strategic care decisions, and delivering benefit enhancements that make sense for patients, caregivers, providers, and their practices.

HOW DOES CAPITATION WORK UNDER DIRECT CONTRACTING?

The payment mechanism for DCEs is capitation—a pre-arranged, fixed amount based on a patient’s anticipated annual, risk-adjusted total cost of care (TCC).

DCEs receive a capitated percentage of the TCC on a monthly basis. They distribute a portion of the capitated payments according to agreements between the DCE and the providers. DCEs can invest other portions of the capitated payments to support both providers and the DCE-covered patients in order to improve outcomes, avoid preventable health conditions and events, decrease TCC, and increase patient satisfaction and engagement.

The percentage of capitation payments received by participating providers is set through an agreement with the DCE, and not mandated by CMS. Providers may have a greater opportunity to improve financial stability and increase total revenues than would have been possible by taking care of the same patients in an FFS environment.

WHAT ARE THE DIFFERENT TYPES OF DCE CONTRACTS?

DCEs can choose from two risk-sharing contract options and a number of participant types. Providers should partner with a DCE that aligns with their philosophy of care and the needs of their practice and patients.

DCEs HAVE TWO INITIAL RISK-SHARING OPTIONS: PROFESSIONAL AND GLOBAL.

Professional Option: The lower risk-sharing arrangement, where DCEs will bear 50% of savings/losses. DCEs receive monthly capitation, a percentage of the risk-adjusted total cost of care benchmark for primary care and any other services provided, up to the total cost of care. Payments to physicians will vary according to the agreement with their DCE.

Global Option: The fuller risk-sharing arrangement, where DCEs will bear 100% of shared savings/losses. DCEs must choose between risk-adjusted capitation payments for primary care only or for the total cost of care. Payments to physicians will vary according to the agreement with their DCE.

PARTICIPANT TYPES OF DCEs:

Standard DCEs are composed of providers who have substantial experience serving Medicare FFS beneficiaries (ie., traditional Medicare, non-Medicare Advantage patients).

New Entrant DCEs are for organizations that do not have experience serving Medicare FFS populations and will rely primarily on voluntary alignment.

High Needs Populations DCEs serve FFS Medicare beneficiaries with complex care needs through the Global risk option. These DCEs are expected to use a model of care such as the one employed by the Programs of All-Inclusive Care for the Elderly (PACE) to coordinate care for their aligned beneficiaries.

MCO-based DCEs service dual-eligible beneficiaries who receive Medicaid benefits through existing Medicaid Managed Care Organizations (MCOs).

Geographic DCEs take responsibility for an entire metro region of all Medicare beneficiaries not already in Medicare Advantage plans. Three to seven Geographic DCEs may be awarded per region and there will be no more FFS traditional Medicare in these areas (launch date TBD).

WHY DO PROVIDERS NEED TO CONSIDER DCEs NOW?

CMS’s $1 trillion financial commitment to VBC and the scale of the Direct Contracting rollout both suggest that Medicare may phase out FFS entirely, making all beneficiaries subject to care management in some way.

Moreover, for practices under the DCE program rules, providers can align with only one DCE, making it vital that practices begin exploring DCE partnerships now. Partnering with a DCE that aligns with a physician’s or practice’s care philosophy and patient needs will have a positive impact on revenue potential and the day-to-day experience of both patients and staff. Practices that commit early will have more negotiating power and a greater say in the benefits they and their patients can receive, which may differ among DCEs.

At this point it is unclear whether practices, systems, or providers who are not part of a DCE application submitted in Spring 2021 will be able to partner with that DCE in 2022. As DCE-provider agreements will be updated annually, it is possible that those not included in the 2021/2022 application will not be able to participate until 2023.

IN HOW MANY DCEs CAN A PRACTICE, SYSTEM, OR PROVIDER PARTICIPATE?

Practices and healthcare systems can be included in applications for and participate with multiple DCEs, but they must use a different EIN/TIN or Medicare Provider Number (CCN) for each DCE.

Practices and systems cannot use the same EIN/TIN/CCN for both a DCE and an ACO/MSSP or other government shared-savings programs. This requirement does not apply during the application period but will take effect at the beginning of the 2022 contract year. Therefore, any conflicting shared-savings programs must be reconciled during December 2021.

Individual providers (those with an individual NPI number) can be included in the application of and participate with only one DCE company. A practice or system can include any subset of their providers in a DCE application.

A DCE-participating provider can continue to maintain Medicare Advantage (MA) contracts, but patients with MA plans will not be DCE beneficiaries.

HOW CAN DIRECT CONTRACTING BENEFIT PROVIDERS AND THEIR PRACTICES?

Direct Contracting’s upfront, per-beneficiary, per-month capitation payments will help improve providers’ financial stability and cash flow. Risk-sharing options have been transformed to increase rewards for providers, as well. Reduced administrative burden, including simplified quality reporting, will allow providers and their staff to focus more on patient care.

Providers who align early will also benefit most in terms of growing their patient base, as Direct Contracting is explicitly designed to align Medicare beneficiaries without primary care providers with such a medical home (ie, primary provider).

In addition, Direct Contracting includes benefit enhancements and patient engagement incentives to further offset risk. Depending on the DCE, these enhancements and incentives could include offerings like home health services with certified nurse practitioners, expanded telehealth benefits, post-discharge home visits, care management home visits, chronic disease management programs and rewards, cost sharing for Part B services, remote patient monitoring, and waivers to facilitate patients’ transition to the most appropriate care settings.

WHAT ARE THE PATIENT BENEFITS OF DIRECT CONTRACTING?

Direct Contracting covers benefits and provides flexibility beyond traditional Medicare, including:

  • Alternative care settings, including telephone, video, and texting
  • Home visits for care management and following discharge from an inpatient facility
  • Meal programs, transportation to medical appointments, and vouchers for over-the-counter medications
  • Vision and dental care
  • Continuity of care support and chronic disease management programs
  • Home modifications
  • Patient engagement, caregiver involvement, and shared decision-making programs
  • No primary care provider networks
  • All costs at or below traditional Medicare

HOW WILL PATIENTS BE ALIGNED TO DCEs?

Beneficiaries will be aligned with the DCE for which their primary clinician is a participating provider. This can happen in two ways:

Voluntary alignment: Beneficiaries elect their primary care provider through electronic or paper-based consent. In the up to ten major metro regions where Geographic DCEs will operate and where all non-MA beneficiaries will be required to participate, DCEs will enroll patients directly through traditional marketing campaigns.

Claims-based alignment: CMS will automatically align beneficiaries to the provider who has provided most of their primary care services over the last two years. This will align the patient with the DCE for which their physician is a participating provider.

WHAT’S THE TIMING OF THE DCE IMPLEMENTATION*?

The deadline for Professional and Global DCE applications is anticipated to be in Spring 2021, though CMS has not yet published the Request for Applications. Applications must include NPI numbers for all participating providers. Although CMS has not yet committed to an application approval date, it is anticipated that CMS will award DCE contracts in June 2021. DCEs and their participating providers approved in 2021 will begin caring for patients on January 1, 2022. Capitated payments for January 2022 and the following months are anticipated to be made within the last week of the preceding month.

*CMS has not yet committed to an application submission approval date. Timing is an assumption based upon best available information at this point.