What could Direct Contracting changes look like?

As the Centers for Medicare and Medicaid Services prepares to make a decision on the future of Direct Contracting, the agency will have to weigh how it can ease progressives’ concerns about profiteering and answer calls to make the program more provider-focused.

CMS said Sunday that a decision is coming “soon” on Direct Contracting’s future. Physicians for a National Health Program, a group staunchly against Direct Contracting, continues to urge officials to permanently end the entire program, sending the agency a letter on Tuesday.

While canceling the program outright is value-based care advocates’ worst case scenario, many believe that’s unlikely.

Direct contracting entities have invested significantly to participate in the program, according to David Ault, a consultant working with provider groups and direct contracting entities and former head of the Division of Financial Risk for the Center for Medicare and Medicaid Innovation. “If the agency can just go pull the rug out from under them for essentially no real good reason other than politics, it basically kills the Innovation Center,” he said.

If CMMI continues the program, changes to the Global and Professional Direct Contracting model are essentially guaranteed, both to compromise with progressives and because that’s the natural progression of a CMMI model, Ault and other experts said. GPDC builds off previous Accountable Care Organization demonstrations by offering higher levels of risk and greater opportunities for reward. CMMI currently has new applications for the program on pause.

Progressives worry Direct Contracting allows too many non-providers into the value-based care program, and that these entities will prioritize profit over patient care. Direct Contracting was explicitly designed to attract organizations without significant experience caring for fee-for-service Medicare beneficiaries to enter into value-based care arrangements, according to CMMI’s 2020 report to Congress.

But it’s unlikely CMS will limit participation to certain types of entities.

“If you start drawing lines around things, and deeming certain things good and certain things bad, pretty soon you end up with no model participants because you’ve excluded broadly,” said McDermott+Consulting Vice President Mara McDermott, who runs the Value Based Care Coalition.

CMMI could make the model more provider-focused through other means. Direct Contracting proponents and detractors suggested several potential changes to the agency since the model’s creation.

Here’s a sampling of what experts think could happen to the model next:

Increase incentives for provider participation. Provider associations want CMMI to reduce the mandatory discount in the Global track that collects a percentage of an entity’s benchmark so CMS can earn savings from the model. The model eventually implements a 5% discount rate in its fifth performance year, but the National Association of ACOs said in a July letter that CMMI should keep the rate at 2%, which is what the Next Generation ACO used. Next Gen was discontinued because it did not save CMS money. But NAACOS hypothesizes that reducing the discount rate for Global Direct Contracting would generate savings by incentivizing more participation in the model overall.

Bumping shared savings in the Professional track to 75% could also spur more providers to participate, groups say.

Level the playing field. CMMI could change the benchmarking system for earning shared savings. GPDC benchmarking currently favors new entrants to CMMI risk models over organizations that previously participated in ACO tracks. New entrants’ benchmarks are based on Medicare Advantage rate books, while prior participants’ benchmarks are based on their previous efforts to become more efficient. This makes standards higher for these former ACOs.

Put providers in charge. The center could require a direct contracting entity’s governing body to include more physicians to allow concerns about insurer or private equity influence. The current guidelines require 25% of the governing body to be made up of participating providers. CMMI could increase this to 50% or even 75%, said America’s Physician Groups Executive Vice President of Federal Affairs Valinda Rutledge.

Fix risk adjustment. Progressives worry entities could abuse risk adjustment in Direct Contracting. While GPDC places limits on diagnostic coding, those limits have exceptions that can benefit new entrants like insurers or investor-back groups. CMMI could tighten those loopholes or fix other glitches, such as how the current system alters risk adjustment based on how the entire group of entities performed, McDermott said. When traditional providers who aren’t used to coding for risk adjustment are adjusted against entities with lots of practice, the strong coders will have the upper hand, she said.

Limit model size. Sen. Elizabeth Warren (D-Mass.) said during a Senate Finance Committee subcommittee hearing earlier this month that as many as 30 million out of 36 million beneficiaries currently enrolled in traditional Medicare could end up aligned to a direct contracting entity. Ault and others dispute that number, and NAACOS expects the figure will be closer to 2 million or 3 million over the course of the program.

But insurer-led entities that have existing contracts with providers through their MA plans could theoretically incentivize providers to drop their ACO affiliations to join the insurer’s direct contracting entity, bringing with them all their patients. CMMI should cap the size of GPDC at 1.3 million beneficiaries, roughly the size of the Next Gen ACO model, former CMS Administrator Donald Berwick and former CMMI Director and health system executive Rick Gilfillan wrote in Health Affairs. The pair suggest a number of other guardrails CMMI could implement as well.

Rebrand, or clarify. Value-based care stakeholders claim GPDC is essentially an ACO by another name. NAACOS said in a press release accompanying the letter it sent to officials Monday night that a rebranding and name change for GPDC could emphasize the model’s place in the accountable care evolution.

“What you want is CMMI to be flexible and be able to experiment and I think bringing [GPDC] into the ACO family more clearly ties that that’s what we’re doing. We are articulating the destination of the total cost of care delivery system reform movement,” McDermott said.

On the other hand, detractors point out Direct Contracting was created with the express intention of bringing new organizations into traditional Medicare. Berwick and Gilfallin said CMMI should clarify Direct Contracting is its own experiment and not a replacement to ACOs. CMMI should create an alternative path for advanced ACOs that includes capitation, Gillfalin said.