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News | Value-Based Payment

CMS unveils the Geographic Direct Contracting model

News | Value-Based Payment

CMS unveils the Geographic Direct Contracting model

  • Either providers or health plans can lead new entities that will coordinate care for Medicare beneficiaries in a geographic area.
  • Full or partial capitation payments will replace ongoing fee-for-service payments to partnering providers.
  • The lead entities will have broad payment authorities for their contracted providers.

A third option in the Medicare Direct Contracting model was recently announced, as the launch of the first two versions nears in the spring.

The voluntary Geographic Direct Contracting (GDC) model will allow hospitals and health plans in four to 10 test jurisdictions to take on full risk for the health outcomes of the local fee-for-service Medicare population. Participants will assume 100% two-sided risk for Medicare Parts A and B for those beneficiaries.

The lead organizations, called direct-contracting entities (DCEs), will coordinate care with local providers through their own shared-risk arrangements. DCEs should have “significant experience taking risk in value-based care models” and can be accountable care organizations (ACOs), health systems, healthcare provider groups or health plans, according to a CMS fact sheet. DCEs also can be partnerships between health plans and providers.

Also eligible are Medicaid managed care plans for dually eligible beneficiaries and Medicare Shared Savings or Next Generation ACOs.

DCEs can choose to be paid under either:

  • Total capitation based on 100% of payments to their preferred providers
  • Partial capitation with payments equaling FFS payments to their preferred providers after reductions of between 1% and 50%

DCEs can provide additional downstream payments to their preferred providers, as established in their individual agreements.

Blair Childs, senior vice president for Premier, applauded the model’s inclusion of capitation, enhanced beneficiary tools and the ability to negotiate novel payment arrangements with preferred providers.

“These functions will allow entities to truly reform care delivery and payment approaches,” Childs said.

However, he said CMS should consider allowing health systems and other providers to be DCEs even if they don’t have experience with functions like claims processing and program integrity oversight. Childs also urged allowing providers to propose regions for the model, rather than limiting it to defined regions.

CMS said it will select from among 15 candidate regions that have between 150,000 and 700,00 FFS beneficiaries, including Atlanta, Dallas, Denver and Detroit.

Provider relationships in the new model

DCEs can create a network of preferred providers with which they establish alternative payment arrangements, including prospective capitation and other value-based approaches. Providers in the selected geographic regions can opt out of an arrangement with a DCE and continue to receive 100% Medicare FFS rates.

“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 Administrator Seema Verma said in a release.

Providers in selected geographic areas can enter contracts with multiple DCEs. Preferred providers can be paid through capitation, sub-capitation, quality bonuses, shared savings or any other arrangement agreed to with the DCE.

Contracts between DCEs and preferred providers must include:

  • Agreement attestations by preferred providers
  • Payment terms
  • Optional additional terms and conditions related to other payment and billing rules, care coordination, quality goals and operational functions such as program integrity

DCEs may implement a range of program integrity tools with preferred providers, including:

  • Prior authorization
  • Concurrent or pre-claim review
  • Prepayment claim edits
  • Prepayment and post-payment medical and payment review

DCEs can use the same approach with non-preferred providers, except that mandatory prior authorization may not be included.

Beneficiary provisions in the model

The model authorizes participating providers to offer enhanced benefits, including:

  • Additional telehealth services
  • Access to home care
  • Skilled nursing care without a three-day hospital stay
  • Concurrent hospice and curative care
  • Reduced cost sharing for Medicare Part A and Part B services
  • Part B premium subsidy

DCEs’ coordination efforts can include:

  • Care management services
  • Telemedicine
  • Identifying for beneficiaries which providers have a history of delivering better results and lower costs over the long term
  • Beneficiaries may still choose and change providers at any time, but they cannot opt out of the model.

Model timelines

Prospective DCEs should submit a nonbinding letter of interest to CMS by 11:59 p.m. PT on Dec. 21, 2020. CMS will use the letters to determine participating regions.

CMS plans to issue a request for applications in January 2021 and select model participants by June 30. The first three-year performance period will launch Jan. 1, 2022, and the second on Jan. 1, 2025.

CMS expects to approve three to seven DCEs in each region.

Applications must include:

  • Aggregated historical data as the basis for proposed Medicare payment discounts (a percentage of the region’s performance-year benchmark) in each region
  • Proposed discounts above a regional minimum (expected to be between 2% and 3%)
  • Actuarially sound discounts (with a likely maximum discount of between 8% and 9%)

The previously unveiled Direct Contracting models are scheduled to start their first performance period on April 1, 2021.

About the Author

Rich Daly, HFMA Senior Writer and Editor,

is based in the Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

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