January 5, 2022
Launched in April of 2019, and starting its first performance year this spring, Direct Contracting is a new, multi-faceted ACO program offered by Medicare. If you have questions about what the program would mean for your practice, and what tradeoffs you’d face, this blog post provides the latest thinking from our team at Aledade.
We need to start with some news, first. On April 8th, the Center for Medicare and Medicaid Services (CMS) announced there will be no new organizations in the Direct Contracting model. This means that the scope of Direct Contracting will be considerably less than envisioned by the prior Administration, with only 53 organizations that had been accepted into the model for April and any previously approved organizations that deferred until January 1, 2022, as well as the recent pause of the of the Geographic Model that we discuss in more detail below.
Keep reading for more information on this new and rapidly changing program.
In Summary: Direct Contracting is designed to appeal to organizations that are either new, and therefore have very few existing primary care relationships, and/or organizations that highly value primary care capitation. While every practice’s situation is different, if your practice does not fall into one or both of those buckets, the Medicare Shared Savings Program (MSSP) is more likely to be the right value program for you. Direct Contracting’s “newness” means that many uncertainties remain with respect to its downstream effects on practices. Conversely, the MSSP offers primary care practices a tried-and-true path to shared savings and financial independence.
What actually is the difference between Direct Contracting and MSSP?
To participate in Direct Contracting, a primary care practice partners with a group certified by CMS, called a “Direct Contracting Entity,” or DCE. This partnership is crucial to understanding what Direct Contracting means for your practice. CMS gives DCEs a lot of freedom in how they pay for health care services provided by your practice to traditional Medicare patients. Some, and possibly all, of your daily Medicare revenue will flow through the DCE and be governed by your relationship with the DCE (not CMS directly). This is fundamentally different than being in an MSSP ACO. In MSSP, your direct relationship with Medicare is fully retained. Ultimately, the future of your practice becomes tightly tied to your relationship with the DCE; therefore, it is vital to clearly understand the details associated with that relationship, which can vary from DCE to DCE.
The Three Types of Direct Contracting Arrangements
Direct Contracting offers three paths for practices to participate in the program.
- “Professional” or “Pro” – This is the lowest risk option in Direct Contracting (and is still riskier than MSSP and also offers less shared savings). Practices and DCEs share 50 percent of all savings or losses with CMS, and there’s no discount to the benchmark. This path will appeal mostly to practices that desire primary care capitation with the least amount of total cost of care risk possible.
- “Global” or “Glo” – This path is the real alternative to MSSP, where practices and DCEs take on 100 percent of the risk of savings or losses. The benchmark will include a 2 percent discount in their first performance year, rising to a 5 percent discount in years 5 and 6. Combined with a 2 percent enhancement in primary care capitation, a Global DCE would have to outperform CMS benchmark by 4 percent or the DCE would have to write a check back to CMS. By comparison, the average MSSP savings rate for ACO’s in their first year is 1.8 percent. Whether your practice is on the hook for any of those losses depends on your relationship with the DCE.
- “Geographic” or “Geo” – An entirely new concept that does not rely on primary care relationships to determine accountability. In Geo, practices and DCEs take on 100 percent of the risk of shared savings or losses, the discount to benchmark is based on a bidding program, and risk is applied across entire regions (of anywhere from 150,000 to 700,000 fee-for-service Medicare beneficiaries. In other words, the “Geo” model is highly dependent on other providers in the region, and how well your practice stands out from theirs.
IMPORTANT: In March of 2021, CMS announced they would be pulling the Geo model as an option for direct contracting while they review it more closely. While we’re not sure which way CMS will decide to go with this part of direct contracting, it’s a vivid reminder that the program is still changing.
Why MSSP is Still Your Practice’s Best Bet
We’ll emphasize again – every practice’s situation is different. Your practice’s results in Direct Contracting could vary wildly even from the practice down the street. And the pilot program is just starting, so policy adjustments made today could change the results your practice would see in a year, let alone by year five or six. For example, the program has still not decided how they will handle COVID-19’s effects on the benchmarks.
Here’s why we still think that MSSP is a better option for most practices than direct contracting:
MSSP is designed for established primary care relationships.
MSSP is a nine-year-old program with more than 11 million beneficiaries enrolled all across the country. It was created, and has been refined over the years, to reward strong primary care relationships. Direct Contracting was created because MSSP did not have a path for new organizations that do not have existing primary care relationships such as Medicare Advantage-only providers, brand new organizations and health plans.
Direct Contracting is new, untested and only a pilot.
Direct Contracting, on the other hand, is brand new. This means two things – the program can change, and it can change fast. Direct Contracting is operated by the Center for Medicare and Medicaid Innovation, which can unilaterally change programs without your typical public input process – meaning they can make changes nearly overnight that could drastically change your practice’s fortunes in the program. For example, the model started on April 1, 2021, without any concrete public information on how it was going to handle the effects of COVID-19 on 2020 or 2021 costs. The early waters for any new program can be choppy.
Direct Contracting has much higher risk.
If your practice hasn’t participated in value-based care before, we highly recommend taking a look at CMS’s existing MSSP ACO tracks – and possibly the Basic track, which protects your practice from downside risk (at the cost of slightly capping the upside savings you can earn in the short-term). In Direct Contracting, because of the primary care capitation and the discount, you start significantly behind and need to catch up to your benchmark just to break even on total cost of care.
It’s too early to know what the direct contracting benchmark will mean for your practice.
Not only does a “discounted benchmark” make direct contracting a higher risk for your practice, but the newness and complexity of how CMS calculates the benchmark mean that some practices will face significant headwinds from how the benchmark is calculated, and some will get significant tailwinds. It’s still too early to know exactly what kind of practices will be in each group so, for the time being, we think it would be wise to stick with a more predictable program like MSSP.
Value-based care is an exciting arena with new ideas and new programs bubbling up all the time. But when it comes to your practice and your financial independence, some ideas can be too new and too risky.
MSSP, CMS’s flagship value-based care program, is tested and proven. It has returned billions to the taxpayers while helping practices all across the country deliver better, more preventive care to their patients.
We’ve taken a close look at the details and, right now, our honest advice to most practices is to stick to the proven road to value-based care – and when we see a path that is clearly better and is proven to provide better outcomes for your practice, we will help you and your practice take that path right away. Visit Aledade.com to speak to our team and find out which value-based care path is the best for you.