Direct Contracting: Preparing for Real Risk

Nigel Ohrenstein, Senior Vice President and Head of Market, Lumeris
Jordanna Davis, President, Rockingstone Group

The Center for Medicare & Medicaid Innovation (CMMI) recently announced its latest value-based initiative, Direct Contracting (DC), a program designed to help providers shift toward delivering high quality, cost-effective care. Building on learnings from prior programs, Direct Contracting opens the door for providers who may not have participated in other CMMI models while also creating the opportunity to provide better coordinated care for Medicare beneficiaries and alleviate administrative burdens.

CMS is accepting application submissions for Direct Contracting through Tuesday, February 25, 2020 for providers and health systems wanting to participate in the Implementation Year. The application period for those wanting to participate in the first performance year will open in Spring of this year.

Pursuing DC could be a catalyst for your value-based care transformation—but it also presents the need for new capabilities and competencies. To be ready, consider the following activities that your organization may need even before applying:

  • Value-based care business strategy advisory
  • Business planning and financial investment analysis support
  • Governance formation and direct contracting entity structure planning
  • Provider delivery network structuring and contracting guidance
  • Provider incentive design, implementation and administration
  • Primary care practice transformation for total cost of care contracts
  • Physician-led primary care education and mentoring
  • Proven clinical programs – complex case management, pharmacy management, risk adjustment, quality gap closure, emergency department and inpatient utilization mitigation
  • Information systems architecture and data aggregation
  • Patient recruitment and engagement strategies

So What is Direct Contracting?

CMS calls Direct Contracting “the next evolution of risk-sharing arrangements to produce value and high-quality health care.” It’s a bold description, but it just might be true.

Direct Contracting is the next iteration in a long line of HHS opportunities for providers to participate in the move to value. Some voluntary and some mandatory, the opportunities have been abundant and sometimes confusing. The multitude, overlap, and demands of these programs have contributed to significant provider fatigue.

However, CMS says Direct Contracting is different. As proposed, Direct Contracting responds to the lessons learned in the Medicare Shared Savings Program (MSSP) and the Next Generation Accountable Care Organization (NextGen) model, and even incorporates approaches from Medicare Advantage and other private risk-sharing arrangements. Other proposed program elements include:

  • Reduced administrative burden regarding quality measures
  • Voluntary alignment and patient alignment strategies
  • Regional Adjustment Factors in the benchmark

Direct Contracting is one of the first CMMI programs that provides the levers to truly manage medical spend and to empower primary care. To get more details on the program, see our paper, Direct Contracting: What should health systems do next?

Managing Risk to Better Serve Medicare Beneficiaries

In creating the program, CMS borrowed from other innovative approaches, such as Medicare Advantage. The monthly capitation allows providers to be both creative and efficient in managing the care plans and services they deliver to their patients. Similar to Medicare Advantage, providers may use these funds to offer behavioral incentives for wellness activities, support services (e.g., nutrition, transportation) or care plan adherence.

Participation allows health systems the chance to better align with a primary care base needed for value-based contracts. Not participating leaves the door open for competitors and new entrants to draw away Medicare beneficiaries. Direct Contracting can provide an opportunity to generate surplus to both reward physicians and reinvest in population health efforts that can better serve beneficiaries and align with the health system’s need to grow a sustainable Medicare business.

Undoubtedly, the time is here to begin a robust transition to risk-bearing models for organizations who have limited to moderate experience.

Is Direct Contracting Appropriate for My Organization?

Who should apply?

  • Provider organizations with experience in CMS’s shared savings programs (e.g., Pioneer, MSSP, Next Gen)
  • Organizations in markets with low Medicare Advantage penetration rates and a significant number of Medicare-eligible beneficiaries
  • Health systems interested in escalating their Medicare strategy commitment—including Medicare Advantage and traditional Medicare

Which track should my organization participate in?

  • For provider organizations with little to no experience in managing risk, the Professional track may be more appropriate
  • The Global track can be a viable option, especially for those that have experience managing Medicare at full risk

For organizations new to managing the premium dollar or who have not previously demonstrated success in value-based programs, a partner like Lumeris with experience in operating full risk contracts can help provide the right tools for success such as:

  • Patient-centered, evidence-based clinical programs
  • Care coordination and care management tools and programs
  • Comprehensive physician engagement
  • Proactive beneficiary outreach tactics
  • Actionable health information within the physician’s workflow to produce timely interventions
  • Physician payment that’s aligned with overall goals
  • Governance structure

As a vehicle to jumpstart or augment a health system’s Medicare business, Direct Contracting could provide a real platform for value-based success. Provider organizations should expect competitors and new entrants to be looking deep into their respective markets, so organizations must do their homework as well. Health systems have an opportunity to lead the transformation of the health care system. For additional program details, see our paper, Direct Contracting: What should health systems do next?

Do not wait for the transformation to happen to you—contact Lumeris to see how we can help your organization succeed.

Not sure where to start? Talk to one of our advisors.

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