Move Over, ACOs. There’s a New Value-based Model in Town

For much of the last decade, providers and payers have been trying to figure out how to make ACOs work and deliver on the promises of value-based care. The results? Let’s call them mixed to middling. Now, with a new decade starting, it may be direct contracting’s turn to be the great hope.

Just before Thanksgiving, CMS announced that requests for applications for Medicare’s Direct Contracting program were available. The agency is calling participants “direct contracting entities,” or DCEs, thereby accreting one more bit of jargon to the vast galaxy of health care jargon. Prospective DCEs have until Feb. 25 to apply to participate in the implementation phase of the program. The first performance year isn’t till 2021, and the deadline for jumping in during that phase will come later this year.

CMS characterizes the Direct Contracting model as a successor to the agency’s Obama-era ACO programs and, in particular, the Next Generation ACO program, which requires ACOs to take on two-sided risk. The agency is testing two risk-sharing arrangements in this program. The lower-risk track, which it’s calling the professional option, involves 50% shared savings/shared losses and primary care capitation equal to 7% of a total-cost-of-care benchmark. How the benchmark will be calculated is complex but, in broad strokes, it will be a blend of the DCE’s historical spending, regional spending, bene­ficiary risk adjustments, and other factors. The other track, which CMS is calling the global option, involves 100% shared savings/shared losses and either the 7% capitation rate that is part of the professional option or “total care capitation,” which would encompass all Medicare Part A and B services provided to the aligned beneficiaries.

Alignment will be both voluntary—meaning that a beneficiary can designate someone as its aligned provider—and claims-based. Quality measurement metrics will come from claims-based metrics and the Agency for Healthcare Research and Quality’s Consumer Assessment of Healthcare Providers and Systems, or CAHPS, for ACOs.

“Benefit enhancements” are an important feature of the Next Generation ACO program. They range from a waiver from the three-day skilled nursing facility rule to coverage for telehealth services to being allowed to offer gift cards to beneficiaries who participate in chronic disease management programs. DCEs will be permitted to go further and offer a variety of wellness, transportation, and drug-discount benefits. To some, direct contracting looks like Medicare Advantage but unmediated by an insurer.

“That’s a big deal,” said Rushika Fernandopulle, MD, co-founder and CEO of the Boston-based medical group Iora Health Care, after the late November announcement. “All of a sudden, people can go in and do essentially Medicare Advantage—full-risk contracting, but directly with the government, which I think is a huge, huge step forward.”

DCEs seem likely to eclipse ACOs in buzz factor, at least in the early going. Even so, the National Association of Accountable Care Organizations was quick to embrace the direct contracting program. The organization announced in December that it was putting together a task force to help “ACOs and other providers navigate the new and unique alternative payment models.” In the prepared statement about the task force, Clif Gaus, the president and CEO of the organization, said: “We are embracing new population health-focused payment and delivery models like direct