Direct Contracting Model Options

Update: December 20, 2019: The application tool is now open. Please apply at https://app1.innovation.cms.gov/dcrfa/dcrfaLogin. Applications for the implementation period are due by Tuesday, February 25th, at 11:59 PM EST.

The application for organizations interested in starting in the first performance year will open in Spring 2020.

Direct Contracting is a set of three voluntary payment model options aimed at reducing expenditures and preserving or enhancing quality of care for beneficiaries in Medicare fee-for-service (FFS). The payment model options available under Direct Contracting create opportunities for a broad range of organizations to participate with the Centers for Medicare & Medicaid Services (CMS) in testing the next evolution of risk-sharing arrangements to produce value and high quality health care. Building on lessons learned from initiatives involving Medicare Accountable Care Organizations (ACOs), such as the Medicare Shared Savings Program (MSSP) and the Next Generation ACO (NGACO) Model, the payment model options available under Direct Contracting also leverage innovative approaches from Medicare Advantage (MA) and private sector risk-sharing arrangements.

The payment model options are anticipated to appeal to a broad range of physician practices and other organizations because they are expected to reduce burden, support a focus on beneficiaries with complex, chronic conditions, and encourage participation from organizations that have not typically participated in Medicare FFS or CMS Innovation Center models.

A key aspect of Direct Contracting is providing new opportunities for a variety of different organizations (Direct Contracting Entities or DCEs) to participate in value-based care arrangements in Medicare FFS. In addition to organizations that have traditionally provided services to a Medicare FFS population, Direct Contracting will provide new opportunities for organizations without significant experience in FFS to enter into value-based care arrangements.

Under Direct Contracting, there will be three types of DCEs with different characteristics and operational parameters. These three types of DCEs are:

  1. Standard DCEs - DCEs comprised of organizations that generally have experience serving Medicare FFS beneficiaries, including Medicare-only and also dually eligible beneficiaries, who are aligned to a DCE through voluntary alignment or claims-based alignment. These organizations may have previously participated in section 1115A shared savings models (e.g., Next Generation ACO Model and Pioneer ACO Model) and/or the Shared Savings Program. Alternatively, new organizations, composed of existing Medicare FFS providers and suppliers, may be created in order to participate in this DCE type. In either case, clinicians participating within these organizations would have substantial experience serving Medicare FFS beneficiaries.
  2. New Entrant DCEs - DCEs comprised of organizations that have not traditionally provided services to a Medicare FFS population and who will primarily rely on voluntary alignment, at least in the first few performance years of the model. Claims-based alignment will also be utilized.
  3. High Needs Population DCEs - DCEs that serve Medicare FFS beneficiaries with complex needs, including dually eligible beneficiaries, who are aligned to the DCE through voluntary alignment or claims-based alignment. These DCEs are expected to use a model of care designed to serve individuals with complex needs, such as the one employed by the Programs of All-Inclusive Care for the Elderly (PACE), to coordinate care for their aligned beneficiaries.

Background

Organizations have expressed interest in a model that draws upon private sector approaches to risk-sharing arrangements and payment with reduced administrative burden commensurate with the level of downside risk. The payment model options available under Direct Contracting take significant steps toward providing a prospectively determined revenue stream for model participants. Relative to existing initiatives, the payment model options also include a reduced set of quality measures that focuses more on outcomes and beneficiary experience than on process. By providing flexible payment model options with regard to, for example, risk-sharing arrangements, financial protections and benefit enhancements, CMS expects that the payment model options under Direct Contracting will be attractive to NGACO participants, as well as organizations that have experience with risk-based contracts in MA, but have not to date participated in Medicare FFS or CMS Innovation Center models.

The payment model options available under Direct Contracting are expected to increase beneficiaries’ access to innovative, affordable care while maintaining all original Medicare benefits. A model participant in any one of the payment model options available under Direct Contracting, a DCE, may offer benefit enhancements and certain additional services to beneficiaries with no requirement that beneficiaries accept these benefits or services. Relative to existing CMS initiatives, the payment model options place an emphasis on voluntary alignment, empowering beneficiaries to choose the health care providers with whom they want to have a care relationship. The payment model options also aim to improve beneficiaries’ experience of care by reducing administrative burdens on practitioners, so that they can focus on what is most important, spending time with patients.

Model Details

The payment model options available under Direct Contracting seek to reduce program expenditures and improve quality of care and health outcomes for Medicare beneficiaries through alignment of financial incentives and an emphasis on beneficiary choice and care delivery while maintaining access to care for beneficiaries, including patients with complex, chronic conditions and seriously ill populations. Specifically, to help ensure that care quality is improved and beneficiary choice and access are protected, CMS will tie a meaningful percentage of the benchmark to performance on quality of care, while also monitoring to ensure that beneficiaries’ access to care is not adversely affected as a result of the model.

The new payment model options also present an opportunity to test novel methods for organizations to manage Medicare FFS expenditures. Further, through refinements in CMS benchmarking methodology and risk adjustment, CMS is aligning financial incentives to attract organizations that manage the complex chronic, and seriously ill beneficiary populations.

Payment Model Options' Goals

The payment model options available under Direct Contracting aim to reduce expenditures while preserving or enhancing quality of care for beneficiaries. By aligning financial incentives, providing a prospectively determined and predictable revenue stream for participants, and putting a greater emphasis on beneficiary choice, the payment model options aim to:

  • Transform risk-sharing arrangements in Medicare FFS by offering both capitated and partially capitated population-based payments that move away from traditional FFS.
  • Broaden participation in CMS Innovation Center models by allowing model participation by organizations new to Medicare FFS, such as physician managed organizations that currently operate exclusively in the MA program, Medicaid MCOs that provide Medicaid benefits for full-benefit dually eligible beneficiaries, and innovative, new organizations that seek to assume responsibility for Medicare FFS beneficiaries in a geographic target region.
  • Empower beneficiaries to engage in their care delivery through voluntary alignment and potential benefit enhancements.
  • Reduce provider burden to meet health care needs effectively, through for example, a smaller set of core quality measures and waivers to facilitate care delivery.

The payment model options available under Direct Contracting are expected to increase beneficiaries’ access to innovative, affordable care while maintaining all Original Medicare benefits. A model participant in any one of the payment model options available under Direct Contracting, referred to as a Direct Contracting Entity (DCE), may offer benefit enhancements and certain additional services to beneficiaries with no requirement that beneficiaries accept these benefits or services. Relative to existing CMS initiatives, the payment model options place an emphasis on voluntary alignment, empowering beneficiaries to choose the health care providers with whom they want to have a care relationship. The payment model options also aim to improve beneficiaries’ experience of care by reducing administrative burdens on practitioners, so that they can focus on what is most important, spending time with patients.

Participation Options

There are two voluntary risk-sharing payment model options as well as a third payment model option for which CMS will release more information later this year:

  1. Professional offers the lower risk-sharing arrangement—50% savings/losses—and provides Primary Care Capitation, a capitated, risk-adjusted monthly payment for enhanced primary care services.
  2. Global offers the highest risk sharing arrangement—100% savings/losses—and provides two payment options: Primary Care Capitation (described above) or Total Care Capitation, capitated, risk-adjusted monthly payment for all services provided by DC Participants and preferred providers with whom the DCE has an agreement.

The Professional and Global options aim to attract a range of health care providers operating under a common governance structure, with attention given to advancing primary care as a means to better managing health care overall. CMS expects that the use of voluntary alignment will attract organizations that previously were ineligible because of their low volume of Medicare FFS beneficiaries, such as organizations that currently operate in the MA program. Each payment model option includes features aimed at encouraging organizations focused on care for patients with complex, chronic conditions, and seriously ill populations to participate.

Current Medicare ACOs interested in continuing and deepening their participation in Medicare risk arrangements will be eligible to participate in all three payment model options.

The payment model options available under Direct Contracting will start in 2020 with an initial implementation period for organizations that want to align beneficiaries to meet the minimum beneficiary requirements. Five performance years will follow, beginning in January 2021. The Request for Applications (RFA) (PDF) is now available.

Direct Contracting will be an Advanced Alternative Payment Model (APM) starting in its first performance year (2021).

Participant Selection

The CMS Innovation Center is requesting a Letter of Intent (LOI) from organizations interested in either the Professional or Global options. While submitting a LOI will be required in order to apply, a LOI will not bind an interested organization to participate. Failure to submit an LOI during the allowed timeframe will result in the organization being ineligible to apply during the application period. The LOI is open for those applicants that did not submit one previously from November 25 through December 10th.

The Request for Applications (RFA) for organizations interested in the Professional and Global options is now available. The RFA describes the eligibility requirements, payment methodology, available benefit enhancements, and selection criteria. The application portal can be found using the link below.

Failure to submit an LOI during the allowed timeframe will result in the organization being ineligible to apply during the application period.

There are two application submission periods: one for applicants interested in participating in the Implementation Period and a second one for applicants wanting to start the model in the first performance year. The application for organizations interested in the Implementation Period will be open from Monday, November 25, 2019 to Tuesday, February 25, 2020. The application for organizations interested in starting in the first performance year will open in Spring 2020.

CMS may entertain additional application rounds for future years for all payment model options.

Information for Interested Stakeholders

CMS will be hosting webinars for Direct Contracting; please continue to check this site for updates. If you are interested in receiving CMS Innovation Center updates, including about Direct Contracting Model Options, subscribe to the CMS Innovation Center listserv.

CMS hosted webinars about the DC Model Options for interested stakeholders:

If you are interested in receiving additional information and updates about the Direct Contracting Model Options, please subscribe to the Direct Contracting Model Options listserv.

Additional Information