Direct Contracting Model Options

Update: The Center for Medicare and Medicaid Innovation (Innovation Center) is excited to announce that 51 Direct Contracting Entities (DCEs) are participating in the Implementation Period of the Direct Contracting Model for Global and Professional Options, which runs from October 1, 2020 through March 31, 2021. The Innovation Center has also accepted applicants seeking to begin participation in Performance Year 2021 (PY2021). Once participation in PY2021 has been finalized in April 2021, subject to the signing of the Participation Agreement, the Innovation Center will publish a list of all PY2021 participating DCEs (including DCEs continuing participation from the Implementation Period and DCEs beginning participation in PY2021).

Direct Contracting is a set of three voluntary 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 four types of DCEs with different characteristics and operational parameters. These four 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.
  4. MCO-based DCEs - DCEs that manage the Medicare FFS expenditures of full-benefit dually eligible beneficiaries who receive Medicaid benefits though a Medicaid Managed Care Organization (MCO). Each MCO-based DCE will be a Medicaid MCO (as defined in Section 1903(m) and 42 CFR § 438.2) or a legal entity affiliated with such an MCO under common ownership (i.e., at least partial ownership by the same parent entity, where that parent entity also has a controlling interest). These MCOs already bear financial risk for the costs of furnishing Medicaid benefits under the Medicaid managed care contract, so by accepting Medicare FFS risk under Direct Contracting, the MCO – or the legal entity affiliated with the MCO, if applicable – will take greater accountability for total cost of care for aligned dually eligible beneficiaries (i.e., accountability for both Medicaid and Medicare Parts A & B services, excluding any services carved out of the Medicaid benefit by the state).

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 beneficiary engagement initiatives to beneficiaries with no requirement that beneficiaries accept these benefits or services. Relative to prior 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, and Medicaid MCOs that provide Medicaid benefits for full-benefit dually eligible beneficiaries.
  • 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 beneficiary engagement incentives.

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 beneficiary engagement incentives to beneficiaries with no requirement that beneficiaries accept these incentives. Relative to prior 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:

  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 Participant Providers 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 previously 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 either of the two payment model options.

The payment model options available under Direct Contracting began in 2020 with an initial implementation period for organizations that want to align beneficiaries to meet the minimum beneficiary requirements prior to the start of the first performance year. Six performance years will follow, beginning in April 2021.

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

Participant Selection

The application period for Performance Year 1 (PY1) has closed. PY1 applicants have received their participation notification. In early 2021, the Innovation Center expects to release a Request for Applications (RFA) for all Professional and Global DCE types, including MCO-based DCEs. This will be the second RFA for Global and Professional Direct Contracting and the first RFA to include MCO-based DCEs. MCO-based DCEs will begin participating in the model in January 2022.

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.

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

For any questions, please email the Direct Contracting Model team at DPC@cms.hhs.gov.

Additional Information

Financial Methodology

Last updated on:
01/08/2021