If you have been reading our previous blogs, you will have guessed that we are a big fan of the joint public/private Medicare Advantage (MA) program that is continuing to grow rapidly as part of the U.S. Medicare program. The legacy of The Center for Medicare and Medicaid (CMS) is to continue to explore and pilot new initiatives.
For now, nearly 60 years into its existence, the biggest tools CMS has had were lowering reimbursement rates, bundling services creating greater value and penalizing hospital for readmissions. As we have also mentioned in previous blogs, the industry has tried a few major programs like Accountable Care Organization or ACOs, with overall mixed success.
Now, a new program is launching that will allow for groups of providers, called a Direct Contracting Entity (DCE), to contract directly with CMS to provide lower cost of care to a pool of patients registered under the provider. The goal is to share savings with providers, and possibly reduce the cost CMS pays insurance companies to administer the MA plans. Some insurance companies have partnered with some of these DCE providers approved by CMS. Following is an excerpt directly from the CMS.gov website regarding the Direct Contracting model.
Direct Contracting (DC) is a set of 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 DC 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 DC also leverage innovative approaches from Medicare Advantage (MA) and private sector risk-sharing arrangements.
DC creates three payment model options for participants to take on risk and earn rewards, and provides them with choices related to cash flow, beneficiary alignment, and benefit enhancements. 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. In an effort to further refine one proposed payment model option, CMS is seeking additional input from the public through a Request for Information (RFI) regarding their perspectives on specific design parameters for a Geographic Population-Based Payment (PBP) option.
The DCE program is designed to do risk-sharing or more like shared saving. Some of the programs also have downside risk for the providers, and why many insurance companies for example, Humana® (HUM:NYSE), announced earlier this year that it has become a DCE. Not only is HUM an insurance company, but they also own and operate medical centers under the name Conviva®.
Medicare believes that this program will both align financial incentives of providers to the payor, as well as give beneficiaries of patients more options. In particular, those with complex medical conditions. Medicare plans to add more quality benchmarks to quality measurements – Key Performance Indicators that providers are supposed to be reporting. They will also take precautions to ensure the patient access is not negatively impacted.
In part, the goal is to transition from the Fee-For-Service model of encounter-based payments to a model that provides incentive to the provider to consider the entire patient condition. This is clearly a more holistic approach, something MA Managed Care Companies (MCOs), insurance companies have also been doing since the MA program was started.
Medicare states that it has four (4) key objectives with the DCE program:
- 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.
We continue to be encouraged by the willingness of CMS to evaluate new models, and to explore payment models that incentivize the payor-provider-patient to both control cost and improve quality.
We are not convinced that slicing the solution another way will make the desired impact any more than focusing more on enhancing the MA program that is already working quite well. In part, this new program called “direct contracting,” as with the ACO program, is likely to be stealthy to the patient or beneficiary, and it will generally only provide the currently approved, yet limited, services that Medicare provides. On the other hand, MA programs, have tremendous flexibility on cost structure for services provided, and as we have noted in previous blogs, can include full reimbursement of Medicare Part B premiums, plus many more services not normally allowed in traditional Medicare, the ACO model, or this new program. In an era of growing emphasis on consumerism, we are not convinced that Direct Contracting will move the needle for Medicare beyond the accelerating trajectory of Medicare Advantage. It takes a great deal to impact a program, one with an annual budget of nearly US$800 billion per year, like MA.
The Direct Contracting Program is just now being fully rolled out and the statistics on the program are yet to provide any indication of success. Therefore, it remains to be seen what, if any, positive impact this program will have and how well the stated goals and objectives will be met.
The one upside is that it may be of value to those patients or beneficiaries that have one or more serious chronic illnesses and find private insurance too expensive, too difficult to find a suitable MA, or find Medicare’s protocols too restrictive on allowable treatments. Beyond this possible bright spot, we will watch with curiosity and expectation. After all, in the end, it is all about improving quality of patient “wellness” and reducing the overall cost of delivery of “wellness-care” to the patient.
-Noel J. Guillama, Chairman