Medicare Direct Contracting Demo Garners Critics and Defenders

WASHINGTON — As the Biden administration continues to move Medicare reimbursement from volume-based payment to payments based on value, officials are expanding those efforts to include providers who care for “traditional” Medicare patients and currently bill under a fee-for-service system.

The new Direct Contracting program, a demonstration program that began under the Trump administration, allows “a broad range of organizations to participate with the Centers for Medicare & Medicaid Services (CMS) in testing the next evolution of risk-sharing arrangements,” according to a CMS fact sheet.

How the Program Works

The program offers three different types of direct contracting models, including “both capitated and partially capitated population-based payments that move away from traditional fee-for-service” and tries to broaden participation to include “organizations new to Medicare fee-for-service, such as physician-managed organizations that currently operate exclusively in the Medicare Advantage program,” according to CMS. These organizations, which could include physician-run accountable care organizations (ACOs), insurance companies, and health systems, would agree to provide care for a certain number of traditional Medicare beneficiaries in a geographic area for a set amount of money.

Liz Fowler, director of the CMS Center for Medicare and Medicaid Innovation (CMMI), which developed the Direct Contracting program, was very clear about the direction the Medicare program is taking. “First and foremost, CMS is committed to the shared goal of moving away from fee-for-service,” Fowler said at the LAN (Health Care Payment Learning & Action Network) Summit last month.

“Our ultimate goal is broader health system transformation that places patients at the center of their own care. And to achieve this goal, we believe beneficiaries have to have an accountable care relationship with their providers,” she continued. “If we reach our goal of moving 100% of traditional Medicare beneficiaries into [accountable care] relationships by 2030, 100% of traditional Medicare payments will be tied to alternative payment models.”

Issues Around Risk-Scoring

However, the program has engendered some controversy. Members of Physicians for a National Health Program protested in front of the Department of Health and Human Services building in November, saying that such a program would end traditional Medicare. Meanwhile, two former CMS officials, including Donald Berwick, MD, who served as acting CMS administrator under President Obama, said the Direct Contracting program could be hacked by for-profit groups who would inflate the sickness of their patients — a measurement known as a “risk score” — in order to get higher capitation payments from Medicare.

Health insurers might do this in part by increasing the risk scores of their 64-year-old commercial insurance patients and then including them as patients in their Direct Contracting program when they sign up for Medicare the following year, because patients can be “auto-enrolled” in the program without their consent. “As we have heard said by industry insiders, ‘There is no bad time to work on risk scores,'” Berwick, along with former CMMI director Richard Gilfillan, MD, wrote in the September 30 issue of Health Affairs. “Overall, it appears that, under current [Direct Contracting] rules, aggressive risk coders might still garner 20%-to-40%” of the program’s profits, despite CMS’s efforts to limit how much risk scores can be increased.

Don Crane, JD, president and CEO of America’s Physician Groups, a lobbying organization for physician-run ACOs, said that most of Berwick and Gilfillan’s criticisms are unfounded, although he agreed that some health plans do try to inflate patients’ risk scores. “We watch with dismay at some of the obnoxious tactics conducted mostly by health plans and their proxy in an undisguised effort to elevate codes,” Crane said during a phone interview at which a public relations person was present. “So we don’t defend that, and if indeed they’re doing something wrong, put them in jail … Anybody that’s defrauding the government ought to be prosecuted.”

However, he added, “in the main, what is going on is a very good thing, which is the identification of patients and their needs — both individual and then the whole population that a group is responsible for. You need to know who your patients are, what their problems are, so that you can group them and do outreach. If you don’t know who your diabetics are, you’re not going to be able to take care of people and certainly that population. So knowing the population is fundamental in any good system.”

Where things can go wrong, Crane said, is when the people at the health plans who perform retrospective chart reviews “scratch their heads and say, ‘Couldn’t we put in a little peripheral vascular disease since most stroke patients also have these other health problems?’ They kind of push the envelope, and it is entirely disconnected from the work of physicians in the physician group … It’s a naked effort to make sure that every ounce of oil put in the car by the mechanic is included in it.”

NAACOS Weighs In

The National Association of ACOs (NAACOS) also has a favorable view of the Direct Contracting program, which it reiterated in a December 16 letter to CMS Administrator Chiquita Brooks-LaSure. NAACOS president and CEO Clif Gaus, ScD, noted that one of the models, the Global and Professional Direct Contracting (GPDC) model, “has come under scrutiny lately from advocates calling for the model to be stopped entirely. We understand a couple of the concerns recently raised, such as not wanting a temporary model to grow too large and wanting the focus of value-based care to be patients as opposed to profits … That said, NAACOS believes stopping GPDC would undermine the country’s move away from a volume-based, fee-for-service system and damage our collective efforts to transition to a value-based payment system.”

“Population health models are sorely needed to incentivize our health system to care for patients’ long-term health needs, and total-cost-of-care models have proven to be superior to other efforts over the last decade in bending the cost curve,” Gaus continued, adding that the “auto-enrollment” feature in which patients are automatically enrolled in the program “is merely CMS’s mechanism for finding where patients have historically sought care and assigning responsibility for patients’ spending and quality to a Direct Contracting Entity (DCE) if patients have most of their primary care from a provider participating in that DCE.”

The model offers more benefits than traditional Medicare, but still allows beneficiaries free choice of provider, “and DCEs must inform patients of their assignment to a DCE,” Gaus said. “This should not be the end of traditional Medicare, as advocates have recently claimed, but is a way to provide additional beneficiary and provider tools as part of a whole-person care approach.”