Fact Sheets

Direct Contracting

Direct Contracting

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.

Why develop new payment model options for direct contracting?
Organizations have expressed interest in a model that draws upon private sector approaches to risk-sharing arrangements and payment and reduces administrative burden commensurate with the level of downside risk.  The payment model options available under DC take significant steps toward providing a prospectively determined revenue stream for model participants. Relative to existing initiatives, the payment model options also include a higher 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, we expect that the payment model options under DC  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.

How are the new payment model options expected to transform the health care system?
The payment model options available under DC 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, we 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 and better integrate care delivery for those dually eligible for Medicaid and Medicare, including through coordinated efforts with Medicaid Managed Care Organizations (MCOs).  Further, through refinements in our benchmarking methodology and risk adjustment, we are aligning financial incentives to attract organizations that manage the complex chronic, and seriously ill beneficiary populations.

What are the payment model options’ goals?
The payment model options available under DC 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.

How are the payment model options available under DC expected to achieve these goals?
Through flexible risk-sharing and payment model options that incorporate patient risk factors, the payment model options available under DC are expected to promote greater accuracy of payments and provider accountability for achieving health outcomes.  Benefit enhancements are intended to promote greater beneficiary accessibility to innovative, affordable care.  Further, the payment model options under DC place a greater emphasis on voluntary alignment, empowering beneficiaries to choose the health care providers with whom they want to have a care relationship.

How are beneficiaries and their families or caregivers expected to benefit from the payment model options available under DC?

The payment model options available under DC 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 DC, referred to as a DC 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.

What participation options are available for organizations interested in being a DCE?

There are two voluntary risk-sharing payment model options as well as a third payment model option for which we are seeking public input:

1. Professional PBP 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 PBP 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.
    
3. Geographic PBP, for which we are seeking public input through an RFI, would offer a similar risk-arrangement as the Global PBP option as potential participants would assume responsibility for the total cost of care for all Medicare FFS beneficiaries in a defined target region.  We are seeking public input to further refine the design parameters.  Responses to the RFI will be accepted through 11:59 p.m., EDT, May 23, 2019 and can be submitted electronically to DPC@cms.hhs.gov.

All payment model options include features aimed at encouraging organizations focused on care for patients with complex, chronic conditions, and seriously ill populations to participate.

How do the payment model options available under DC differ from other Medicare ACO initiatives? 
Unlike prior Medicare ACO initiatives, the payment model options available under DC seek to engage a broader variety of organizations than have previously participated in CMS models and programs.  While CMS expects that current NGACO and MSSP participants will be interested in the payment model options available under DC, CMS also seeks to attract organizations that are new to Medicare FFS, such as health care providers and organizations who are currently only in MA, and Medicaid MCOs that are ready to take on accountability for Medicare FFS spending for their dually eligible members.  If the CMS proceeds with the Geographic PBP option, DC may also attract innovative organizations that are interested in both entering into formal arrangements with health care providers and being accountable for an entire population in a target region.

DC’s current design seeks to create a competitive delivery system environment based on regional payment neutrality, in which organizations bear appropriate risk, and population-based benchmarks are applied equitably across all model participants in the same market (i.e., accounting for risk adjustment factors). We expect competition to flourish in such environments, as organizations offering efficiencies, better quality, and better service are financially rewarded and attract greater numbers of beneficiaries, while being held to a standard of continuous improvement.

Who can participate in the payment model options available under DC?
The Professional and Global PBP 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.  We expect 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.  Medicaid MCOs that provide Medicaid benefits for full-benefit dually eligible beneficiaries will also be able to participate as DCEs for their dually eligible enrollees who are in FFS Medicare.

Subject to responses from the RFI, the Geographic PBP option would encourage participation from innovative organizations, including health plans, health care technology companies and other entities interested in entering into contractual relationships with providers and suppliers and taking on risk for a Medicare FFS beneficiary population in a defined geographic target region.

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.

How will participants be paid under the payment model options?
For the participants in the Professional PBP option, CMS will offer primary care capitation equal to 7 percent of the total cost of care for enhanced primary care services, along with 50 percent shared savings/shared losses with CMS.  For participants in the Global PBP option, CMS will offer the choice of Primary Care Capitation or Total Care Capitation, in addition to 100 percent shared savings/losses. 

How will participants be selected?
The CMS Innovation Center will request a Letter of Intent (LOI) from organizations interested in either the Professional PBP or Global PBP options.  While submitting a LOI will be required in order to apply, a LOI will not bind an interested organization to participate.  CMS will use the LOI process to better understand the scope and spread of organizations interested in participating in the payment model options available under DC.  Failure to submit a LOI during that period will result in the organization being ineligible to apply during initial application period.  CMS will subsequently release a Request for Applications (RFA) for organizations interested in the Professional PBP and Global PBP options.  The RFA will describe the eligibility requirements, payment methodology, available benefit enhancements, and selection criteria.

Subject to responses received in response to the RFI for the Geographic PBP option, CMS expects to initiate the application process for the Geographic PBP option in the fall of 2019.  

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

What is the model timeline?
The payment model options available under DC will start in January 2020 with an initial alignment year for organizations that want to align beneficiaries to meet the minimum beneficiary requirements.  Performance periods will begin January 2021 and will be five years.

Resources and Support

Email: DPC@cms.hhs.gov
Visit: https://innovation.cms.gov/initiatives/direct-contracting-model-options/     
CMS Primary Cares Initiative: https://innovation.cms.gov/Files/x/primary-cares-initiative-onepager.pdf