CMS rolls out geographic direct contracting model aimed at improving regional health outcomes

care coordination
CMS rolled out a new voluntary payment model aimed at improving care across an entire region. (Getty)

The Trump administration announced a new voluntary payment model that calls on providers to improve care across geographic regions.

The Geographic Direct Contracting model released Thursday by the Centers for Medicare & Medicaid Services is a bid to test whether direct contracting entities can improve quality and lower costs for beneficiaries across an entire region. Providers in the region can enter into value-based care payment arrangements.

“This model allows participating entities to build integrated relationships with healthcare providers and invest in population health in a region to better coordinate care, improve quality and lower the cost of care for Medicare beneficiaries in a community,” said CMS Administrator Seema Verma in a statement Thursday.

Under the model, providers will work in a specific region and leverage a beneficiary’s existing provider relationships to develop a care delivery solution that would take into account a region’s local needs.

“Specifically, model participants will coordinate care and clinical management for beneficiaries in original Medicare in their region,” the agency said. “This coordination may include care management services, telemedicine, as well as help for beneficiaries to understand which providers have a history of delivering better results and lower cost over the long-term.”

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Providers could decide to create a network of preferred providers that could enter into alternative payment arrangements such as prospective capitation and similar value-based models.

“Participants will also work to augment Medicare’s current program integrity efforts, reducing fraud, waste and abuse in their region and decreasing costs for beneficiaries and taxpayers,” CMS said.

CMS has identified 15 regional candidates that could serve as initial regions. These include the metropolitan areas of major cities such as Atlanta, Dallas, Houston and Los Angeles.

The model is building off CMS’ Direct Contracting model, which offers providers three paths to take on risk-based payment arrangements.

There will be two voluntary payment mechanisms for providers: total or partial capitation. Under total capitation, providers opt into a monthly capitated payment equal to the projected decline in fee-for-service spending and is responsible for any downstream payments to providers.

Partial capitation works the same way but the providers will get a monthly payment equal to reduced fee-for-service billings between 1 and 50%.

The models’ financial methodology will be based on a provider’s performance weighed against the region’s performance benchmark. The benchmark is set based on the historic Medicare fee-for-service spending in the region, which is trended forward based on a control group of regions, said Brad Smith, the director of the Center for Medicare & Medicaid Innovation, which will oversee the model.

Quality measures will also account for 1% of the model's benchmark in the first year, a figure that will then increase to 3% in the third performance year and beyond, Smith added in a call with reporters Thursday.

CMMI also aims to use the Hierarchal Chronic Conditions (HCC) risk adjustment methodology to take into account the underlying health status of a population aligned to a provider in the model.

“Risk scores will be normalized and subject to a zero-sum coding intensity factor to ensure there is no increases in payments triggered solely by coding intensity increases,” according to a fact sheet on the model.

CMMI will have two three-year performance periods. The first period will take applications in 2021 and run from Jan. 1, 2022 to Dec. 31, 2024.

The second period takes applications in 2024 and run from Jan. 1, 2025 and through 2027.

Beneficiaries included in the model will maintain their original Medicare benefits but providers can offer certain new benefits such as wellness programs, vouchers for over-the-counter drugs and for dental or vision services.

The goal is to have more than three direct contracting entities in a region.

“What we expect is each of those direct contracting entities will bring a large number of providers,” Smith said. “We think people will have robust networks across the region in which they are taking this risk.”