Providers in Direct Contracting Model saved Medicare $70M in 2021, CMS reports

The Direct Contracting Model saved Medicare $70 million in 2021 as the Biden administration plans a major overhaul to the value-based care program next year.

Recently released data from the Centers for Medicare & Medicaid Services (CMS) found that 53 direct contracting entities generated savings for Medicare and 38 organizations earned $47 million in shared savings in 2021, the first year of the model. In response to the public health emergency, the start of the performance year was delayed to April 1, 2021, leading to nine months of experience reflected in these results.

The Direct Contracting Model gives physician groups fully and partially capitated population-based payments. The model was created under the Trump administration.

All 53 direct contracting entities received quality scores of 100 percent in areas such as patient satisfaction and unplanned admissions for patients with chronic conditions, according to an emailed announcement from CMS.

The global and professional Direct Contracting Model is an initiative targeted at ACOs experienced in coordinating care for entire patient populations. The model allows these provider groups to assume higher levels of financial risk and reward than those available under the Medicare Shared Savings Program. The goal of the model is to test whether strong financial incentives for ACOs, coupled with tools to support better patient engagement and care management, can improve health outcomes and lower expenditures for original Medicare fee-for-service beneficiaries, according to the CMS announcement.

A number of member organizations of America’s Physician Groups (APG) are among the 53 organizations that generated $70 million in savings for the Medicare program.

These direct contracting model results constitute some of the "strongest achieved to date by the advanced alternative payment models tested by the federal government," according to Susan Dentzer, APG president and CEO, in a statement.

The APG member organizations participating in the model include physician practices affiliated with agilon health; Castell Direct LLC, a division of Intermountain Healthcare; Collaborative Health Systems; Heritage Provider Network; One Medical with Iora; Sutter Health Foundation; and VillageMD.

"This important early evidence reinforces the concept behind this model: that its strong financial incentives encourage physician practices to transform care delivery; better manage and engage patients; and achieve higher quality-of-care outcomes than are typical for Medicare patients in the traditional fee-for-service program," Dentzer said.

APG members participating in the model pointed to their ability to achieve such robust results for patients and the government despite demanding circumstances. “We are pleased that the Direct Contracting Entities were collectively able to show strong performance in the first year of the program, despite ongoing challenges from COVID and the steep investments required to activate such a large program,” said Suzanne Hansen, One Medical’s chief Medicare program officer. She noted that One Medical with Iora achieved a high 4.93% net savings rate, results that “speak to the strong team and capabilities we have developed to support our patients.”

“We’re proud that our participation as one of CMS’ Direct Contracting Entities yielded improved healthcare savings while earning perfect quality scores for Medicare patients. The results show that our physicians who consistently provide high-quality, value-based care as their method of care delivery substantially reduce the cost to the Medicare system, which can reduce patients’ medical misery,” said Clive Fields, M.D., chief medical officer of VillageMD, in a statement.

Earlier this year, the Biden administration revamped the Direct Contracting payment model after major criticism from progressive lawmakers. The redesigned model adds new requirements to tackle health equity and ease progressive lawmakers’ concerns over the role of private equity.

The professional and global Direct Contracting Model will transition in 2023 to the Accountable Care Organization Realizing Equity, Access and Community Health (ACO REACH) Model. In addition, the geographic Direct Contracting Model, which was on pause since March 2021, will be eliminated immediately.

The ACO REACH Model will require participants to meet several provisions on promoting health equity, including the creation of a health equity plan. The model will also introduce a health equity benchmark adjustment to payments to help support entities on care delivery and coordination in underserved areas.