Medicare’s proposed direct-contracting model carries both rewards and risk

A new direct provider contracting model under consideration at the CMS could potentially save providers billions in administrative costs, but could also threaten access to care for Medicare’s frailest and lowest-income beneficiaries.

Under the proposal, the CMS would directly contract with provider practices and pay a fixed per-beneficiary per-month payment to cover various services, such as office visits, certain office-based procedures, and time spent managing care for a patient. Practices could be eligible for incentive payments if they hit savings and quality goals.

“Such a model would have the potential to enhance the doctor-patient relationship by eliminating administrative burden for clinicians and providing increased flexibility to provide the high-quality care that is most appropriate for their patients, thus improving quality while reducing expenditures,” the CMS said in a request for information seeking input from the industry.

Iora Health, a Boston-based medical practice, found that similar direct-contracting models lowered hospital admissions, and emergency department and specialist visits by 30% to 40%.

Unlike other primary-care models such as Comprehensive Primary Care Plus, which also pays a per-beneficiary per-month fee, Medicare enrollees could choose the direct-contracting model or use another primary -care provider.

The CMS is eying the model in response to comments late last year on what new priorities the Center for Medicare and Medicaid Innovation should pursue.

The agency received 1,000 comments, which were all posted April 23.

Ascension, the nation’s largest not-for-profit health system, supported private contracting in its comments. Officials for the Catholic system said this approach would make funds available to beneficiaries upfront and allow them to directly contract for primary care and related services.

The upfront funding could also be used to pay for services that are not presently covered under Medicare.

“This aspect of such a model would allow both a beneficiary and provider, in partnership, to define what has value and create competition for such services,” the Rev. Dennis Holtschneider, chief operations officer at Ascension, said in a comment letter.

In exchange for providing Medicare funds upfront, providers may face some risk as the CMS is considering holding participating practices accountable for all or a portion of a beneficiary’s total care costs.

The CMS is collecting comments through May 25 on how much risk a practice should face and whether to limit how often beneficiaries can change primary-care providers.

Doctors participating in the proposed model would face less scrutiny from Medicare billing contractors.

Since they are getting prepaid for services, they wouldn’t be required to submit claims, according to Michael Miscoe, president of AAPC’s National Advisory Board. AAPC is a trade association for medical billing professionals.

That could potentially save practices billions annually. Appealing a denial costs an average of $118 in administrative costs, totaling $8.6 billion a year, according to an analysis from Change Healthcare, a consulting firm.

Specialists, however, may see revenue drop if the CMS makes participating practices responsible for a beneficiary’s total cost of care and imposes enrollment lock-ins, according to Eliot Fishman, senior director of health policy at Families USA and a CMS Medicaid official in the Obama administration.

“As things are now, Medicare beneficiaries can go to a specialist without a referral. Under this model, primary-care practices would begin to serve a gatekeeper function,” he said.

Commercial payers like the Blue Cross and Blue Shield Association said that another downside is that providers may be less willing to take on Medicare beneficiaries with severe chronic healthcare needs since practices would be on the hook for beneficiary costs.

The CMS seemed to concede this possibility, saying it is seeking feedback on how to ensure participating practices don’t cherry-pick which patients they’ll treat under the model.

In addition, there is concern that participating practices could choose to charge so-called concierge fees in exchange for premium offerings like same-day appointments, extended visits and email exchanges with doctors.

In the commercial coverage sector, such fees are common for direct-contracting practices.

Those fees tend to be paid annually and on average equal $1,500 per year, according to comments sent to the CMS. Research shows that about half of Medicare beneficiaries live on incomes of $24,000 or less, making the fees a considerable hardship.

As of now there is nothing in the request for information that would prohibit charging such fees; widespread adoption of them could limit access for low-income beneficiaries.

“It would weaken the equity of Medicare and could create a two-tiered system,” said Loren Adler, an associate director at the Brookings Institution’s Center for Health Policy.

The request for information is also silent about allowing deductibles and co-insurance fees beyond what could be charged under Medicare or whether the balance-billing prohibition would remain in place, according to Edwin Park, a research professor at Georgetown’s McCourt School of Public Policy.

Under balance billing, a provider bills a patient for the difference between what an insurer doesn’t pay for a patient’s care and what the provider chooses to charge.

The scenario occurs in direct-contracting agreements between providers and patients and was favored by former HHS Secretary Dr. Tom Price as a method to encourage more doctors to take Medicare patients.

Direct contracting between providers and beneficiaries was raised as a potential option for the CMS to explore in public comments received by several provider groups, including the American Association of Neurological Surgeons.

As things are now, physicians must opt out of Medicare for two years in order to privately contract with any patient.

“Medicare beneficiaries should not be prevented from using their Medicare benefits if they choose to see a physician who does not accept Medicare, and physicians should not face penalties or be forced to opt out of the Medicare program to contract with Medicare beneficiaries privately,” the American Association of Neurological Surgeons said in a comment.

Relaxing rules for private contracting could ultimately increase beneficiaries’ financial burden since Medicare couldn’t limit what providers charge above Medicare rates, the National Council on Aging, an advocacy organization, said in a comment to the CMS.

In the request for information, the CMS said it is aware of a wide range of direct-contracting options, such as those between patients and physicians, and said future versions of its model “could be tested in an iterative manner with additional options added over time.”

The request for information’s silence on opposing balance billing concerned policy insiders.

“There remains a significant worry that this could open the door to direct contracting with balance billing and the inevitable harm to beneficiaries that would result,” Park said.