Providers Relieved CMS Chose To Overhaul Direct Contracting Model Instead Of Canceling It

Providers say they dodged a bullet when the Biden administration decided to redesign the Direct Contracting Model instead of eliminating it entirely as progressive lawmakers and groups demanded.

However, it remains unclear whether the redesigned model set to launch next year will quell criticisms from progressives that the model will lead to the privatization of traditional Medicare.

The Centers for Medicare & Medicaid Services (CMS) announced Thursday the global and professional Direct Contracting Model created by the Trump administration will be redesigned as the Accountable Care Organization Realizing Equity, Access and Community Health (ACO REACH). It will include new requirements for health equity and governance to give physicians more power.

Several providers and related advocacy groups cheered the changes and were happy that the Center for Medicare and Medicaid Innovation (CMMI), which oversees payment models, resisted political pressure to get rid of the model entirely.

“Many of the criticisms against Direct Contracting were a product of great misunderstanding about the model and the overall shift to value-based payment,” said Clif Gaus, president and CEO of the National Association of ACOs, in a statement. “Instead, keeping the model with additional focus on equity, increased provider governance, improvements to risk adjustment and other changes is best moving forward.”

ACO REACH is expected to start in January 2023, and the 99 entities currently in direct contracting this year will have to meet new requirements for health equity and greater oversight on coding practices. Providers will still get capitated or partially capitated payments in exchange for meeting key spending and quality benchmarks.

Participants must develop a health equity plan and agree to collect key data on social determinants of health and other risk factors. They also must meet new health equity benchmarks.

There are also new requirements for governance of ACOs. Direct contracting required providers to comprise 25% of the ACO governing board, but ACO REACH requires 75% control. Applicants will also have to give additional information on the ownership of the entity and financial interests.

Entities will also face higher scrutiny of their coding practices, a nod to concerns among progressives that providers could use upcoding tactics to inflate payments from Medicare. Progressives have voiced similar concerns over the Medicare Advantage program.

The requirements for a greater physician role in governing boards also come in response to concerns from progressive lawmakers and groups that private equity or Medicare Advantage plans will have an outsized role in the model.

Several providers did not oppose the requirements for greater scrutiny nor the higher governance requirement.

“In terms of governance, the majority of our DCE boards are already led by physicians and all boards have beneficiaries on them,” said Gary Jacobs, executive director of VillageMD’s Center for Policy. VillageMD is one of the largest direct contracting entities and had previously told Fierce Healthcare it was worried about losing the model entirely.

The governance requirements could also help as a selling point to providers, who want to be more empowered in value-based care models, said Mark Nolan, chief operating officer for Hint Health, which advises primary care practices that participate in private direct contracting.

“The new provision means that there will be more empowerment of providers in these models, which will make them more comfortable to join the models,” Nolan told Fierce Healthcare in an interview.

Nolan added that the fact CMMI decided not to get rid of the model could also instill confidence in providers as “CMS won’t just drop a program soon after the gate even after strong political pressure.”

But it remains unclear whether that political pressure will abate.

The progressive group Physicians for a National Health Program, a physician group that pushes for single-payer healthcare reform, said the redesign is a ruse.

“ACO REACH is Direct Contracting in disguise,” said Susan Rogers, M.D., the group’s president, in a statement. “This new model doubles down on Direct Contracting’s fatal flaws, inserting a profit-seeking middleman between beneficiaries and their providers.”

The group charged that ACO REACH will pay middlemen a flat fee to manage seniors’ health and enable them to keep 40% of what they do not spend on overhead.

Rep. Pramila Jayapal, D-Washington, leader of the House Progressive Caucus, was slightly more tempered in her response to the redesign. Jayapal led a letter of more than 50 House lawmakers last month to the administration calling for the model’s demise.

While Jayapal was glad to see the center taking steps to redesign the program, she said in a statement she was concerned the changes won’t be enacted until 2023, and “there are no limits on how many seniors are funneled into this experimental model,” according to a statement.

Sen. Elizabeth Warren, D-Massachusetts, who also called for an end to the model, did not return a request for comment as of press time.


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