By Richard Gilfillan and Donald M. Berwick
Health Affairs Blog, September 30, 2021
Given an Orwellian title, Direct Contracting, launched by Center for Medicare and Medicaid Innovation (CMMI), was anything but direct. “Indirect Contracting” would have been a far more accurate name, since the cornerstone of the program was CMS’s opening the door to non-provider-controlled “Direct Contracting Entities (DCEs)” to become the fiscal intermediaries between patients and providers.
Originally CMS proposed three Direct Contracting Models: Professional, Global, and Geographic (GEO). The GEO Direct Contracting model was the most extreme, proposing to auto-assign every fee-for-service (FFS) beneficiary in a number of large geographic regions into a fully capitated MA-like “Geo DCE.” Beneficiaries were not given the right to opt out. GEO DCEs were expected to assume total responsibility for all FFS beneficiaries in their region. This responsibility included beneficiaries in any accountable care organizations (ACOs) or other Alternative Payment Models (APMs), except those assigned to other types of DCEs. With full capitation, as with MA, GEO DCEs would be responsible for most claims payments as well as medical management. This was, therefore, straightforward privatization of traditional Medicare, differing from MA only in that GEO Direct Contracting beneficiaries retained the right to see any Medicare provider under standard Medicare coverage.
The Global and Professional Direct Contracting models, combined as GPDC, offered alongside GEO DC, look like an extension of the ACO approach. Like ACOs, DCEs create a defined provider network. Beneficiaries are either auto-aligned via claims history or voluntarily enrolled. Members maintain access to all Medicare providers under standard benefits. Benchmarks or capitation rates will include a defined discount to CMS. But GPDC DCEs differ in important ways from ACOs. GPDC DCEs can select varying degrees of capitation up to and including full capitation. Full capitation would require them to pay DCE preferred provider claims. Although beneficiaries do have the right to opt out of CMS data sharing, they remain aligned with the DCE for purposes of capitation payments and ultimate financial reconciliation.
The ACO model was built as a direct contracting relationship between CMS and providers. ACOs were required to have 75 percent provider governance control. In Direct Contracting, CMS established a stated aim of bringing “organizations that currently operate exclusively in Medicare Advantage” into traditional Medicare, targeting the very MA insurers and investor-controlled provider firms that are driving the MA overpayments explored in Part One of this post. To help accomplish this, CMS decreased the provider governance requirement to just 25 percent.
Dr. Gilfillan was the CEO of Trinity Health System from 2013 until 2019. He is a Trustee for United States Pharmacopeia; a Director for the Health Care Transformation Task Force; a member of Advisory Committees for the Institute for Exceptional Care and several Robert Wood Johnson Foundation programs addressing health equity and SDOH (all uncompensated). Dr. Gilfillan also recently consulted for an integrated health system (compensated). Dr. Gilfillan was the Director of CMMI during the roll-out of several ACO Models and was involved in the development of CMS ACO regulations. He has also been a leader and member of teams that managed multiple ACOs and Medicare Advantage plans.
Dr. Berwick served as Administrator of the Centers for Medicare and Medicaid Services from July, 2010, to December, 2011, during which he oversaw the issuing of the initial CMS regulations for Accountable Care Organizations, as well as numerous other regulations devolving from the Affordable Care Act. He serves on the boards of LumiraDx (stock option compensation); Virta Health (stock option compensation); NRC Health (stipend and stock option compensation); Institute for Exceptional Care (uncompensated); CareVisor (stipend) Partners in Health (uncompensated); Results for Development (uncompensated). He also serves on Advisory Boards for the National Institute for Health Care Management Foundation, Datavant, and the Institute for Accountable Care, and on the American Medical Association Journal Oversight Committee. Dr. Berwick occupies multiple committee positions with the National Academies of Sciences, Engineering, and Medicine.