ACOs Fear Direct Contracting Options Stray Too Far From Providers

December 23, 2020 - Value-based providers, like accountable care organizations (ACOs), may be at a disadvantage under new direct contracting options in Medicare that allow for a broad range of healthcare organizations to participate, according to the National Association of ACOs (NAACOS).

In a letter to CMS Innovation Center Director Brad Smith, the industry group called for changes to both the Professional and Global Options of Medicare’s Direct Contracting Model to ensure “equal opportunity for success for both organizations that have participated in prior Medicare fee-for-service (FFS) accountable care initiatives and those organizations that are wholly new to such programs.”

“Unfortunately, the financial specifications, as currently laid out, will disenfranchise legacy ACOs that have worked for nearly a decade in some cases to lower the cost of care in their communities,” NAACOS president and CEO Clif Gaus, ScD, wrote in the letter.

“Their commitment to clinical transformation and value-based care has advanced the entire healthcare industry and they should be rewarded, not penalized, for these efforts. Penalizing these early adopters sends a message that early adoption and risk taking should not be rewarded, which will have an unfortunate effect of disenfranchising organizations who have been at the heart of the value movement,” Gaus stated.

While built on Medicare’s ACO models, CMS designed the Direct Contracting Model to appeal to healthcare organizations that have not participated in value-based care models in the past. Just recently, the agency announced a new direct contracting option under the model for Medicaid managed care organizations.

READ MORE: 51 Organizations Join New Direct Contracting Opportunity from CMS

Under the model, organizations form Direct Contracting Entities (DCEs) that, like ACOs, agree to coordinate the care for a group of Medicare fee-for-service beneficiaries. Notably, though, DCEs take on high levels of financial risk, including full risk under the Global payment option.

CMS has touted the model’s opportunity to reduce costs and improve quality by incenting competition between providers (since beneficiaries have the option to switch DCEs) and care coordination across the industry.

But NAACOS recently argued that organizations that have not worked with Medicare fee-for-service in the past may be doing so now under the Professional and Global Direct Contracting options in order to increase “with the goal of gaining exposure to beneficiaries to then recruit them to Medicare Advantage.”

Additionally, the Center for Medicare Advocacy warned of similar issues with the Geographic option, a newer payment option in the model that holds DCEs accountable for beneficiaries in a specific region.

“In many ways, the ‘Geo Model’ appears to turn more of the federal Medicare program over to private insurers – privatizing the Medicare program even beyond the growth in Medicare Advantage, (due in part to imbalanced payment, coverage and enrollment changes made in recent years),” the advocacy group stated. “This new Model would actively target the still-majority of Medicare beneficiaries who choose not to enroll in private, managed care plans, and, in effect, force them to do so.”

READ MORE: NAACOS Establishes Direct Contracting Taskforce

The Direct Contracting model aims to attract health plans, but will not hold them to the reporting and oversight requirements applicable to Medicare Advantage plans, such as medical loss ratio, encounter data reporting, the group argued.

Both NAACOS and the Center for Medicare Advocacy have now called for the delay of the Geographic Option so CMS can address their concerns.

“Rather than adding a new layer of complexity that introduces even more confusion about overlap, we request the Innovation Center focus on fixing the existing model overlap issues,” NAACOS said. “Overall, NAACOS recommends that certain policy goals of the Geographic Option would be better tested and evaluated in the Direct Contracting Model’s Professional and Global Options and/or other ACO programs, and we urge the Innovation Center to halt implementation of a Geographic Option at this time.”

The ACO group also urged the CMS Innovation Center to adjust benchmarking and risk adjustment methodologies to level the playing field for experienced value-based providers participating in the model’s other tracks.

For example, the Innovation Center should add consider how using a three-year historical expenditures baseline will disadvantage experienced DCEs, especially since the most weight will be given to the most recent year. ACOs and experienced DCEs will have delivered more value in the most recent year, while new entrants will not be subject to the use of historical expenditures for at least four years.

READ MORE: CMS Announces A New Value-Based Direct Contracting Model

The model should reduce its reliance on historical baselines and leverage regional expenditures more to give all DCEs a more equal opportunity to succeed, NAACOs said.

The group also called for extending the model’s use of a concurrent risk adjustment model, lowering the discount for Global DCEs, and making High Needs DCEs eligible for the Advanced APM bonus.