CMS overhauls Direct Contracting model to include new requirements on governance, health equity

 The Biden administration is redesigning the controversial Direct Contracting model to add new requirements to tackle health equity and ease progressive lawmakers’ concerns over the role of private equity.

The Centers for Medicare and Medicaid Services announced Thursday that the professional and global Direct Contracting model will transition in 2023 to the Accountable Care Organization Realizing Equity, Access and Community Health (REACH) Model. In addition, the geographic Direct Contracting model on pause since March 2021 will be eliminated immediately.

“Under the ACO REACH Model, health care providers can receive more predictable revenue and use those dollars more flexibly to meet their patients’ needs — and to be more resilient in the face of health challenges like the current public health pandemic,” said Center for Medicare and Medicaid Innovation Director Liz Fowler in a statement.

Currently, there are 51 entities in the global and professional Direct Contracting model, which gives physician groups fully and partially capitated population-based payments. The model was created under the Trump administration.

The ACO REACH Model starts on Jan. 1, 2023 and will be accepting applications in April. Any model currently in Direct Contracting must agree to meet several new requirements to continue participation.

The new 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.

Model participants will also have to report data on the demographic and social needs of their beneficiaries and enhance the range of services offered to improve access to care.

ACO REACH will also contain a stricter policy on the amount of provider-led governance. For instance, Direct Contracting required providers to make up 25% of governing or voting rights but ACO REACH will require providers to comprise 75%.

Each model must also have separate beneficiary and consumer advocate representatives on their board, according to senior administration officials. The current model allows the representatives to be the same person.

CMMI will also crack down on compliance on coding practices to ensure there is no inappropriate coding practices, a nod to concerns from progressive lawmakers who asked the center to get rid of Direct Contracting entirely.

Sen. Elizabeth Warren, D-Mass., called for CMMI to drop the model during a hearing earlier this month. She charged that the model would help to privatize traditional Medicare and turn the program over to “corporate profiteers.”

Critics have claimed that direct contracting would employ similar tactics used by Medicare Advantage plans to glean overpayments from traditional Medicare. Warren and others have claimed that some plans work with providers to add unnecessary diagnoses to inflate risk scores of MA beneficiaries, thus inflating the patient’s risk scores and getting a higher payment from Medicare.

Warren said that under the capitated payment model providers would be able to pocket any profits, creating an incentive to lower the quality of care.

A group of 54 House Democrats wrote to Department of Health and Human Services Secretary Xavier Becerra in January also asking for an end to the model and cited similar concerns.

Senior CMS officials demurred on whether progressive concerns sparked the redesign, only noting that the agency needs to do better to make its work on models transparent.

“We welcome the transparency, and we have part of our plan going forward with this particular model is to be even more transparent,” the official said.

But it remains unclear if the changes will mollify concerns from progressive lawmakers and other advocacy groups. The nonprofit advocacy group Social Security Works said Thursday that “changing the name doesn’t change the fact that the direct contracting program is backdoor privatization of Medicare.”

However, some provider-led advocacy groups said the decision made by CMS was the right one and that criticism over the direct contracting model has been overblown and misinformed.

“In spite of the rhetoric being used, traditional Medicare patients need more access to coordinated care and providers who are accountable for their quality and total cost of care,” said Clif Gaus, president and CEO of the National Association of ACOs in a statement.

The geographic direct contracting model would have tied payments to participants based on spending in an entire geographic region but has been on hold due to concerns from providers. CMS said Thursday it will be eliminated immediately.

CMS’ decision comes as CMMI is already doing an entire strategic refresh of its existing models to determine which ones need to continue, with equity a major deciding factor.

https://www.fiercehealthcare.com/payers/cms-overhauls-direct-contracting-model-include-new-requirements-governance-and-health-equity