Last week we went through an explanation of the new Medicare Innovation Center's Direct Contracting Model, why it offers competition for Medicare Advantage plans and how to model it. You can link to the replay HERE. For those of you that had too many zoom meetings last week, synopsis below with timestamps and abridged version of charts.
Timestamps.
0:00 - 2:00 Introduction. "This time is different...for now."
2:00 - 7:58 Primary sits atop our health care Ecosystem but until the recent spate of SPACs and IPOs had not been much of a force among public companies. First in a generation changes to primary care E/M codes are a major driver as these new codes recognize both the sophistication of medical decision making and the time spent with the patient. The change reflects a collaboration with the AMA and for that reasons these changes are not going to be confined to Medicare's payment system.
7:58 - 12:23 Advances in technology are also playing a role. COVID accelerated telehealth adoption, as everyone knows. But before COVID the Trump administration had been moving steadily toward accelerating technology adoption. Things like remote patient monitoring of diabetes and hypertension are now easier, more accurate and generally lead to better patient care. Other tools like voice technology and AI assisted clinical decision are emerging as ways to enhance productivity and accuracy.
12:24 - 16:34 Medicare Advantage penetration is reaching maximum levels in many urban counties. So the battle for new enrollees is highly competitive. Physicians who control the relationship with the patient have the potential to divert beneficiaries from FFS to a non-MA option without paying for broker services. Meanwhile the political environment for Medicare Advantage plans has turned negative. The Trump administration encouraged enrollment while progressive like Sen. Bernie Sanders are openly hostile to the program. Growth in Medicare eligible population is slow and steady as the post-war generation dissipates.
16:34 - 20:36 In addition to a weaker position politically, Medicare Advantage plans are not fulfilling their promise of managing costs and care. Costs have increased with little evidence care has improved. This less than ideal record make Medicare Advantage plans a target for Medicare cuts to offset recent spending behavior or addressing the Medicare solvency issue. Too small to matter, those pressures are not as likely to be felt by Direct Contracting Entities.
20:36 - 40:16 Introduction to Direct Contracting. The model has three types; professional, global and geographic, the latter of those has been deferred by the Biden administration. . There are two types of Direct Contracting Entities engaged in the model: Participant Providers, which are primarily primary care physicians and Preferred Provider which are typically specialists. Direct Contracting Entities are paid approximately the MA monthly capitated rate for the global model and about 7% of the MA capitated rate for the professional model. With that fee the DCE must manage either all primary care under the professional model or all care under the global model. Risk corridor and stop loss programs apply. The payment is also subject to adjustments to deter coding intensity.
40:16 - 41:19 Direct Contracting is young and small but it solves a few important problems. Doctors do not like to work for insurance companies. Increases the influence the doctor has over the patient and their total care.
41:19 - 51:25 How to Model Direct Contracting. Cano and CLOV are approaching the program differently with CLOV creating a "virtual practice" and Cano following a more typical approach. The monthly global capitated amount is approximately the same as an MA plan ~1,000/mo but varies by county. Growth for the program participants can be quantified by the monthly capitated payment, the county FFS, MA eligibility and enrollment and the growth of physicians affiliated with the Direct Contracting Entity.
51:25 - 56:53 Q & A
Please let me know if you have any questions.
Emily Evans
Managing Director – Health Policy
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