We dove into the data Monday, taking a look at the three models developing around direct contracting. Direct contracting has been around for a number of years. Employer sponsored insurance has made a number of attempts with Walmart Health being one of the notable success stories. Veterans Affairs has also adopted Direct Contracting with some success. Of course, some of the Accountable Care Organizations that grew out of the ACA have had an influence. The most meaningful adoption has been by Medicare Advantage plan sponsors, especially in penetrated, urban markets, like south Florida. CMS got into the game in April by implementing the Direct Contracting Program that has been all the rage recently.
It has been known, and often ignored, that a primary care physician, who, at least in most non-emergent situations, sits at the front door of any care journey. When it comes to "value-based care" they are really the only provider type in a position to help a patient balance care and outcomes. They also know the physicians in their community, often having been educated and trained alongside them. Like politics, health care is local.
In this webcast, we focus on the Direct Contracting Program being implemented by CMS which has the potential to give form to other non-CMS type value-based programs. In other words, proliferation of similar approaches are not entirely dependent on involvement in the Medicare Global and Professional Direct Contracting Model. As we explain in the webcast, a major consideration is market concentration of insurers and providers.
Replay here with audio only and slides. For those of you with video fatigue, below is a summary with relevant time stamps. Data presented available. Just ask!
0:00 - 3:48 Introduction and Place in Direct Contracting Entities in the Health Care Ecosystem.
Drives of Change to Total Capitated Models including CMS's Direct Contracting Model.
3:48 - 6:06 Changes to Payment Levels and Structures in Primary Care. In the 1990s we saw physicians practices get rolled up in the face of the HMO threat, only to blow-up later. This time, the AMA and Medicare have changed how they value primary care Evaluation and Management Codes, the practice's bread and butter. For the first time in 30 years, primary care physicians are getting a pay boost from Medicare and efforts are underway to have that change proliferate across payers.
6:06 - 9:36 Penetration of Medicare Advantage. While the sell-side and others have asserted Medicare Advantage has room to run in its penetration, the data reveals that, in fact, Medicare Advantage enrollment is highly penetrated in many urban markets. Interestingly, it seems that this penetration has given rise to value-based arrangements between insurers and plans as carriers shift risk while improving service and providers recognize that FFS patients for which there is little oversight become hard to find. MLR rules imposed by the ACA and other actions, have accelerated the trend as insurance companies find themselves punished by shareholders if they manage risk poorly and punished by the government if they do it too well. HUM is a good case study of this trend.
How the Direct Contracting Model Works.
9:37 - 19:14 Model Design. CMS has created three different approaches, Global, Professional and Geographical Direct Contracting Models. The Geo models is on hold by the Biden administration. In the model are two types of payer: Participant Providers who work for or are under contract with the Direct Contracting Entity. Preferred Providers are usually specialists who agree to reduce their fee for service billing and, instead, be paid part of the capitated amount under agreement with the Direct Contracting Entity. In the program there are two payment mechanisms, the Total Care Capitation and Primary Care Capitation. Under the Total Care Capitation, the Direct Contracting Entity is paid a monthly "benchmark" and assumes all liability - with certain risk management tools - for care. In the Primary Care Capitation, the Direct Contracting Entity is paid about ~7% of the benchmark amount and assumes liability for primary care services. The program includes waiver of certain rules like a 3-day hospital stay before a SNF admission.
19:14 - 21:01 How to Model Program's Contribution. At a high level, the factors to consider are the enrollment weighted benchmark for the number of beneficiaries in each county the Direct Contracting Entity serves, plus estimated enrollment and then apply risk adjustment assumptions.
Emerging Business Models.
21:02 - 29:13 Three Emerging Models for Value-based Care: Center-based, Plan-based and Physicians Practice Management-based. A key determinant of which model will prevail will be the requirements of a state's Corporate Practice of Management statutes and the contracting entity's ability to navigate them. The center-based model focuses care delivery on a clinic, often augmented by exercise, wellness and community gathering spaces staffed by social workers case workers. The model, used by CMAX, CANO and OSH associates care with a place and social activity, making the physician him/herself less critical to retaining the patient.
The plan-based model used by mostly Medicare Advantage plans attempts to leverage the plan's networks of providers by providing technological risk management tools. HUM, CLOV, ANTM and ALHC all have participant agreements with CMS under the Direct Contracting Program but have already been deploying similar approaches within their networks (excluding CLOV.) While these insurance carriers have robust networks, they have less control over physicians who may choose to work with another DCE or develop in-house capabilities so they capture the entire benchmark amount.
The physicians practice management approach is more similar to the PPM companies from the 1990s. AGL for example is creating Risk-based Entities, contracting with physicians to provide the risk-management tools, clinical practice decision support and all the other usual things associated with managing a practice. The practices retain their name and branding, making the moat around AGL's a little more shallow than other approaches.
Data Dive: Three Approaches.
Center-based
29:13 - 39:45 CMAX. Locations, affiliated physicians and service areas and TAM
39:45 - 43:20 CANO. Locations, affiliated physicians, service areas and TAM
43:20 - 45:27 OSH. Locations, affiliated physicians, service area and TAMs
Plan-based
45:27 - 50:22 CLOV. Affiliated physicians and service area
Practice-based
50:22 - 53:37 AGL.. Affiliated physicians
53:37 - 54:27 PRVA. Affiliated physicians
54:27 - 1:03:25 Closing commentary and Q & A
Let me know if you need any more information.
Emily Evans
Managing Director – Health Policy
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