CMS' Direct Contracting Model - Is it Still One of the Value-Based Models Built on Fee for Service Chasis?

Below you'll find a brief excerpt from the transcript of our recent podcast interview with François de Brantes. They have edited for clarity and length.

Can you give us your take on the Direct Contracting Model? Is just another creature in the menagerie of value-based models or a real departure?

I think the Health Care Payment and Learning Action Network that was set up as part of the ACA to categorize alternative payment models has done a good job in creating some consistency in how you want to think about alternative payment models. At the far edge of those models are the population-based models. They're expressed in payment as combinations of different kinds of global payments. The Direct Contracting Model is one of the penultimate expressions of global payment because it truly does involve a per beneficiary, per month payment to a healthcare organization. And that payment should cover the majority — not the totality, but close to it — of the care for an individual plan member.

This is actually a relatively big departure from all of the other models that the Center for Medicare and Medicaid Innovation — CMMI — has released to date, because all of the prior models, including the Next Generation ACOs and the Medicare Shared Savings Program ACOs, and even the Medicare bundled payment program — they all still rely on underlying fee-for-service payments.

This is the first time when CMS has said, "yes, we're still going to require provider organization to submit claims, because asking them to stop a known process for a segment of their patients doesn't make sense." So we're still going to rely on that stream of data for information purposes, but not for payment purposes.

Related: Meet the Board: François de Brantes of Signify Health Talks the Direct Contracting Model, Value Based Care and Toxicity of Fee for Service

Instead, we are going to give a direct contracting entity a monthly, per beneficiary payment that will cover an estimated portion of the costs for that beneficiary. It is up to that direct contracting entity to contract directly, hence the term, with physicians, typically starting with a primary care group — there’s recognition that at the core, you need primary care — and extending out to specialty care groups and others.

Those direct contracts between the DCEs — that's the acronym for the direct contracting entity — and the providers in that mini-network can take any shape or form that the two organizations agree to and what the form of payment ought to be. So, for example, you can create a fixed, per member, per month fee for the primary care group. You can create fixed price episode contracts with specialty practices to manage, for example, the cardiac care of beneficiaries. So there's lots of innovation that you can do within the Direct Contracting Model, much like in Medicare Advantage.

Medicare Advantage plans have the freedom to do lots of payment innovation with the providers in their network. So this is taking Medicare Advantage, for all intents and purposes, into Medicare fee for service and not requiring health plans to be the manager of those funds but allowing for provider organizations to take on that responsibility.

However, with that responsibility comes significant risk. And to a certain extent, it is more risk than what happens in the Medicare Shared Savings Program because you are paid upfront a per beneficiary, per month payment. And if during the course of the month, as a direct contracting entity, you end up by spending a lot more on beneficiaries than what you have been given, you need to float that difference. It's not as if you're going to make it up in fee for service payments, because you're not going to get any fee for service payments. So it's a different ballgame.