Reaching for Equity: CMMI Ends Direct Contracting, Launches New Value Based ACO Model
Post Written by Juliette Price, Chief Solutions Officer
The first new value based model of care proposed by the Biden Administration was released late last week, in a move that directly replaces the Direct Contracting model released under the Trump Administration. The new model places equity at its center, while retaining most of the risk-taking mechanisms of Direct Contracting.
First, Let’s Talk Direct Contracting
To best understand the ACO REACH model, a good place to start is to review the program that it is replacing. The Global and Professional Direct Contracting Model, often referred to as “Direct Contracting,” was a voluntary, accountable care organization (ACO) model that the federal Centers for Medicare & Medicaid Services (CMS) put forward through the Center for Medicare & Medicaid Innovation (CMMI) in 2019 for the Medicare program.
The stated goals of the Direct Contracting program were three-fold:
Transform risk-sharing arrangements in original Medicare by tying payment to the quality of care provided to patients and reducing total expenditures through partially capitated payments that move away from traditional fee-for-service.
Empower beneficiaries to engage in their health care with support from entities that help them to navigate the complex health care system. The model offers many additional flexibilities for beneficiaries, such as making in-home care management visits available when a patient is at high risk for hospitalization.
Reduce provider administrative burden so that they can focus on what is most important: spending time with patients. For example, participants are able to report quality measures that focus more on outcomes and beneficiary experience in lieu of measures that focus on process. As a result, the providers can spend more time concentrated on the specific and individualized needs of their patients.
There were three specific risk-sharing models of Direct Contracting that Direct Contract Entities (DCEs) could select from:
Professional: A lower risk-sharing arrangement—50% savings/losses—with one payment option for participants: Primary Care Capitation Payment, a risk-adjusted monthly payment for primary care services provided by the DCE’s participating providers.
Global: A higher risk sharing arrangement—100% savings/losses—with two payment options: Primary Care Capitation Payment or Total Care Capitation Payment, a risk-adjusted monthly payment for all covered services, including specialty care, provided by the DCE’s participating providers.
Geographic: we won’t dive into this one, as this risk-share model was permanently canceled in 2021 for not aligning with CMS’ vision for accountable care and concerns raised by stakeholders.
Long story short-–Direct Contracting was an accountable care model that included not just risk-sharing with the DCE on total cost of care (at varying levels of risk, see Professional vs. Global) but importantly, also advanced capitation payments to DCEs. This was a significant leap forward from previous value based models. Participating DCEs were getting up front cash along with maximum flexibility around usage of funds to deliver better outcomes for patients. This is particularly why the model had so many participants and why some organizations built their entire business model around Direct Contracting. Lots more detail on Direct Contracting here, if you want to take the deeper dive.
The New Model on the Block: ACO REACH
With a new federal administration, CMMI released a strategy refresh whitepaper in 2021 (my colleague Kalin Scott did a great synopsis of the paper if you missed it) which detailed the direction in which CMMI was headed. Among its top goals, CMMI noted it wanted to embed health equity into all new models put forth, and aims to have all Medicare beneficiaries in an accountable care relationship by 2030. Last week, CMMI released the ACO REACH Model, which delivers most heavily on these two goal statements.
The new model is named Accountable Care Organization Realizing Equity, Access, and Community Health (ACO REACH) and the first cohort will begin participation on January 1, 2023. The model’s goals are three-fold and interesting to compare to the above Direct Contracting goals:
Advance Health Equity to Bring the Benefits of Accountable Care to Underserved Communities. The ACO REACH model promotes health equity and focuses on bringing the benefits of accountable care to Medicare beneficiaries in underserved communities. ACO REACH will test an innovative payment approach to better support care delivery and coordination for patients in underserved communities. All model participants will be required to develop and implement a robust health equity plan to identify underserved communities and implement initiatives to measurably reduce health disparities within their beneficiary populations.
Promote Provider Leadership and Governance. The ACO REACH Model includes policies to ensure doctors and other health care providers continue to play a primary role in accountable care. At least 75% control of each ACO's governing body generally must be held by participating providers or their designated representatives, compared to 25% during the first two Performance Years of the GPDC Model. In addition, the ACO REACH Model goes beyond prior ACO initiatives by requiring at least two beneficiary advocates on the governing board (at least one Medicare beneficiary and at least one consumer advocate), both of whom must hold voting rights.
Protect Beneficiaries and the Model with More Participant Vetting, Monitoring and Greater Transparency. CMS will ask for additional information on applicants’ ownership, leadership, and governing board to gain better visibility into ownership interests and affiliations to ensure participants’ interests align with CMS’s vision. They will employ increased up-front screening of applicants, robust monitoring of participants, and greater transparency into the model’s progress during implementation, even before final evaluation results, and will share more information on the participants and their work to improve care. Lastly, CMS will also explore stronger protections against inappropriate coding and risk score growth.
The levels of risk available to ACO REACH participants are the same as they were in Direct Contracting, preserving the Professional and Global options and associated risk structures therein. The same goes for the capitation options available to participants.
That about does it for the similarities between Direct Contracting and ACO REACH, so let’s dive into the differences.
Structural Differences Between the Models
In addition to the differences in overall goals of the model, there are a number of structural differences between Direct Contracting and the ACO REACH Model.
Performance years: Direct Contracting had 6 performance years attached to the program; REACH will have only four (2023-2026).
Governance of Participating Entities: Direct Contracting Entities had to have 25% of their governing board voting rights associated with participating providers in the ACO; REACH ACOs will need to demonstrate that providers have 75% voting rights, a major shift towards provider-led ACOs. Additionally, DCEs were required to have both a beneficiary representative (member) and a consumer advocate, but it could be the same individual and the person did not need to hold voting rights. REACH ACOs will need to have both a beneficiary and an advocate on the governing board and both of these individuals will need full voting rights. This is a shift towards co-designed governance models.
Application Scoring: DCE applicants were scored based on the following categories: organizational structure; leadership and management; financial plan and risk-sharing experience; patient centeredness and beneficiary engagement; and clinical care. For REACH ACOs, these five categories still apply, but another three elements have been added: demonstrated strong track record of direct patient care, demonstrated record of serving historically underserved communities with positive quality outcomes, and program integrity risks posed by REACH ACO ownership/parent companies. This new layer of program integrity review of not just the ACO but any associated parent companies is clearly a direct response to concerns about private equity-owned organizations that participated in Direct Contracting. Additionally, the new requirements regarding demonstrated records of direct care will make it significantly more difficult if not impossible for new-cloth organizations to achieve ACO REACH designation.
Reduced Discount Applied to Global ACO Participants: DCEs that participated in the Global risk option received 100% of savings/losses; however, a discount was applied, enabling CMS to recoup some of the shared savings. This discount in Direct Contracting ranged between 2% and 5%. In the ACO REACH model, the discount has been lowered (2% to maximum of 3.5% in later years) to encourage model participation by reducing the shared savings that can be recouped by CMS.
Quality Withhold: In Direct Contracting, the quality withhold was 5%, in ACO REACH it has been reduced to 2%, which is in alignment with other CMMI models.
Risk Adjustment: One of the most hotly debated topics of the moment is the risk adjustment methodology for Medicare and some of the misaligned incentives with regard to risk score gains. Changes proposed from the Direct Contracting method of risk adjustment for ACO REACH are significant.
In the Direct Contracting model, there was a Coding Intensity Factor, which aimed to limit risk score growth across the whole model by comparing performance period risk score growth to member averages prior to the start of the model. ACO REACH introduces the concept of a static reference year population for the entirety of the performance period.
In the Direct Contracting model, there was a cap (limit) on risk score growth of 3% over a 2-year period. In the ACO REACH model, the risk score cap will be relative to the ACO’s demographic risk score growth, so the 3% cap is adjusted based on demographic changes in the population over time.
Executing on Health Equity Goals
The Biden Administration has been very vocal about their intent to infuse equity into all policy work they undertake. Much mention has been made about this through articles, presentations, etc., but until the ACO REACH model was unveiled, little detail was available about how the administration would implement this priority, so this is an exciting moment to watch.
Under the ACO REACH model, there are several health equity requirements that participating ACOs will need to execute on.
Health Equity Plan: Each ACO will need to develop and submit a plan that includes identifying health disparities and specific actions intended to mitigate them. This may be a tough lift for ACOs, given the frequent lack of available patient-level demographic data, so it will be interesting to see how detailed these analyses are and how specific the health equity plans are.
Data Reporting: All model participants will need to collect beneficiary-reported demographic and social need data. Clarifying that the request is to collect “beneficiary-reported” demographic data appears to be a tiny nuance but is critically important. There are several commercial tools available that “estimate” an individual’s race, ethnicity, income, etc. by aggregating large, publicly available data sets. While there are appropriate applications for these tools, there are also potential pitfalls. We should avoid further reinforcing entrenched systemic racism and classism by engaging with individuals instead of producing broad generalities through use of algorithms for this purpose. As mentioned above, so little demographic data is available on an individual basis, which renders activities like identifying disparities difficult and at times impossible. I applaud CMMI for taking the “both and” approach here by asking the ACO to put together a health equity plan (perhaps with not much to go by) AND to start collecting data now. This is a great approach–not allowing perfect to be the enemy of good!
Benefit Enhancement with regard to Nurse Practitioners: The model includes an expanded benefit to help reduce barriers of care that exist in areas where there are fewer physicians for beneficiaries to access. By allowing Nurse Practitioners to assume new responsibilities (examples from CCMI included hospice care and certifying diabetic shoe needs), the model expands access and responds to the current provider shortage issues that are very real to beneficiaries.
Health Equity in Application Scoring: Discrete points will be awarded to applicants who have a track record of serving underserved communities with positive outcomes.
Health Equity Benchmark Adjustment: Perhaps most boldly, the ACO REACH model includes a health equity benchmark adjustment–a beneficiary-level adjustment ($$) will be applied to ACOs who serve higher proportions of underserved beneficiaries. Historically, ACOs who participate in CMMI models have tended to serve less-underserved populations when compared to Medicare Fee For Service beneficiaries. Disenfranchised members tend to have lower health care spending relative to their health care needs, so this equity adjustment is necessary because if the model simply took into account historical spending (artificially low for disenfranchised members), the benchmarks for ACOs who serve predominantly disenfranchised beneficiaries underestimate need, creating disincentive for ACOs to serve these beneficiaries. Confused? This single change creates incentives for ACOs to serve historically intentionally marginalized individuals, and that’s really important. How exactly will CMS do this-–by using a composite measure that blends Area Deprivation Index (percentile score 1-100) and Dual Medicaid Status (Medicare only vs. Dual-eligible). Once all beneficiaries are scored using this method, CMS will then stratify all individuals and identify the top decile for an upwards adjustment of $30 PMPM and the bottom five deciles will see a smaller downwards adjustment of -$6 PMPM. Still confused? We’ve got a more detailed breakdown of this coming your way shortly, stay tuned.
What to Do if You’re Interested: Application Process
The application period to participate in the model opens March 7, 2022 and closes April 22, 2022–that’s seven short weeks to complete the application. The application process is for new model entrants only; current participants in the Direct Contracting model do not need to apply through the RFA process, they will be reached out to directly by CMS, and based on program compliance records in the Direct Contracting program, they will be moved over into the ACO REACH program if they agree to the program’s terms and conditions.
Three Thoughts I Had That Might Interest You
The 7-week Turnaround: The Direct Contracting program has been a hot topic in the health space–following the pause of new applications into the program, the delay of implementation due to the pandemic, and the very public criticisms that the program garnered, the announcement that CMS was ending the program and launching a revised model did not come as a complete shock to those who have been watching. What is surprising is the very short application window that CMMI has put forth. If I were a new ACO applicant, the top issues that I see with the short turnaround timeline include the program integrity component and the new governance board requirements (both 75% provider and the beneficiary and advocate requirement). These are items that may be hard to turn around in 7 weeks.
All Means All: Much has been proclaimed about the Biden Administration’s commitment to equity; this is the first time we’re looking at actual proposals and can consider their impact on populations that have been intentionally marginalized. The multi-layer approach here (reward ACOs in multiple ways for executing on equity) as well as setting the stage for future work for equity is a very positive development for those of us who care deeply about this issue.
Language Matters: The fact that Direct Contracting participants were called “Direct Contracting Entities” instead of ACOs seems to have muddied the waters to some extent with elected officials and the public at large, setting off some of the criticisms being leveled at the Direct Contracting program. CMMI staff made it very clear multiple times during their recent webinar that participants in the REACH model will be referred to as REACH ACOs, even if they are the same entities that engaged in Direct Contracting. As an anthropologist at heart, I see the importance of language & naming here, and CMMI attempting to perhaps tamp down on some ill-deserved criticisms of the program by clarifying and aligning language choices.
About the Author: Juliette Price is the Chief Solutions Officer at HSG. Follow her on Twitter and connect with her on LinkedIn.
