Geographic Direct Contracting: Background & Strategic Opportunity

Geographic Direct Contracting: Background & Strategic Opportunity

On December 3, 2020, the Centers for Medicare and Medicaid Services (CMS) Innovation Center released details on the much-anticipated Geographic Direct Contracting Model, or “Geo.”

Geo is a new payment and care delivery model designed to assess whether Direct Contracting Entities (DCEs) can improve quality of care and lower total cost of care for Medicare beneficiaries across an entire geographic region. Geo differs from the Direct Contracting Professional and Global Options as it requires participating organizations to take risk for a portion of Medicare Fee-For-Service (FFS) beneficiaries residing in a specific geographic region rather than beneficiaries aligned to specific providers.

Geo is expected to generate interest from a broader range of organizations compared to previous Medicare Shared Savings or Accountable Care programs, particularly with those that see an opportunity for growth in government markets.

This brief summarizes the Geo program, outlines the strategic opportunity for healthcare organizations and provides HealthScape’s suggested next steps for program preparation.

Geo Model Overview

Direct Contracting Entities (DCEs):

DCEs are responsible for managing the total cost of care for Medicare FFS beneficiaries in a specific region and are formed by organizations (e.g., health plans, Accountable Care Organizations, providers) that believe they can succeed in such a risk-based model. Given the broader level of risk contemplated by this program, Geo creates the following mechanisms for DCEs to achieve program objectives of cost reduction and quality improvement:

• Geo Preferred Providers: DCEs will contract with a network of Geo Preferred Providers and align on incentives for program goals of cost and quality through alternate payment arrangements (e.g., sub-capitation, shared savings). DCEs may also offer cost-sharing support to beneficiaries to seek care from these Geo Preferred Providers.
• Beneficiary Engagement Incentives: DCEs and their Geo Preferred Providers will have the flexibility to offer a number of tools to engage and support aligned beneficiaries in clinical coordination and care management. These tools are similar to the Medicare Advantage program’s expanded definition of supplemental benefits, such as vouchers for OTC medications, dental care services and transportation services; wellness program memberships; and support items and services for chronic care management (e.g., home railing installations).
• Program Integrity: For Geo Preferred Providers, DCEs may conduct certain program integrity functions to validate medical necessity and adherence with Original Medicare policy. These reviews may include prior authorization, pre-payment claim edits and pre / post medical and payment review. DCEs and Geo Preferred Providers must agree to these functions in their contract.

Alignment:

There are five ways for beneficiaries to be aligned to a DCE (which will be applied in the following hierarchy)—voluntary alignment, MCO-based alignment for dually eligible beneficiaries, ACO-based alignment, claims-based alignment and random alignment. Geo’s prioritization of voluntary alignment creates an opportunity for proactive outreach and marketing to drive prospective assignment, which will be helpful in DCEs’ ability to identify and manage their beneficiary population.

Financial Methodology:

The financial methodology for Geo compares a DCE’s performance against a region’s Performance Year Benchmark, which is established using a Geographic Rate Book. As part of the application phase, DCEs will bid a discount on this benchmark, assuming responsibility for the entirety of savings or losses above or below the discount. The Performance Year benchmark will be risk adjusted, shared savings / losses will be constrained by risk corridors and payments will be subject to a quality and participation withhold.

DCEs and Geo Preferred Providers will opt to reduce Geo Preferred Providers’ FFS payments either completely (Total Capitation) or partially (Partial). DCEs will receive a capitated payment equal to this FFS reduction and subsequently, distribute to their Geo Preferred Providers.

DCE Selection:

DCEs will be selected via a two-step process:

• Step 1: Capacity Assessment: Applicants will be evaluated across nine domains ranging from leadership and risk-sharing experience to care management and IT systems. Applicants can only advance to the second step if they meet a pre-determined scoring threshold.
• Step 2: Proposed Discounts: Applicants will be selected based on their proposed discount off the region’s Performance Year Benchmark. Applicants with proposed discounts that are above a regional minimum and actuarially sound will be eligible for Step 2. CMS will select the applicants with the highest three-year average discount.

While CMS expects to have between three and seven DCEs in a given region (depending on the number of beneficiaries), and each DCE will be aligned a minimum of 30K beneficiaries.

Candidate Regions:

As part of the first performance period which will start January 1, 2022, the CMS identified fifteen potential geographic regions (below) and requested organizations to indicate their interest for participation. Each region contains between 150K to 700K beneficiaries. Four to ten regions will be selected based on the degree of interest from submitted Letters of Intent (LOI).

Timeline:

Geo will be tested over two three-year performance periods. The first performance period runs from January 1, 2022 through December 31, 2024. Below are the key dates leading up to the first performance period.

What is the Opportunity?

Geo represents a strategic growth opportunity for organizations in government / senior markets and lines of business.

• Growth: Given that each DCE guarantees a minimum of 30K beneficiaries, Geo affords organizations an opportunity to rapidly grow lives under management or enter the senior markets with immediate scale. While not a stated intent of the program, health plans could also consider Geo an opportunity to introduce FFS beneficiaries to a managed model of care that, over the longer term, could help accelerate conversion to MA.
• Administrative Scale: Organizations can leverage existing infrastructure and allocate fixed costs for clinical care management investments (e.g., IT infrastructure, data / analytics) across a broader population.
• Value-Based Tipping Point: The additional lives represented by Geo can help achieve the scale necessary to convert a given provider’s panel for the desired change management and adoption of value-based practices.
• Market Share Defense: CMS’s limit on the number of DCEs per region creates a risk of non-participation if early adopters are successful.

Letter of Intent (LOI)

Organizations interested in participating in Geo are encouraged to submit an LOI.  While LOI submissions are optional and not legally binding, they will be used to help inform CMS’s further refinement of the program. More importantly, with CMS limiting testing Geo to four to ten regions, LOI submission will increase the chances of selection of an entity’s preferred region.

Next Steps

With the Request for Application expected in January (which will be required for application submission) and applications due on April 2, 2021, organizations interested in pursuing Geo should quickly develop their strategic rationale and complete the necessary steps to prepare for program application and launch. HealthScape is well positioned to support organizations:

• Align on the strategic business case / imperative for participation and socialize with internal stakeholders
• Determine capabilities required for Geo participation and success, ability to meet those capabilities and remediation strategies for any identified gaps
• Develop a network strategy for Geo Preferred Providers, including contracting model and payment terms (note: application requires attestation of providers and description of payment terms)
• Identify beneficiary engagement incentives and tools for clinical / care management
• Develop a beneficiary outreach strategy to support voluntary alignment
• Create financial models to derive a proposed discount to CMS, preferred capitation model and economic flow to Geo Preferred Providers
• Understand the financial impact of current provider participation in other value-based care initiatives (e.g., MSSP)
• Forecast program performance under a range of scenarios (e.g., performance, beneficiary alignment, market participation)
• Determine impact and opportunity for other government programs

Also published on LinkedIn, here.