Give Medicare direct contracting time to prove its value or expose its flaws

January 26, 2022

Healthcare experts have argued for years that we should move away from the dysfunctional, unsustainable fee-for-service Medicare reimbursement system and toward value-based models that incentivize better health outcomes such as reduced hospitalizations and post-acute care costs.

Unfortunately, one of the federal Center for Medicare and Medicaid Innovation’s most promising value-based programs is facing a coordinated attack from “Medicare for All” advocates who want to end it before concrete evidence can prove that it benefits patients, providers and the Medicare system.

A campaign to stop the Direct Contracting program is led by Physicians for a National Health Program, an organization advocating for a universal, single-payer national health program. Their main argument against the Direct Contracting program is tried-and-true and deeply partisan—that it’s a back-door effort to “privatize Medicare” because some Direct Contracting Entities (DCEs) are owned by for-profit companies. It’s not.

We should know. VillageMD is one of the leading DCEs in the model program. Our doctors appreciate that it puts primary-care providers at the center of care teams and rewards physicians who build ongoing relationships with patients. By providing payments for each person in a provider’s care based on their disease burden, the program incentivizes patients’ overall health, rather than providing medical services piecemeal. Patients retain freedom of choice to see any Medicare provider.

By not focusing on volume, primary-care providers can spend the time needed to provide high-quality care, especially for patients with chronic conditions who require comprehensive care plans. In the U.S., more than $4 trillion is spent on healthcare annually, and more than 85% of this amount is tied to patients with chronic disease. Keeping those people healthier longer is a potential source of tremendous savings for the healthcare system and can allow people to live more fulfilling lives. Care coordination across multiple settings facilitates a long-term partnership with the patient, prerequisites for improved management of chronic conditions.

Primary-care practices are receiving increased investment due to the Direct Contracting model, which is encouraging providers to build clinics and create access in underserved rural and urban communities. VillageMD has committed to launch primary-care practices in more than 500 medically underserved areas, which will serve millions of Americans on Medicaid and Medicare in care deserts.

The Direct Contracting model draws upon private-sector approaches to risk-sharing arrangements and payment and reduces administrative burden. Risk adjustment means the provider is paid more if the patient is sicker because it will take more time, effort and cost to treat the patient. One of the benefits of risk adjustment is that it centers attention on the diagnosis of the patient instead of creating meaningless tasks and measurements to determine payment that do not add value for the patient.

Critics of Direct Contracting suggest that DCEs will engage in aggressive diagnostic “upcoding” and miscategorize patients to qualify for higher risk-adjusted payments. Actually, DCEs are subject to multiple coding limitations and Direct Contracting risk adjustment is not undermined by the complicated regulations and litigation that limit government action on miscoding in Medicare Advantage. The opportunity to improve risk adjustment oversight and educate providers on effective coding practices is a reason to keep the Direct Contracting program, not end it prematurely.

DCEs are ineligible for shared savings without achieving CMS’ quality benchmarks. Relative to prior existing initiatives, the Direct Contracting payment models include a stronger set of quality measures that focus more on outcomes and beneficiary experience than on process.

There are going to be starts and stops on the path to a Medicare system that better serves patients, but value-based care is ultimately the key to improved health outcomes and lower costs to the system. In 2021, CMMI halted implementation of another model of Direct Contracting in which DCEs would have bid on the opportunity to accept financial risk for an entire population of fee-for-service Medicare beneficiaries in select geographic regions. Given the significant capital and administrative resources required of a DCE in the geographic model, many would not be able to participate and feared that they would be driven out of value-based care. The current Direct Contracting program does not invoke those concerns, and allows beneficiaries freedom of choice among Medicare providers.

In the long term, the key to success in value-based models like Direct Contracting is providing quality care that is personalized, preventive, comprehensive and equitable. This is the first year of a planned six-year model program. During that time, CMS will determine whether it delivers high-value care to patients and savings for the Medicare system—or not. That evaluation should be based on data, not politics.