The Biden administration is redesigning a Trump-era Medicare pilot program opposed by dozens of congressional Democrats who viewed it as an effort to privatize the beloved health program for the elderly and disabled.
The Centers for Medicare & Medicaid Services on Thursday announced the global and professional direct contracting model will be replaced by the Accountable Care Organization (ACO) realizing equity, access, and community health (REACH) model. The transition to the ACO REACH model will begin Jan. 1, 2023. Current GPDC Model participants must agree to meet all the ACO REACH Model requirements by that date to continue participating.
The global direct contracting model was designed to help move traditional Medicare away from fee-for-service care and more toward value-based care, in which provider reimbursements are based on patient outcomes and cost efficiency.
The redesigned model seeks to put a greater focus on increasing health equity among underserved populations in Medicare, and is designed to reduce the incidence of “upcoding,” in which providers overstate the seriousness of a patient’s condition in order to get higher reimbursements.
“Under the ACO REACH Model, health care providers can receive more predictable revenue and use those dollars more flexibly to meet their patients’ needs—and to be more resilient in the face of health challenges like the current public health pandemic,” Liz Fowler, CMS deputy administrator and director of the Center for Medicare and Medicaid Innovation, which designs Medicare payment models. “The bottom line is that ACOs can improve health care quality and make people healthier, which can also lead to lower total costs of care.”
The overhaul, name change, and new model requirements follow a late push by the health-care industry to persuade the administration to fix the model.
CMS officials also announced the cancellation of another pilot program, the geographic direct contracting model. That model was paused in March 2021 and “is being canceled because it does not align with CMS’ vision for accountable care and concerns raised by stakeholders,” the CMS said in a press statement.
Both decisions come on the heels of a strategic review of experimental Medicare payment models to better address issues of health disparities and equity. And they follow the administration’s termination last year of two other Medicare payment models over concerns about poor participation and performance.
In a phone briefing Thursday afternoon, senior CMS officials said future Medicare pay models must: ensure that beneficiaries retain freedom to get care from all Medicare-enrolled providers and suppliers; promote greater equity in delivery of high-quality services; and include underserved communities to improve beneficiary access.
“Models that do not meet these core principles will be redesigned or will not move forward,” the agency said in statement.
In addition to a focus on health equity and stronger protections against upcoding, the newly designed pilot program will prioritize provider-led organizations, strengthen beneficiary input in the model’s operation, and increase the screening of model applicants and the monitoring of participants, the CMS said.
The revamped model will also improve transparency in data reporting on the quality of care and the financial performance of participants. Many of these improvements were recommended to CMS by the National Association of ACOs and other stakeholder groups.
The National Association of ACOs said in a statement that the decision to “keep the Direct Contracting Model, albeit with numerous changes and a new name, is the right decision.”
“Many of the criticisms against Direct Contracting were a product of great misunderstanding about the model and the overall shift to value-based payment,” the group’s statement said. “Instead, keeping the model with additional focus on equity, increased provider governance, improvements to risk adjustment, and other changes is best moving forward.”
Others were not as complimentary. Physicians for a National Health Program, which favors a single-payer health system, said in a statement that the ACO REACH program has “virtually no limits on what type of company can participate; entities can be owned by commercial insurers, private equity investors, and other profit-seeking firms, including current Direct Contracting entities.”
The group said beneficiaries would still be automatically enrolled into ACO REACH entities “without their full understanding or consent, and once enrolled cannot opt out” unless they change primary care providers.
Medical organizations, known as direct contracting entities, that participate in the global model can assume either 50% or 100% of the risk-adjusted cost of care for Medicare beneficiaries—while sharing in the savings and losses accordingly.
But in a recent letter to HHS officials, 54 House Democrats said the model creates a “perverse motive to decrease the quality and volume of seniors’ care.” They asked Health and Human Services Secretary Xavier Becerra and CMS Administrator Chiquita Brooks-LaSure to scrap it.
The global and professional model “disrupts the sanctity of traditionally public Medicare benefits by giving control of beneficiary care to private interests,” the Democrats’ letter said.
Current participants in the global and professional model include 1Life Healthcare Inc., Oak Street Health Inc. and Clover Health Investments Corp., SVB Leerink analysts wrote in a Feb. 15 research note.
A product of the Trump administration, the model began operation April 2021, but the CMS stopped accepting applications from new organizations interested in participating in 2022.
A ‘Natural Evolution’
Primary-care chain VillageMD has about 65,000 patients in the direct-contracting program, making it one of the largest participants, said Gary Jacobs, executive director of the company’s Center for Government Relations and Public Policy. In an interview ahead of the CMS decision, he called direct contracting a “natural evolution” of policies advanced by the Affordable Care Act that make doctors accountable for patients’ total medical costs.
Jacobs, who co-chairs a payment model coalition for America’s Physician Groups, said the organization was in communication with CMS officials about changing the risk adjustment model that influences how much direct-contracting providers get paid. The risk-adjustment system is meant to set payment rates according to the expected cost of members, but critics have called it susceptible to manipulation.
“Fair risk adjustment is something that needs to be figured out and done, and we want to continue to collaborate with CMS” and the CMMI, which designs the models, Jacobs added.
But some opponents said the system was unfixable. Physicians for a National Health Program has called the direct contracting model an attempt to privatize Medicare and petitioned the HHS to end it.
In 2021, its first performance year, 53 direct contracting entities participated in the model. Participants can be “provider organizations (like health systems), primary care practices, clinics, health plans or other health care organizations,” according to the CMS.
But congressional Democrats say the contracting entities are privately owned, some by large health insurance companies and private equity firms. They have an incentive to steer beneficiaries to their network providers “to maximize profits which can limit patients’ care options,” the Democrats, led by Rep. Pramila Jayapal (D-Wash.), said in their letter.
“These models transform the care of a traditional Medicare beneficiary to care typically seen in a private Medicare Advantage (MA) plan despite the fact that the patient chose not to enroll in an MA plan,” the letter said.
Changes ‘Fall Far Short”
Jayapal on Thursday said the Biden administration didn’t go far enough in revamping the model.
“While I’m glad to see the administration taking steps to redesign this flawed program—I am disappointed that these changes will not be enacted for 10 months and that there are no limits on how many seniors are funneled into this experimental model,” Jayapal said in the statement from Physicians for a National Health Program. “More needs to be done, and I will continue to fight tooth and nail against any and all efforts to privatize Medicare.”
Alex Lawson, executive director of Social Security Works, which has lobbied to end these arrangements, also said the administration’s changes to the model were insufficient.
“Changing the name doesn’t change the fact that the direct contracting program is backdoor privatization of Medicare. This dangerous experiment must be stopped before it further harms the health of vulnerable seniors, eats into the Medicare Trust Fund, and destroys traditional Medicare,” Lawson said “The tweaks that CMMI announced today fall far short of that goal.”
“DCEs and their investors—which include private equity firms—are focused on generating profits. They are incentivized to deny and delay care as much as possible. There are no changes that can address that fundamental flaw at the heart of the program,” he said.