CMS to Replace DC Program

Credit Suisse https://www.credit-suisse.com announced that on February 24, 2022, CMS made their decision to replace the Direct Contracting (DC) program with a more equity-focused and provider-led ACO model in 2023.

This should be seen as a positive outcome given the concerns around the future of the DC program which has recently weighed on the shares of Tech-enabled PCP companies.

Credit Suisse analysts caught up with some industry experts and some of the companies in their coverage. Most, in fact, see this as a favorable outcome for the participating PCP companies especially when taken into consideration the reduced quality withhold for participants and lowered discount rates.

Notably, the current Geographic and Professional Direct Contracting (GPDC) participants can continue in the ACO Realizing Equity, Access, and Community Health (REACH) model as long as they agree to meet all the new model’s requirements by the start date, while CMS will accept applications this spring for the first cohort of ACO REACH participants.

CANO management, in particular, noted that the company checks the box on some additional program requirements around governance, provider leadership, member engagement, greater health equity, etc.

Separately, there is a possibility that the new model economics are attractive enough for PRVA to consider participating. By way of background, PRVA decided not to pursue the DC program as the company could not figure out economic parity to make it worthwhile to move the MSSP lives to DCE.

After much debate in Washington over the past several weeks and months, CMS announced a redesigned ACO model that better reflects the agency’s vision of creating a health system that achieves equitable outcomes through high quality, affordable, person-centered care.

As a result, the GPDC model is being transitioned to the REACH model under CMS’ three key principles: freedom of choice for beneficiaries, greater health equity, and reaching underserved communities. In addition, one notable difference is at least 75% control of each ACOs governing body must be held by participating providers or their designated representatives, compared to 25% in the GPDC Model. The GPDC Model will continue until December 31, 2022 and then will transition to the ACO REACH Model.

In the meantime, CMS will operate the GPDC Model with more robust and real time monitoring of quality and costs for model participants. GPDC Model participants that do not meet model requirements, such as participants that restrict medically necessary care, will face corrective action and potential termination from the model.

The first performance year of the redesigned ACO REACH Model will start on January 1, 2023, and the model performance period will run through 2026. Further, CMS is releasing a Request for Applications for provider-led organizations interested in joining the ACO REACH Model. Current participants in the GPDC Model must agree to meet all the ACO REACH Model requirements by January 1, 2023 in order to participate.

In a catch-call with CANO, the company emphasized that the transition from the GPDC Model to the ACO REACH Model is positive for CANO. In fact, management argues that it is the current model with some additional program requirements around governance, provider leadership and engagement, which CANO checks the box on. CANO noted that its current DCE lives should be transitioned automatically to the new model by CMS. On the REACH program opening to new applicants, CANO noted that there shouldn’t be an issue with competition as there are plenty of Medicare FFS beneficiaries for everyone.

Lastly, with respect to the lowered discount rate (from a maximum of 5% to 3.5%). CANO highlighted that it is a good thing because it increases revenues as the discount rate (more of an administrative fee from CMS) eats up a smaller portion of the revenue PMPM which makes the program more attractive. As a result CANO emphasized they had been prepared for any change to DCE and the discount savings under the new program should it drop straight to the bottom-line.

For more  information on the Note, Tech-Enhanced PCPs: Direct Contracting Program to be Redesigned: a Neutral to Positive Outcome for Tech-enabled PCPs in Our Coverage, for news, or to provide feedback, email Jailendra Singh jailendra.singh@credit-suisse.com or call 212-325-8121.

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