Direct Contracting Model Results in Savings for Medicare in First Year

Data released by the Centers for Medicare and Medicaid Services (CMS) found that in 2021, the first year of the professional and global Direct Contracting Model, 53 direct contracting entities generated savings for Medicare while 38 organizations earned $47 million in shared savings. Due to the pandemic, the start of the performance year was delayed to April 1, 2021, meaning these results are only from 9 months of experience with the model.

The Direct Contracting Model is a voluntary Accountable Care Organization (ACO) model that aims to put patients at the center and improve their experience of care. Beneficiaries may be aligned to an entity participating in the model if they choose (or have) a primary care doctor who is part of an ACO participating in the model. Beneficiaries do have the right to opt out of model-related aspects of care and can choose any provider they want, without being restricted to a network. The model ties payments to improvements in the quality of care provided to patients, leading providers to collaborate across treatment plans, spend more time with patients, and ultimately improve patient health outcomes.

The direct contracting model allows ACOs to assume higher levels of financial risk (and reward) than what is available under the Medicare Shared Savings Program. The goal of the model is to test whether strong financial incentives for ACOs, in addition to tools that help support patient engagement and care management, can improve health outcomes and lower expenditures for original Medicare fee-for-service beneficiaries.

All 53 direct contracting entities received quality scores of 100% in areas such as patient satisfaction and unplanned admissions for patients with chronic conditions.

“The [Direct Contracting Model] results are some of strongest achieved to date by the advanced alternative payment models tested by the federal government,” said Susan Dentzer, president and CEO of America’s Physician Groups (APG), a national association representing more than 335 physician groups. “APG is proud of our members’ participation in the program, and we especially congratulate VillageMD’s Village Medical Houston Accountable Care Organization (ACO) in Houston, Texas for producing the highest level of net savings for taxpayers of any DCE in the country, while also attaining perfect quality scores.”

Looking Forward

In 2023, the Direct Contracting Model will transition to the Accountable Care Organization Realizing Equity, Access and Community Health (ACO REACH) Model. The ACO REACH Model will introduce a health equity benchmark adjustment to payments to help support entities on care delivery and coordination in underserved areas and participants will be required to meet certain benchmarks on promoting health equity.

CMS released a Request for Applications (RFA) to solicit a new cohort of participants for the ACO REACH Model to begin participation on January 1, 2023. Previous Direct Contracting Model participants must continue to maintain a strong compliance record and agree to meet all the ACO REACH Model requirements to continue participating in the ACO REACH Model as ACOs after January 1, 2023.

Additionally, the geographic Direct Contracting Model (on pause since March 2021) will be eliminated.