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.
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:
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.
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.
DCEs will be selected via a two-step process:
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.
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).
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.
Geo represents a strategic growth opportunity for organizations in government / senior markets and lines of business.
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.
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: