2021 Direct Contracting Models – What Healthcare Organizations Need to Know

Written By:

Kathy Ormsby, CPC, CPCO

VP of Compliance and Analytics

June 2020


The Centers for Medicare & Medicaid Services (CMS) Innovation Center recently announced that it will begin the first performance year of the Direct Contracting model for the Professional and Global options on April 1, 2021. The new start date reflects a three-month delay to account for coronavirus (COVID-19) pandemic.

Direct Contracting (DC) is a set of voluntary payment models designed to encourage healthcare organizations to take higher financial risk for their traditional Medicare fee-for-service (FFS) patients, in return for a potentially higher financial reward. CMS is aligning the financial incentives to attract organizations that manage the complex chronic and seriously ill beneficiary populations. The model offers healthcare providers and Medicare FFS beneficiaries opportunities that are flexible and result in enhancing the quality of care, while at the same time reducing the total cost of care.

The model builds on the lessons learned from successful Accountable Care Organizations (ACOs), Next Generation ACOs and the Medicare Shared Savings Programs (MSSP).

Click here for more information on DC


How does an organization know if they are ready to take on risk or additional risk?

Under direct contracting, healthcare organizations will receive capitated payments from CMS. The organization will contract with providers and make payments directly to the provider. At the close of each performance year, CMS will compare the actual spending against a benchmark to determine if the organization underspent or overspent for its population.

To know if your organization is ready to assume the risk required by the DC model, organizations should have an understanding of what is included in the benchmark. Organizations already using the MSSP will find the DC benchmark familiar. Like the ACO and MSSP programs, the DC benchmark is driven by the trended historical experience.

For DC, CMS proposed an agreement period starting in 2021 and continuing through 2025 using a baseline period from calendar year 2017 through 2019. While the baseline years do not change the historical experience, the inclusion of risk scores may change. There are other variables included in the benchmark, but the component that organizations should concentrate on prior to the DC implementation is the risk score.

CMS will use the Medicare Advantage (MA) rate book in determining payments for the DC. The MA rate book lists rates for specific regions, counties and states and translates this to a capitated payment amount for MA plans. The rate book includes information that determine the monthly payment per patient. Using the rate book, value-based care organizations, such as the DC, can collect the information and perform an analysis of their population to understand how they would perform in the DC model. For example, using the MA rate book, you could determine that a low-risk patient would equate to $900.00 per month and a high-risk patient equates to $1500.00 per month. With proper analytics, you can use the data from your EHR (electronic health record) to compare the discrepancies.  This analysis may highlight coding deficiencies that, in turn, will, identify training and education needs for your coders and providers. Value based care is a new environment for all participating organizations, taking action today ensures success in Direct Contracting tomorrow.

Immediately begin to understand your patients’ data. Work with analytics to understand deficiencies in your RAF (Risk Adjustment Factor) scoring and know if you are over or under-utilizing resources. Take action on these results today!

For help in analyzing your organization’s RAF score contact us today.