Physicians are now being actively recruited by health plans to sign up for a new “Direct Contracting Entity (DCE)” model promoted by CMS as an alternative to “traditional” Medicare.
There are three versions of this model, and a summary explanation of each is available via the CMS website in a “fact sheet” format. The version that most physicians will see is as an individual provider contracted through a Participating Provider Agreement.
This DCE model takes traditional Medicare patients who are paid on a fee for service basis and reassigns them to a capitation model that is intended to pay the physician less for the overall care of the patient. The objective is for Medicare to save money by paying a fixed amount per member per month, regardless of the level of care provided, and pass risk down to the physician. The provider agreements clearly state the physician will receive less money for care in this model than with traditional Medicare. The physician will be able to participate in any shared savings as calculated by the sponsoring health plan, but will also be liable for any losses.
Extreme caution should be exercised when considering participation in a DCE program. These are experimental, with the first year starting in January 2022. CMS has a poor track record in designing, implementing and administering financial risk sharing programs, and provider dissatisfaction has historically been a major issue for the first several years of their existence. For example, the Medicare ACO shared savings programs had a 40% dropout rate in their first years of existence; only 10% received any savings payout, and these were paid 8 months or longer after the close of the contract year.
This program is no exception; capitation is a very financially risky method of reimbursement at the best of times. While there is considerable experience in capitating commercial health plan beneficiaries (whose maximum age is 64 years), there is virtually no experience with capitating an aged population such as Medicare. The size of the provider panel and the age cohort of those assigned will be more of a determinate of shared savings or losses than the care decisions made by the individual physician.
Questions to Ask Prior to Signing A DCE Contract
- Will I be eligible? If a physician is currently a participant in a Medicare ACO, he may be prohibited from participating in a DCE. The enabling legislation (Section 1115A of the Social Security Act) for this program reads as follows: “Other Model Participation. Pursuant to Section 1899(b)(4)(A) of the Act, Provider may not be an ACO participant, ACO provider/supplier, or ACO professional in an accountable care organization in the Medicare Shared Savings Program.”
- What is the Per Member Per Month capitation payment proposed for my specialty?
- When will the first capitation payment be received?
- Will there be a “stop loss” provision for exceptionally sick patients, and if so, how will it be structured?
- Will all of my traditional Medicare patients be converted to the DCE capitation model, or just those who elect or are assigned by the plan?
- How will patients be assigned to this capitated program?
- Will this program permit CMS to assign patients without my prior approval?
- Is there a maximum limit to the number who can be assigned, and if so, can I set this limit?
- How will the program protect the provider against adverse selection, by either pre-existing illness or age?
- Will I be informed know the composition (name, age) of my DCE patients, and if so, how long in advance will I be notified?
- Will I have the ability to refuse the assignment of a DCE patient?
It is imperative that physicians know the answers to these questions before signing a formal contract. The DCE contracting period is 5 years, and there is a minimum participation time of 1 year before the contract can be terminated for no cause by the physician. If the contract is terminated for any reason before the 5-year limit is up, the physician will not be eligible to participate in any shared savings.
In addition, there is a risk that all, or a substantial portion of the physician’s traditional fee for service Medicare patients could be converted to the lower paying, risky capitation reimbursement model. If this happens, the physician will be at risk for shared losses incurred by other providers in a program over which he has little or no control.