Direct Contracting Model Strategies that Drive Innovative Healthcare

CMS Direct Contracting Model

It’s no secret that the U.S. healthcare system could benefit from a healthy dose of creativity and innovation. Over the past several decades, healthcare costs have been rising at an unsustainable rate, while patient outcomes have been less than ideal. Efforts to create a more value-based healthcare system, which have featured an especially concerted effort over the last decade, have thus far not succeeded. In recognition of this reality, the Centers for Medicare/Medicaid Services (CMS) has recently introduced its Direct Contracting model. Specifically designed to encourage innovative healthcare ideas, Direct Contracting will hopefully lead us toward a more value-based healthcare system. 

Many healthcare organizations and providers believe the Direct Contracting model has tremendous potential. While the model is currently being used only for Medicare beneficiaries, many hope that its central themes–provider capitation, quality measures with minimal administrative overhead for practices, and global risk sharing–may soon be adopted by private payers and providers furnishing care in the commercial sector. Such proliferation will depend on the model’s initial success in managing costs of the Medicare population and how well providers adapt. If the model works as planned, it will incentivize innovative healthcare strategies, leading to better outcomes and lower costs. With this in mind, it’s essential that healthcare professionals understand ways to innovate in this  environment. 

Thomas Graham quote

Innovative Healthcare Strategy #1 – Enhance Workflow Efficiencies

It is well known that many healthcare systems lack efficient operational workflows. This is especially true in coordinating care among different care settings in and out of various facilities. Therefore, innovative healthcare ideas are needed to streamline many of these more complex care activities. The Direct Contracting model accomplishes this by linking rewards to value-based outcomes. As a result, all stakeholders are motivated to develop more efficient and coordinated processes of care. Healthcare organizations can leverage the Direct Contracting model’s investment capital construct (i.e. the ‘enhanced cap’) to pursue better workflow efficiencies. Likewise, they can encourage the use of standardized workflows that are patient-centric in an effort to reduce care variations. Similar to Lean Six Sigma approaches, these efforts reduce waste while improving the capacity for predictable and reproducible results. This is an area of innovation needed for many healthcare systems today. 

Jason Joseph healthcare quote

Innovative Healthcare Strategy #2 – Advance Digital Integrations

Advancing and streamlining digital integrations across the healthcare system may lead to more efficient healthcare delivery. Interoperability, the ability of different digital healthcare platforms to communicate, has been a barrier for efficient and effective healthcare. Healthcare systems can use the Direct Contracting model to encourage improved connectivity and interoperability by incentivizing such investment through outcomes alignment. This inherently reduces waste by limiting duplication services and increases access to information for better decision-making. Such connectivity can also improve the insight of analytics efforts, providing healthcare systems with better data to drive future changes. By investing in these types of activities, organizations can better thrive under the Direct Contracting model and reap the rewards. 

Aaron Martin health system quote

Innovative Healthcare Strategy #3 – Effective Provider Incentives

Under CMS’s Direct Contracting model, Direct Contracting Entities (DCEs) have the ability to structure bespoke risk contracts with the providers that they engage. A DCE may choose different risk tracks, taking on 50% or 100% of the risk and shared savings benefits. While past ACO programs allowed for similar risk-sharing, DCEs are afforded greater freedom to create more targeted risk-based and capitated contracts with providers that incentivize them to develop innovative healthcare solutions. This is one of the major advantages of the Direct Contracting model that did not exist with prior CMS approaches to value-based healthcare. 

John Brownstein healthcare quote

Innovative Healthcare Strategy #4 – Engage and Involve Patients

The Direct Contracting model places the burden to develop innovative healthcare solutions on DCEs and member providers. Yet the involvement of patients is critical to the success of efforts to achieve performance improvement in value-based care. By empowering and incentivizing patients to engage in this manner, DCEs can make better, more informed choices about which strategies they will invest in and patients can contribute to self-care and self-monitoring. DCEs and providers should therefore invest resources in educating and training patients in these areas. In doing so, they are better able to utilize patient resources that reduce costs and lead to better results. These types of activities also broaden care coordination across additional care settings that include the patient’s home environments. 

Embracing a Culture of Innovation in Healthcare

Each of the above strategies can help organizations and providers realize more innovative healthcare practices. The Direct Contracting model simply serves as a framework by which these efforts can be used. Over time, however, DCEs and providers alike can embrace a culture of value-based innovation to achieve healthcare goals. 

1. Adams, K. (2021). 6 big ideas in healthcare innovation. Becker Hospital Review. Retrieved from https://www.beckershospitalreview.com/digital-transformation/6-big-ideas-in-healthcare-innovation-4.html

2. Ibid.

3. Ibid.

4. Ibid.

Pearl Health

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