Debunking Myths about Direct Contracting

Direct Contracting — also known as Global and Professional Direct Contracting (GPDC) — is a new alternative payment model from the Centers for Medicare and Medicaid (CMS) that encourages primary care physicians (PCPs) and other eligible professionals to shift away from fee-for-service (FFS) to value-based payments in primary care.

There are a growing number of myths and misstatements about what GPDC is and what it means for patients and providers. To set the record straight, Pearl Health pulled together this quick summary of myths and facts.

Healthcare Providers Illustration

myth #1

Direct Contracting is a plot by the Trump Administration to privatize Medicare.”

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FACT #1

Global & Professional Direct Contracting (GPDC) is an incremental evolution of previous value-based models that the government has tested.

GPDC allows healthcare providers, especially primary care providers (PCPs), to choose to participate in a model that will give them the tools they need to generate savings through diligent care of their patient populations, shifting the value they create to their own practices. The GPDC model is motivated by the view that high costs of care in Medicare stem from a lack of coordination and misaligned incentives.

myth #2

Private actors in Direct Contracting, motivated by profits, will impose structural barriers, coercion, or deception to curtail patient access to care.”

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FACT #2

Beneficiaries are still enrolled in Original Medicare with the same rights and benefits as before, like the Medicare ACO program but without the baggage.

Direct Contracting Entities (DCEs) have no power to create gated benefit designs (i.e., referral requirements) or otherwise degrade the Medicare benefit structure (e.g., through increased patient cost-sharing), create closed networks of providers from which beneficiaries must receive care, or barricade care behind prior authorization or utilization management processes. Further, all communications a DCE has with Medicare beneficiaries must be pre-approved by CMS.

myth #3

Privatization is happening without the knowledge or consent of Medicare beneficiaries allocated to Direct Contracting Entities.”

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FACT #3

Beneficiaries can be aligned to a provider participating in Direct Contracting (and, therefore, a DCE) without taking any action if they have substantial history of receiving care from that provider.

It is appropriate for CMS to make use of such a passive process in the context of a model that can only enhance beneficiaries’ experience in the healthcare system. The only changes a Medicare beneficiary should experience for being aligned to a DCE are: (1) a more attentive PCP that is more engaged with managing their care, and (2) optional “beneficiary engagement incentives” a DCE may apply for to reward patients for adhering to care plans or otherwise incentivize healthy behaviors. In other words: all carrots, no sticks.

myth #4

Direct Contracting Entities and Medicare Advantage plans will have similar inflationary impacts to healthcare costs of Medicare beneficiaries managed in the models.”

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FACT #4

The similarities between Direct Contracting Entities and Medicare Advantage plans are grossly overstated.

The architects of the GPDC model learned from the mistakes of MA and, while they still incorporate the notion of risk adjustment, they enacted two critical changes to avoid a similar arms race: (1) the aggregate risk score of beneficiaries aligned to a DCE cannot increase more than 3% year-over-year, and (2) each year, all DCEs are re-indexed to the average risk score of beneficiaries aligned to DCEs nationwide. This means that risk adjustment efforts will allow DCEs to “keep up with the pack” but will not lead to the same inflationary phenomenon experienced in MA. This will save Medicare money.

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