If the total spend for her Traditional Medicare members is less than the benchmark, she will earn back a portion of the savings. Medicare keeps some, and then the DCE and Dr. Ruiz will share the rest of the savings.
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Medicare’s Direct Contracting payment model provides an opportunity for primary care providers (PCPs) to capture the full dollar value generated from effectively managing care for Medicare patients. PCPs can use these funds to reinvest in their staff, their practices, and their patients.
She is a Primary Care Physician (PCP) who practices in Raleigh, NC 27604. She has 213 Traditional Medicare patients in her practice.
When she signed up with the DCE, they reviewed the historical spending patterns for her Medicare members.
The 2019 spend for primary care office visits for her Medicare patients was $56.00 Per Member Per Month (PMPM).
This PMPM amount is approximately what she will get paid for each active Medicare patient that is attributed to her practice.
The benchmark is a blend of her own historical performance and that of her peers. It also incorporates the clinical severity of her patients.
Different DCEs have different ways to share in the savings, with some offering a higher portion of the shared savings for a lower monthly per-member payment.
Some DCEs will also offer a higher portion of shared savings if the physician is also willing to take downside risk. Downside risk means that, if savings are not achieved, money is owed back to Medicare.
Dr. Ruiz’s historical spend is below the benchmark, and she is only comfortable with a moderate level of shared savings risk. She joined a DCE that best met her risk tolerance, with 25% shared savings potential.
Based on this analysis, she knows that Part B spending is one of the main cost drivers of her overall spend.
Fortunately, the DCE she belongs to is building out a preferred provider network of aligned specialists in her area that will help bring this number down.
By shifting to this new payment model that is not tied to the volume of visits she can fit into one day, she is able to personalize how she spends her time with patients.
For complex patients, she is able to have longer visits. For patients who need more frequent check-ins, she is able to use different ways of communicating like secure messaging and video calls.
Dr. Ruiz can also more effectively use a team-based approach, to ensure that patients are getting not only the frequency of care that they need, but the specialized services specific to their own health and social circumstances.
While she has increased her SNF spending, this has been more than offset by a corresponding decrease in inpatient hospital spend. She has also started to leverage her DCE’s preferred network of specialists, further adding to her shared savings forecast.
Based on her DCE contract, and the way that Medicare calculates shared savings with the DCE, she would then retain $23k of this amount.
In this scenario, her total annual compensation would be approximately $166k: $11,928 per month for the capitation revenue ($143k annually), plus $23k in shared savings.
In this example, the amount of estimated Shared Savings is calculated based on the method Medicare uses to calculate the total amount of savings it shares with the DCE, a 25% shared savings selection by the participating physician, and full achievement of the 5% quality withhold amount. Pearl can support you in implementing strategies to reduce your patients’ total healthcare spend, meet your quality benchmarks, and achieve Shared Savings.
This example is illustrative only, intended to show how different variables could impact how the Direct Contracting program can work.
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