Primary Care First Direct Contracting: Where Hospice Fits

The first application deadline for participation in the Primary Care First direct contracting payment models expired Feb. 25, but even this late in the game, many in the hospice space and other health care stakeholders struggle to understand these models.

The direct contracting options include three voluntary payment models that are designed to help the U.S. Centers for Medicare & Medicaid Services (CMS) and health care providers reduce the cost of care and improve quality within Medicare fee-for-service programs. The models adapt and integrate concepts from other programs such as Accountable Care Organizations, the Medicare Shared Savings Program, and Medicare Advantage, as well as strategies used in the private sector.

The Center for Medicare and Medicaid Innovation (CMMI) at first indicated that only large practices of more than 5,000 patients were eligible to participate in these models. However, CMMI later developed a pathway in the first year for smaller organizations with a threshold of 250 patients. This is designed to address a high-needs population, which the agency defines as patients with a hierarchical condition category (HCC) score greater than 3, or a lower HCC score with multiple unplanned hospital admissions and demonstrated frailty or disability.


Health care organizations would assume 50% risk or 100% total risk for these patients.

“These entities will really be aligned with working with hospices to reduce costs, which is really how you get paid under these,” said Thomas Cornwell, M.D., founder of Northwestern Medicine HomeCare Physicians and CEO of the Home Centered Care Institute, in a Hospice News webinar. “Home-based palliative care and [home-based] primary care could be a great benefit to these direct contracting programs with only 250 patients, and they can actually apply for them.”

The first of the three direct contracting models is the Professional option. Within this model, providers would accept the risk for 50% of shared savings or losses for all Medicare Part A or Part B services for patients that fit the Primary Care First eligibility requirements. Organizations working in this model would receive a risk-adjusted monthly payment for primary care services equivalent to 7% of the total cost of care.


Also under the direct contracting rubric is the Geographic option, in which contracted providers would accept 100% of the risk of shared savings or losses on the total cost of care for a particular geographic area. Within this program is a voluntary Total Care Capitation option, which includes a capitated, risk-adjusted payment for all services the contracted agency provides, as well as preferred providers who have contractual relationships with the contracted agency, such as a hospice that contracts with a primary care practice to provide services to eligible patients under their care.

CMS would select agencies to participate in the Geographic option through a competitive bidding process and would have to offer CMS a specified discount on the cost of care for the patient population in the designated region.

Finally, providers have the Global option. Within this model, providers would also bear 100% of the risk associated with eligible patients. Contracted agencies would have to choose between a Total Care Capitation option or a Primary Care Capitation option. Similar to the Professional direct contracting option, this would be a capitated, risk-adjusted monthly payment for enhanced primary care services equal to 7% of the total cost of care.

“The critical feature of [direct contracting models] is the ability for a [direct contracting entity (DCE)] to receive stable monthly payments directly from CMS, which provides a DCE with improved cash flow and allows them to control funds being passed on to providers,” said Corey Rosenberg, direct contracting model co-lead at CMMI, in a CMS conference call. “The DCE can make investments necessary to improve the care provided to their beneficiaries. Second, they can develop tailored value-based arrangements directly with the downstream providers that provide the right incentives for their providers to deliver high-quality, low-cost care to beneficiaries.”

The option for participating organizations to create value-based relationships with downstream providers represents an opportunity for hospices, particularly for those who have diversified their services to include home-based palliative care or primary care. Strategic partnerships with primary care providers could be the key for hospice and palliative care providers seeking to capitalize on the emerging payment models, including direct contracting and the other models available through the larger Primary Care First initiative.

Hospice and palliative care organizations can partner with participating primary care practices to provide interdisciplinary care and support the practice’s efforts to reduce hospitalizations, while sharing in the payments.

Hospice and palliative care have a demonstrated ability to reduce hospitalizations, emergency room visits and hospital readmissions, which are among the program’s major goals.

Patients who enroll in hospice are far less likely to be hospitalized than patients who do not elect hospice, according to a 2014 study. Likewise, hospice patients tend to have lower health care costs during the last year of life than other patients and are five-times more likely to die in their homes in accordance with their wishes. Patients who receive palliative care are also considerably less likely to seek hospitalization or go to the emergency department.

“We know that collaboration versus fragmentation leads to better outcomes, better patient experience and reduced costs, principally from decreasing acute hospital utilization, which reduces costs but also is the principal quality metric for the new value-based payments,” Cornwell said. “Collaboration capitalizes on all of our strengths, maximizes our efficiencies and minimizes duplication. It really allows us to take on these chronically-ill and/or disabled patients with limited resources, while utilizing the different organizational strengths we all bring to the table.”

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