Geographic Direct Contracting: Where Hospice Fits

Through the U.S. Centers for Medicare & Medicaid Services (CMS) forthcoming geographic direct contracting model, participating entities will step into the role of payer as well as provider, including responsibility for program integrity and utilization management. The best opportunity for hospices that wish to be involved would be to establish preferred provider relationships with direct contracting entities (DCEs).

The demonstration will test whether a geographic-based approach to value-based care can achieve the twin aims of quality improvement and cost savings across designated geographic regions, with a particular focus on care coordination and clinical management. The model, set to begin Jan. 1 2022, will allow for concurrent hospice and curative care, which has been shown to improve quality of care and reduce costs, according to Annie Acs, director of policy and innovation for National Hospice & Palliative Care Organization (NHPCO) . 

The prospect of joining a DCE’s preferred provider network presents financial opportunities for hospices.


“If a hospice or palliative care organization is a preferred provider, there is an opportunity to gain more market share or control because this model allows for utilization management,” Acs told Hospice News. “DCEs have the option to lower beneficiary out-of-pocket costs in certain circumstances, such as if the beneficiary voluntarily chooses to visit one of those DCE preferred providers.”

DCEs would be responsible for patients’ health outcomes within each designated region. These entities can include Accountable Care Organizations (ACOs), health systems, health care provider groups or health plans.

CMS is considering 15 geographic regions in which to test the model, though ultimately the agency will select only a maximum of 10. The areas under review include the following metropolitan areas: Atlanta, Dallas, Denver. Detroit, Houston, Los Angeles, Miami, Minneapolis, Orlando, Phoenix, Philadelphia, Pittsburgh, Riverside (Calif.), San Diego and Tampa. Each of these areas includes 150,000 to 700,000 beneficiaries.


DCEs will be responsible for the total cost of care for Medicare fee-for-service beneficiaries and implement regional care delivery and value-based payment systems. To achieve the program’s goals, CMS will allow DCEs to create a preferred provider network able to provide enhanced benefits to their Medicare-covered patients. 

“If a hospice wants to be a part of this, they need to work on becoming a preferred provider. The DCE will actually pay the hospice; they won’t get paid by Medicare as a preferred provider,” said Thomas Cornwell, M.D. “What you can do is, for example, contract with the DCE where they will pay the hospice 90% of the Medicare allowable for those patients, but if the hospice does well, give them up to a 20% bonus.”

Cornwell is the founder and executive chairman of the Home-Centered Care Institute and senior medical director for Village Medical at Home with VillageMD.

DCEs will function as payers in other respects as well, particularly in the areas of program integrity and utilization management, actually managing the care of the patient population. The DCE can analyze data to identify opportunities for improving efficiency and cut costs.

“DCEs can have the analytic capability to call out high utilization patterns and actually changing behaviors,” Gary Jacobs, executive director of the VillageMD Center for Public Policy and president of Village Medical at Home, told Hospice News. “They can ask questions such as why a physician is ordering a high-volume of MRIs for low back pain when another doctor is using physical therapy and achieving similar results.”

The geographic model is one of several direct contracting components of the CMS Primary Cares Initiative, which also includes a general primary care payment option and a model targeting the serious illness population. 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.

CMS is currently accepting letters of intent from potential DCEs with a final due date of Dec. 21. The agency will release more details about the program when it issues a request for applications, which is expected to occur in January 2021.

“Hospice providers that are not part of a preferred provider network are going to be getting the fee-for-service rate, but they may be operating at something of a disadvantage,” Theresa Forster, vice president for hospice policy and programs for National Association for Home Care and Hospice (NAHC), said. “If you have these larger entities that are in control of the delivery system, there may be ways that they can incentivize use of their preferred provider network over the hospice providers that are not part of the network.” 

To achieve this, hospices will have to communicate their value proposition to DCEs, according to Forster. They will need to demonstrate their ability to provide quality care, provide data on patient outcomes, and show how they can reduce health care costs.

The geographic direct contracting model is one step in a longer journey to move the U.S. health care system away from traditional fee-for-service payments and towards a value-based payment structure. Along the way, hospices are seeing new opportunities to participate in reimbursement structures that are outside of the traditional Medicare Hospice Benefit. These include the value-based insurance design model demonstration, often called the Medicare Advantage hospice carve-in, the Primary Cares Serious Illness Population model, and the various direct contracting options.

“I think that we’re at the end of fee-for-service as we know it, and the move to value is just so overwhelming. I think that fee-for-service options will wither away, and everybody will want to move towards a capitation type of payment,” Jacobs told Hospice News. “You won’t have to worry about cash flow. It’ll be a defined amount of money, and they can have more predictability in their costs and run their offices more efficiently.”

Companies featured in this article:

, , , ,