Hospices See Big Opportunities in Direct Contracting, But Care Must Move Upstream

When the U.S. Centers for Medicare & Medicaid Services (CMS) in 2019 announced its Primary Care First Serious Illness Population model, many hospices saw the program as their greatest opportunity for successful participation in the agency’s alternative payment structures. While interest in the program remains high, many providers are shifting their gaze towards the direct contracting models.

The direct contracting options include three voluntary payment models that are designed to help 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.

“There’s been a lot of ambiguity around the Serious Illness Population model. Direct contracting is so appealing to many providers asit offers a chance to move even more into a primary care type of role beyond just more of a palliative type of role,” said Jacqueline Kimmell, director of population health strategy Capital Caring Health. “Direct contracting offers the chance to serve as the main point of contact and the main primary care provider for those patients and also to take on the total cost of care responsibility for those patients.”


Capital Caring Health is a member of the recently launched venture Advanced Illness Partners, a coalition of seven nonprofit hospices that joined forces to create a direct contracting entity. Forming a collective organization will enable its members to provide care further upstream and meet the program’s requirements regarding the size of a direct contracting entity’s patient population.

The partners in AIP include seven nonprofit organizations: Pure Healthcare, Geriatric Solutions, Hospice of the Valley (Ariz.), Hope Healthcare, Housecall Providers, Cornerstone Hospice, Nathan Adelson Hospice and Capital Caring Health. Pure Healthcare is a venture of Ohio’s Hospice, a group of 10 affiliated providers located throughout that state. These nonprofit organizations first began connected through participation in the National Partnership for Hospice Innovation (NPHI).

The direct contracting models, announced in conjunction with the Primary Cares initiative, were initially slated for a Jan. 1 implementation date but were delayed until April 1 due to the coronavirus pandemic.


“Community-based hospice providers are experts in providing care at home,” said Carol Fisher, president of NPHI. “This [high-needs direct contracting] model really speaks to them leveraging their expertise, leveraging on the opportunity to innovate and create new pathways for patients to really get a wide range of care that typically has been left out of that hospice benefit.”

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.

One reason that many providers leaned towards the Serious Illness Population model early on is the complexity of the direct contracting models. Some also needed time to gear up for the primary care role that direct contracting is designed to facilitate.

“Many hospice providers have been diversifying their services trying to move upstream from hospice. But even if they are diversified, the only experience many of them have with value-based contracting is some of them have palliative programs,” Bob Tavares, chief strategy officer for the health care analytics firm Cyft, told Hospice News. “When the model was first announced, even though there was a high-needs track, it didn’t register with many of them, maybe because they had limited experience with risk-based contracts. The Primary Care First Serious Illness Population model was a smaller step on the journey with a lot less risk.”

Within the direct contracting models, providers bear 100% of the risk associated with eligible patients for the global option or 50% risk with the professional option. Contracted agencies would have to choose between a Total Care Capitation option or a Primary Care Capitation 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 high-needs direct contracting track is geared towards organizations that serve Medicare fee-for-service beneficiaries who have complex needs, including dually eligible beneficiaries, who are aligned to the direct contracting entity through voluntary alignment or claims-based alignment.

Providers, hospices or otherwise, must be equipped to step into a primary, coordinated care role in order to make direct contracting work. This is one of the reasons that many organizations that have traditionally focused on hospice are now launching home-based primary care programs and offerings such as Programs for All-Inclusive Care for the Elderly (PACE).

Empath Health and Stratum Health, which are considering applying to the high-needs direct contracting program, are parent companies of Suncoast Hospice and Tidewell hospice, respectively. The companies are in the final stages of completing a merger. The combined organization will provide hospice, private duty, skilled home health care, physician services, palliative care, primary care, a PACE program and an HIV medical clinic.

As Empath-Stratum mull their options related to direct contracting, they are focusing a lot of attention on their PACE program as a cornerstone for their participation in that model.

“We really see the direct contracting model as a very exciting extension of what Empath has been doing over the years through its PACE program,” said Stratum Health President and CEO Jonathan Fleece. “It’s ultimately going to be a model that will give integrated delivery health care systems like Empath-Stratum, the ability to do a better job of managing their overall health, to give them better outcomes, reduce hospitalizations, and result in saving for payers.”

The focus on cutting acute care utilization is expected to spur a growing trend in the health care field that is shifting care out of the institutional setting and into the home, particularly for those patients who have high-needs. These high-need patients represent a large and growing contingent of the Medicare population, and they often come with higher health care costs.

“We have been doing PACE rather successfully. That has really prepared us in many ways for that whole element of risk management, cost containment, and providing the best care at a contained price,” Rafael Sciullo, president and CEO of Empath Health, told Hospice News. “It really came down to that strategic fit for our future.”

Even as they look more closely at direct contracting, hospice providers are not abandoning the Serious Illness Population model. However, they may be more cognizant of its limitations as a transitional program. The objective is to identify seriously ill beneficiaries who are experiencing fragmented, uncoordinated care under Medicare fee-for-service and deliver an intensive episodic intervention to stabilize their condition.

Patients would be aligned with the model for about eight months to a year before transferring to a long term primary care relationship under a different payment structure. In direct contracting, a high-needs, high-cost patient could be aligned for several years.

The Serious Illness Population program is also limited geographically. During the program’s first year it will be available in 21 states and five metropolitan areas including Cincinnati, Kansas City, Philadelphia, and two regions within New York state.

Regardless of which payment models hospices apply for or build partnerships to address, they will have to evolve to function in a value-based payment environment, whether that be through Primary Cares, direct contracting or the Medicare Advantage hospice carve-in.

“There’s confidence that value based contracting is not going away. If these entities don’t participate themselves and payers approach them to be preferred providers, they’re pretty much guaranteed to have to take a discount,” Robin Jensen, lead policy expert for Cyft, said. “If they can form a [direct contracting] entity and be in the driver’s seat, that protects their own interest to a great extent.”

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