[UPDATED] CMS Stops Accepting Direct Contracting Applications from Hospices, Other Providers

The U.S. Centers for Medicare & Medicare Services (CMS) has suspended the application process for the second year of the direct contracting payment models associated with Primary Care First. The status of first-year participants (April 1 to Dec. 31, 2021) has not changed.

The agency announced that the direct contracting program is “under review.” This mirrors a similar action on the Primary Care First Serious Illness Population payment model, which CMS has suspended indefinitely, also citing a review.

Though the Center for Medicare & Medicaid Intervention (CMMI) hasn’t given a reason for this decision, it could be a matter of the incoming Biden Administration trying to ensure that existing programs are in line with their objectives.


“It’s most likely that the new administration is reviewing the details of the models for alignment with their priorities around equity, access and so forth,” Tyler Cromer, principal with the consulting firm ATI Advisory, told Hospice News. “There is definitely a gap in the availability of value-based models for the most complex and frail Medicare beneficiaries, and we hope that CMMI will be laser focused on furthering and developing models to support this population.”

The suspended application process also includes organizations seeking participation in the model as a Medicaid Managed Care Organization-based (MCO-based) direct contracting entity.

Direct contracting includes three payment model options that are designed to help CMS and health care providers reduce the cost of care and improve quality. The models incorporate lessons learned from other programs such as Accountable Care Organizations, the Medicare Shared Savings Program, and Medicare Advantage.


The direct contracting models, announced in conjunction with the Primary Cares initiative, were initially slated for a Jan. 1, 2021 implementation date but were delayed until April 1 due to the coronavirus pandemic.

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.

According to CMS, the purpose of direct contracting is to transform risk-sharing arrangements in Medicare fee-for-service by offering both capitated and partially capitated population-based payments as well as expand participation in CMMI payment model demonstrations.

The agency indicated that it may resume accepting direct contracting applications for future participation years, but that outcome is not certain.

This development will likely pose challenges for providers who have been preparing to participate in this model for nearly two years. Many hospices have forged new partnerships and affiliations, made investments in technology and launched new business lines in anticipation of these models.

“It’s really quite disruptive. These models require organizations to assess and further develop their capabilities, partnerships, governance and care models,” Cromer said. “They also require taking on a significant amount of financial risk and should not be entered into without significant diligence.”

Despite these setbacks, the direct contracting and Serious Illness Population models may resume following the CMS review. If the programs do not go forward, hospices will likely be able to leverage their investments to succeed in future value-based payment models.

CMMI has indicated that they are committed to developing models to support seriously ill beneficiaries, according to Edo Banach, president and CEO of the National Hospice & Palliative Care Organization. Such models would likely apply features of direct contracting such as full risk, capitation and benefit enhancements, Banach told Hospice News.

“NHPCO encourages providers to continue partnerships with existing direct contracting entities, because many of them will be looking to grow and find new ways to improve outcomes in the coming months and years,” Banach said. “We also expect to see many of the same key components of direct contracting to be offered in future models, so it is important for our community to prepare for these opportunities.”

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