The U.S. Centers for Medicare & Medicaid Services (CMS) has approved Humana Inc. (NYSE: HUM) to become a direct contracting entity (DCE). The company has branded the DCE as Humana Direct Contracting Entity, Inc., which operates as Humana Care Solutions. The new DCE plans to partner with hospice and palliative care providers to improve quality of care and reduce costs.
Direct contracting, which was unveiled in conjunction with CMS’ Primary Care First initiative, includes three payment model options 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. The models incorporate lessons learned from other programs such as Accountable Care Organizations, the Medicare Shared Savings Program, and Medicare Advantage.
“We’re honored that Humana Care Solutions is one of only 53 organizations selected to participate in this innovative value-based model, which strives to accelerate the shift away from fee-for-service across the nation while providing greater financial consistency for providers,” said Oraida Roman, vice president of value-based strategies at Humana. “This is important and exciting work, to collaborate with clinicians and expand the availability of value-based care beyond Humana’s membership, and in a way that supports physician organizations during uncertain times.”
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. An additional program under Primary Cares is the Serious Illness Population model, which CMS recently postponed indefinitely.
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.
CMS recently announced that the direct contracting program is under review, and the agency is not currently accepting applications for the demonstration’s second year. This means that the remaining option for hospice and palliative care providers to reap the benefits of these models would be to partner with an existing DCE.
Direct contracting is essentially a primary care program. Most participating hospice providers have launched new business lines designed to manage the patient’s care further upstream than the end of life. Common examples include home-based primary care and PACE programs.
However, Humana has plans to expand its relationships with hospice and palliative care providers as the demonstration progresses.
“Humana Home Care Solutions has been working with hospice and palliative providers over the past three years as we prepared for and launched our participation in the [Center for Medicare & Medicaid Innovation’s hospice value-based insurance design model (VBID)] demonstration,” a Humana spokesperson told Hospice News. “Based on our learnings from those experiences, we are in the process of exploring DCE provider partnership opportunities beyond primary care, inclusive of both hospice and palliative care partners for 2021 and beyond.”
VBID is often referred to as the Medicare Advantage hospice carve-in. Through Medicare Advantage, CMS contracts with private insurance companies to provide coverage for Medicare beneficiaries. CMS in early 2019 year announced that it would test coverage of hospice care through Medicare Advantage plans beginning in 2021.
The carve-in will be a small program in its first year. The 53 participating Medicare Advantage plans cover 8% of the market and a limited geographic footprint, according to CMS. Humana is the largest player in the demonstration to date, having the highest number of participating MA health plans compared to other payers. Humana currently has a total 4.8 million members enrolled in Medicare Advantage plans.
Humana recently agreed to purchase in full the hospice and home health provider Kindred at Home in a $8.1 billion deal. Humana has held 40% ownership of Kindred at Home since 2018 and will now purchase the remaining 60% stake from the private equity firms TPG Capital and Welsh, Carson, Anderson and Stowe. The $8.1 billion price tag includes Humana’s current $2.4 billion in equity value from its 40% holding.
The company indicated that it was primarily interested in Kindred’s home health operations and plans to divest the hospice segment in a sale, spin off or other transaction.