Hospices Can Expect More Value-Based Payment, Despite SIP, Direct Contracting Delays

As the Biden administration reviews value-based programs put forth during the Trump years, hospice and palliative care providers have had to recalibrate as the new payment models they were expecting hang in limbo, including the direct contracting program and the Primary Care First Serious Illness Population (SIP) model. 

Regarding the SIP model, providers have little to do but wait to see if the program will go forward as planned, be scrapped or if a modified initiative or even a total replacement will emerge.

Despite a few delays due to the pandemic, the direct contracting program did launch as planned on April 1. However, the U.S. Centers for Medicare & Medicaid Services (CMS) has indicated that they are 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 direct contracting entity (DCE).


CMS to date has approved more than 50 organizations to become DCEs during the implementation year. Some of the major players include Humana Inc. (NYSE: HUM), Landmark Health, VillageMD and CareMore and Aspire, subsidiaries of Anthem (NYSE: ANTM).

Humana 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.

Engaging with DCEs to ensure that your hospice can gain entry into their preferred provider networks is likely the next best option to direct participation in the model.


Direct contracting, which was unveiled in conjunction with CMS’ Primary Care First initiative, includes three payment model options that are designed to help the agency 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.

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.

Direct contracting (as with SIP) 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.

These new business lines underscore the degree to which hospice providers have been re-examining their operations to gear up for the new payment models. Many providers believed that the SIP model to be the most promising for hospices among the new payment systems associated with Primary Care First.

SIP is aimed at promoting care for high need seriously ill beneficiaries, who lack a primary care practitioner and receive fragmented care coordination. CMS anticipates that this would account for roughly 2% to 3% of Medicare beneficiaries. The program is designed to control costs, reduce avoidable hospitalizations and improve care coordination.

To prepare for SIP, hospice providers have invested in new technologies, including interoperable electronic health record systems and predictive analytics platforms. In some cases they have launched new lines of business such as palliative care or home-based primary care.

Despite the opportunities that SIP presented, the program did have significant limitations. Foremost, CMS was expected to launch SIP, like Primary Care First, in only 26 regions throughout the United States. This strictly limited the number of providers who could participate as well as the patient populations who may have benefited from the program.

SIP was also considered a transitional model meant to bring a patient under the wings of a primary care provider who could coordinate their care going forward. Patients would receive care under the auspices of this program for eight months to a year before being aligned with another payment system.

While CMS has been mum on the future of the program, the possibility exists that a revised or replacement model could address some of these limitations, making SIP more widely available or for a longer duration.

However the future of SIP and direct contracting plays out, movement towards value-based payment models has been one of the rare issues that has benefited from widespread bipartisan support, even within a very contentious political environment.

The newly appointed administrator of CMS, Chiquita Brooks-LaSure, indicated during her confirmation hearings that she improving health care quality and reducing costs would remain a priority for the agency under her leadership. These are the twin aims of most value-based payment models.

Likewise, Elizabeth Fowler, the new head of the Center for Medicare & Medicaid Innovation (CMMI), indicated in a speech at a  National Association of Accountable Care Organizations conference that CMMI’s “commitment to value-based care has never been higher.” CMMI is the office within CMS charged with designing and testing alternative payment models. 

Hospice providers can expect that the movement towards value-based payments will continue in some form going forward, whether these are expansions or reimagining of existing models or entirely new initiatives.

Concerns abound regarding the entry of hospice into payment models other than the Medicare Hospice Benefit, including the potential for lower dollar amounts for their services and potential impacts to their existing care models. A likely bright side is that the effort and investments providers have undertaken to prepare for these models are unlikely to go to waste and would position them well for future payment systems. 

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