Hospices Expect ‘Seamless’ Transition from Direct Contracting to ACO REACH

The U.S. Centers for Medicare & Medicaid Services (CMS) direct contracting model demonstration is transforming, the agency announced last week.

In the intervening days, the hospice providers who had prepared to participate in those programs have sought answers as to where they fit in this new direction.

CMS is replacing the Global and Professional Direct Contracting (GPDC) model with a program called ACO Realizing Equity, Access, and Community Health (REACH). The agency says the new program reflects its redesigned strategy for payment system demonstrations, with advancing health equity as a key tenet.

The agency is also eliminating the Geographic Direct Contracting Model, which was paused in March 2021.

After taking time to examine the REACH model, organizations involved in direct contracting expect a relatively smooth transition, according to Tom Koutsoumpas, CEO of hospice and senior services provider Capital Caring Health. Koutsoumpas was speaking on behalf of Advanced Illness Partners (AIP), a joint venture of which Capital Caring is a founding member.

“Most organizations – like AIP – will have the opportunity to move fairly seamlessly from direct contracting to the ACO Reach Model,” Koutsoumpas told Hospice News. “In terms of the new reporting and governance requirements, we are already largely provider-led and commit significant resources toward health equity.”

AIP is a direct contracting entity established by a coalition of seven nonprofit hospices that joined forces. The founders saw an opportunity to provide care further upstream of hospice and meet the direct contracting program patient population thresholds.

With the move to the REACH model, some of the rules are changing. As Koutsoumpas indicated, governance and health equity mandates are near the top of the list.

For example, the direct contracting models required participating entities to maintain at least 25% of governance voting rights. Under REACH, that number is up to 75%.

Some aspects of REACH are intended to foster greater health equity.

Participating entities must develop an equity plan that identifies health disparities that could affect their patient population as well as action items to address those concerns.

REACH also institutes a health equity benchmark adjustment for payments to ACOs serving higher numbers of underserved beneficiaries. CMS will identify these providers using statistical manuals such as Area Deprivation Index and Dual Medicaid Status.

Other new features include expansion of the services that nurse practitioners can provide and additional rules to tighten oversight and compliance.

Some of these changes are in part a response to congressional critics of direct contracting’s design, particularly Sen. Elizabeth Warren, (D-Mass.). Warren called for the elimination of the program, saying that it would leave Medicare vulnerable to what she called “corporate profiteers.”

While other stakeholders also raised concerns about the program, Warren’s view was not universal.

“There is value in these types of programs,” Nick Loporcaro, senior operating partner for the Chicago-based private equity firm The Vistria Group, told Hospice News. “I think the intent is great, especially when you start looking at the primary care space. It allows the opportunity to deliver a different type of care.”

Loporcaro is the former CEO of Landmark Health.

CMS announced the direct contracting models in conjunction with the Primary Cares initiative, which launched last year following some pandemic-related delays. While a range of health care organizations were eligible to participate, they would be taking on total responsibility for the patient, effectively becoming the primary care provider.

Seeing an opportunity, some hospices nationwide began to develop additional business lines to capitalize on these value-based models. Some began offering PACE, home-based primary care and palliative care, among other services.

These types of programs were essential for hospices considering direct contracting.

Hospices also had to develop the skillsets needed to work in a payment structure that involved greater risk — 100% for the global option or 50% risk with the professional option.

This created a learning curve for those seeking value-based arrangements.

“If you look at the data in the Medicare Shared Savings Program model, ACOs started to perform well in year three. It’s rare for a provider group to get up and running and have all the skills they need to manage risk,” health care private consultant Bob Tavares said. “For the most part, the folks that were accepted into the high-needs track of the direct contracting model were new to risk. They kind of jumped into the deep end of the pool.”

Among the concerns that prompted the transition to REACH was the nature of some of those participating entities, Tavares told Hospice News.

Thus, CMS has prioritized new screening processes in the new program to gain a better view into applicants’ ownership, governance, health care delivery experience as well as financial interests and affiliations.

The REACH model also will include rules designed to protect the program from inappropriate coding and risk score growth, according to CMS.

“I think the pushback was if you look at the list of direct contracting entities, overwhelmingly they are not traditional provider organizations contracting with Medicare to take risk,” Tavares said. “There are these intermediaries, largely health plans and venture capital-backed disruptors. Ideally, if it’s providers contracting directly with Medicare and they generate savings, they reinvest those savings into the care they provide. I don’t know if these intermediaries would reinvest in the community in the same way.”