4 key takeaways from CMS' value-based payment model announcement

Topics: Health Care Reform, Finance, Care Models, Direct Primary Care, Insurance, Medicare

Analysis from our publisher

By Yulan Egan

HHS on Monday unveiled five new value-based payment models intended to shift primary care providers and other eligible professionals away from fee-for-service (FFS) payments.

About the new value-based payment models

The five new payment models—which were developed and will be implemented by CMS' Center for Medicare and Medicaid Innovation—are designed to examine whether performance-based payments paired with providers taking on financial risk will reduce health care costs and maintain or improve health outcomes and quality of care.

CMS broke the payment models down into two paths:

  • Primary Care First (PCF), which is specifically designed for primary care practices and includes two voluntary, five-year payment models (PCFGeneral and PCFHigh Need Populations);
  • Direct Contracting (DC), which is targeted at a wider range of organizations and builds on lessons learned from the Next Generation ACO model and Medicare Advantage via three payment models (DCProfessional, DCGlobal, and DCGeographic).

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4 takeaways from CMS' new payment models

Below I break down my four main takeaways from CMS' announcement of these new models:

1) Value-based payment is a clear area of bipartisanship, but participation remains largely voluntary as CMS continues seeking proven models for bending the cost curve. In announcing the Primary Care First and Direct Contracting models, HHS Secretary Alex Azar emphasized the long-standing bipartisan nature of value-based payment reforms. And the payment mechanisms available through the new models represent the most significant departure from traditional fee-for-service CMS has offered to-date—a clear vote of confidence in the potential of alternative payment models. At the same time, the voluntary nature of the new models suggests that CMS still considers these models in the experimental phase. 

2) The new models reflect a continued focus on encouraging participation among independent physician groups, as well as a new attempt to engage health plans in Medicare's cost control efforts. In many ways, the new models announced yesterday build on recent changes made to the Medicare Shared Savings Program (MSSP); the new "Pathways to Success" design was also intended (in-part) to encourage participation among independent physician practices. At the same time, the Primary Care First and Direct Contracting models are also clearly an attempt by CMS to engage a wider range of stakeholders in controlling Medicare total cost of care than ever before—including Medicaid managed care organizations, Medicare Advantage (MA) plans, and health care technology companies.

3) The focus on the seriously ill population reflects a growing industry trend to develop and support segmented care models for high-cost populations. Senior-focused care models, in particular, have become increasingly popular in recent years as organizations like ChenMed and CareMore have continued to expand their presence. Many of these players have historically focused heavily on the MA market due to their desire to operate under a capitated payment model, but the availability of similar payment models within traditional Medicare could accelerate the growth of these types of organizations.

4) CMS' attempts to incorporate features of Medicare Advantage and streamline administrative complexity could be quite appealing for many providers—but the devil will be in the details. Many of the key elements of the new models—prospective, population-based payments; a more streamlined set of quality metrics; and a benchmarking methodology based around regional spending patterns—could address common challenges associated with earlier iterations of Medicare's primary care and account care organization models. However, the precise details of the payment mechanisms, financial model, and quality reporting requirements have yet to be released. Whether these features are sufficient to attract organizations that have historically held off from participation (e.g. MA-focused organizations) will become clearer as CMS releases more information in the coming weeks. 

*Editor's note: Yulan Egan is a practice manager with Advisory Board who specializes in health policy, Medicare risk strategy, and shifts in the health care purchasing landscape. The Advisory Board, which is a division of Optum, publishes American Health Line.