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Is Medicare Direct Contracting the right fit for your organization?


Program focuses on improving quality and reducing cost, while maintaining patient choice.

provider network

Medicare Direct Contracting program is a unique opportunity for existing Medicare Shared Savings Program (MSSP) accountable care organizations (ACOs), NextGen ACOs, organizations that have experience serving Medicare fee-for-service (FFS) patients, and even organizations with limited Medicare FFS experience that wish to grow their market share. 

The primary goals of Medicare Direct Contracting include: 

  • Transform to risk-sharing arrangements in Medicare FFS

  • Empower beneficiaries through provider choice

  • Reduce health care provider (HCP) administrative burden 

Provider groups have the option to choose the type of Direct Contracting Entity (DCE) they wish to join based on their experience managing Medicare FFS populations, their existing Medicare FFS patient population, and the level of risk they are willing to assume. Entities can choose among the following DCEs:

  • Standard DCE: Organizations that have at least 5,000 attributed Medicare FFS beneficiaries and are composed of existing Medicare FFS providers and suppliers 

  • High Needs Population DCE: Organizations with a significant beneficiary population and business focused on Medicare, dual-eligible beneficiaries, and other high-cost, complex members

  • New Entity DCE: Organizations with limited exposure providing services to a Medicare FFS population but have the ability to grow membership over time 

The Medicare Direct Contracting program creates new opportunities for organizations to realize Medicare savings and enhance quality of care through risk-sharing arrangements and primary care redesign. Therefore, it is important for physician groups to understand how their current patient population and payer mix align to the appropriate Medicare Direct Contracting Entity options and level of risk sharing. 

What is the Opportunity in Medicare Direct Contracting?

In considering whether to serve an as independent DCE versus joining a larger DCE network, provider groups should consider their size and ability to take on the financial risk associated with Direct Contracting in order to be successful in this value-based model. 

A key opportunity for participation in Medicare Direct Contracting is the focus on improving quality and reducing cost, while preserving patient choice. The voluntary alignment of Medicare FFS beneficiaries to participating providers is a key feature under Direct Contracting and empowers patients to seek care with providers with whom they want to build a relationship. The opportunity for providers to outreach to Medicare FFS beneficiaries encourages patient engagement and allows for network expansion. Physician groups can leverage this benefit to grow their practice and invest in new benefit features that will support or enhance population health management initiatives to improve care. 

For practices with significant Medicare experience and high-risk patient volumes, the capitated payment model will allow for greater flexibility in how practices deliver care by moving more members under risk, so the financial structure is more similar with Medicare Advantage. These practices can be critical for network enhancement of a larger DCE because of their contribution to the regional benchmark, broadening the DCE’s footprint. Having a diverse provider network will be beneficial to a DCE’s success as network contracts can incorporate upward and downward adjustments that provide enough financial reward for groups that perform more efficiently relative to their region while also mitigating losses for DCEs that drive higher costs compared to their region–thus encouraging participation and improved high performance. 

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For groups with limited exposure to Medicare FFS models or risk-sharing agreements, taking advantage of the capitated model under Direct Contracting will provide the consistent cash flow to allow physicians to focus on their member engagement strategy to better understand their patient population and develop more personalized care to help improve performance. It will be important to consider how beneficiaries can be better engaged to actively participate in their own care, whether it be through initiatives such as the development of care management or incentive- or rewards-based engagement programs offered to beneficiaries.

All organizations should understand and refine their existing network management strategy to identify providers in their network or region, and in turn, identify the high performing specialty providers with whom they would like to contract. First dollar savings allow organizations to realize savings without a minimum threshold; however, larger provider organizations will be challenged with determining how to allocate those savings across entities and providers with whom they contract while ensuring participants will continue to be incentivized to perform at an efficient level. Therefore, these groups must assess what level of risk they can reasonably bear to ensure savings and high performance.

For mid-size provider groups and smaller provider practices, contracting with a larger DCE may be a critical way to grow their Medicare FFS footprint and gain exposure in risk-based contracts. In a similar vein, some groups may have experience treating FFS beneficiaries but under other value-based programs, such as MSSP ACOs, they face attribution challenges and are unable to achieve shared savings when patients are treated at out-of-network locations. Under Direct Contracting and voluntary alignment, entities have the opportunity to realize shared savings when they otherwise would not under other value-based payment models that primarily reward savings via claims-based attribution. The Medicare Direct Contracting model builds upon existing value-based payment structures, allowing practices to further refocus their care management approach to ensure long term benefits. 

Considerations for Success

Direct Contracting may not be for everyone but there are keys to ensuring success in the competitive landscape:

  • Know and learn your population, their behaviors, their needs, and choices. This model is voluntary and requires claims-based alignment. These beneficiaries will need to be engaged and supported. 

  • Know your network, their strengths, and areas to improve. The claims and voluntary alignment are outputs of how well your provider network engages, maintains, and delivers quality care.

  • Identify gaps–proactively and routinely. Develop a cadence to review data for adjustments.

  • Collaborate and align. Assess opportunities to contract with other provider networks, including high-risk population provider groups or groups with limited Medicare FFS experience. Understand the successes and struggles of those programs in your region. Identify and build relationships that meet the needs of your provider and your population. Direct Contracting has the ability to move a significant cohort of your patients to risk, therefore, there are great new opportunities for physician compensation reform and incentive alignment. Aligned providers are engaged providers.

  • Evaluate and monitor. Review dashboards and determine if you are actually measuring and collecting useful data that will allow you to reach your quality and financial goals. Put an improvement framework in place as you begin your program. 


Andrew Snyder is a Principal and Chief Medical officer at COPE Health Solutions and Katrina Dauigoy is a Senior Consultant at COPE Health Solutions. For more information on Medicare Direct Contracting, please contact Dr. Snyder at  asnyder@copehealthsolutions.com or 401-225-9417 .

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