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CMS Launches Value-Based Primary Care Initiative With Downside Risk

Analysis  |  By John Commins  
   April 22, 2019

CMS anticipates its new primary care payment models could better align and reduce cost of care for nearly 11 million Medicare fee-for-service beneficiaries.

Federal officials on Monday unveiled a voluntary, risk-based initiative to transform primary care to a value-based system that rewards physicians who keep patients healthy and out of the hospital.

Health and Human Services Secretary Alex Azar said the CMS Primary Cares Initiative for Medicare and Medicaid beneficiaries will also reduce administrative burdens and empower primary care providers to spend more time caring for patients while reducing overall healthcare costs.

Azar said he anticipates that 25% of traditional Medicare beneficiaries will opt into the initiative, which will launch pilot programs in January 2020.

"Primary care is a small slice of healthcare spending overall, but it has a significant impact on downstream cost and quality," Azar said at a press conference Tuesday

"This initiative will radically elevate the importance of primary care in American medicine, move towards a system where providers will be paid for outcomes rather than procedures, and free up doctors to focus on the patients in front of them, rather than the paperwork we send them," he said.

"Basically, what this model is going to do is get us where providers are competing for beneficiaries. They're not gate keepers. They don’t control access to specialty physicians. They don’t control access to hospital admissions," he said.

Two Paths, Five Models

The CMS Primary Cares Initiative creates five payment models under two paths: Primary Care First and Direct Contracting. All five models focus on care for chronically and seriously ill patients.

Two Primary Care First models will pay practices a total monthly payment that Azar said allows clinicians to focus on caring for patients rather than their revenue cycle. The Primary Care First – High Need Populations, will offer more money to practices that specialize in care for high need patients, including those with complex, chronic needs and seriously ill populations.

Both Primary Care First models incentivize providers to reduce hospitalizations and cost of care by rewarding them through performance-based payment. PCF will be tested for five years beginning in January 2020, with applications accepted beginning this spring. A second round is also planned for January 2021.

"Both options allow practices to move away from fee-for-service and to eliminate their revenue cycle operations," said Adam Boehler, director of the Centers for Medicare & Medicaid Services Innovation.

"CMS will make monthly population based payments along with a simple, flat primary care visit each time a provider sees a patient. Providers will be eligible payments if their patients stay healthy and at home," he said.

There is downside risk of 10%, which Boehler said is about the equivalent to the revenue cycle costs today, and "an asymmetrical upside potential of 50%." The performance will be measured on risk-adjusted hospitalizations.

"For example, doctors who earn $200,000 today could earn up to $300,000 if their patients stay healthy," Boehler said. This model is scheduled to begin in January 2020. 

Related: Providers Applaud CMS' Primary Care Initiative

Related: Stakeholders Tell CMS to Keep It Simple on Direct Provider Contracting

Related: Proposed ACO Models Would Hasten Downside Risk

Related: Direct Primary Care Offers Segue to Direct-to-Employer Contracts

The three Direct Contracting payment options offer Global, Professional, and Geographic models that engage organizations that have experience with financial risk and serving larger patient populations, such as accountable care organizations, Medicare Advantage plans, and Medicaid managed care organizations.

The Direct Contracting payments are designed to create a competitive delivery system that rewards organizations offering greater efficiencies and better care. The payment model options include a focus on care for seriously ill patients with complex, chronic needs, as well as a voluntary alignment option that allows beneficiaries to align with the health care provider of their choosing, Boehler said.

The Direct Contracting participants will get a fixed monthly payment that can range from a portion of anticipated primary care costs to the total cost of care. Participants in the global option will bear full financial risk, while those in the professional payment model will share risk with CMS.

Boehler said these options will provide participants a range of financial risk arrangements while providing a more predictable revenue stream and reducing healthcare provider burdens commensurate with level of financial risk.

"The professional option gives providers the opportunity to share 50% of the savings and the losses on risk-adjusted total cost of care," he said. "Providers in this option will receive predictable, monthly payments for enhanced primary care services."

The global option allows providers to take full 100% accountability for savings and losses, Boehler said.

The global and professional models will launch in January 2020, with applications reviewed in June.

The geographic option will organizations the opportunity to assume responsibility for the total cost of care and health needs of a population in a defined target region, and is expected to launch in January 2021, after reviewing request for public input.

"This would provide an unprecedented ability for that local organization to negotiate better rates than Medicare does today, take responsibility for outcomes and provide benefits that work for the local communities' needs," Azar said.

Practices that choose to care for seriously ill patients will be required to clinically stabilize the patient, and all payment models include enhancements to encourage provider participation for that population.

11 Million Lives

Boehler said empirical evidence has repeated validated the importance of primary care.

"Despite only being 2% to 3% of spend, primary care providers have an enormous influence over downstream costs," he said. "Our current payment systems do not recognize the essential role that primary care providers play. We're going to change that today."

The five payment options could provide better alignment for more than 25% of all Medicare fee-for-service beneficiaries—nearly 11 million people—with 5 million beneficiaries in the DC payment model options and 6.4 million in PCF payment model.

CMS is projecting that 25% of primary care practitioners will be drawn into the initiative, which would also create opportunities to coordinate care for Medicaid dual eligibles.

"Why we think there is so much interest is that: 1, providers like to practice and spend time with patients; 2, this simplifies their lives significantly. You're taking away revenue cycle, an unnecessary burden, and; 3, we're creating a significant amount of financial upside for doing the right thing," Boehler said.

To guard against cherry picking healthier patients, Boehler said providers won't be allowed to select a subset of patients.

"It has to be a panel with Medicare fee-for-service, so it keeps from totally cherry picking," he said.

“Basically, what this model is going to do is get us where providers are competing for beneficiaries.”

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.


HHS anticipates that 25% of traditional Medicare beneficiaries will opt into the initiative, which will launch in January.

The models incentivize providers to reduce hospitalizations and cost of care by rewarding them through performance-based payments.

There is downside risk of 10%, about the equivalent of revenue cycle costs. There is an upside potential of 50% that will be based on risk-adjusted hospitalizations.

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