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Medicare Just Invited More Competitors Into Value-Based Primary Care

Analysis  |  By Steven Porter  
   May 09, 2019

Even as some important questions remain unanswered, the CMS Primary Cares Initiative is generating a lot of excitement. Observers say it opens the door to more competitors for healthcare incumbents.

The shift to value-based care has sputtered a bit in the past two years, as hospitals and health systems have waited to see what innovative reforms the Trump administration would push across the healthcare policymaking finish line.

Despite a litany of attempts—and two years of a Republican-controlled Congress—the administration has neither repealed nor replaced the Affordable Care Act and the value-based payment provisions embedded within it. Even with its individual mandate neutralized and its constitutionality under judicial review, the ACA remains law, and officials in the Centers for Medicare & Medicaid Services are using the ACA's authority to roll out a potentially transformative undertaking: the CMS Primary Cares Initiative.

That initiative, industry stakeholders say, is poised to kickstart value-based care in Medicare and beyond, ushering in a new wave of consumer-centric competition that could help to shake off some healthcare providers' risk aversion.

"There was a sense that things were flattening out. It wasn't going backwards. It wasn't going down. It just was not progressing as fast as we all had hoped," says Norman H. Chenven, MD, founding CEO of Austin Regional Clinic in Texas and vice chairman of the Council of Accountable Physician Practices.

"With this announcement for Medicare—again, with the caveat that the devil is in the details—there is a sense that this is going to be a shot in the arm and we're going to see some real new energy, innovation, and evolution of the value-based movement," Chenven tells HealthLeaders.

The initiative, which CMS announced last month, has a total of five voluntary payment model options split between two paths. There are two options under the Primary Care First (PCF) path and three options under the Direct Contracting (DC) path. The idea behind all five options is to demonstrate how risk and reward can lead to investment in primary care that ultimately reduces overall healthcare spending and boosts quality outcomes.

While there are still key details we don't know about how the new models will operate, they appear to present opportunities for healthcare providers that are strategically positioned to make big moves in value-based primary care.

But there also seem to be significant threats, including potential competition from some unlikely sources.

Beware New Entrants

These new primary care models are being built on foundational lessons learned through past pilots by the CMS Innovation Center, the agency says.

The PCF models build upon Comprehensive Primary Care Plus (CPC+), and the DC models build upon various Accountable Care Organization (ACO) models, including the Medicare Shared Savings Program and Next Generation ACO Model, plus benefit design principles of Medicare Advantage.

An organization doesn't need to be a large physician group or hospital to form an ACO or similar entity to participate. The new PCF models are open to primary care providers with as few as 125 attributed Medicare beneficiaries at a particular location. That helps to empower individual physician groups that might otherwise feel the need to align themselves with health systems, says Dennis K. Butts, Jr., MBA, a managing director in Navigant's value transformation practice.

And the new DC models include language that makes clear healthcare's transformation will not be constrained to the current provider landscape, Butts says. That means incumbent providers could find themselves up against some new competitors.

Participants in the third of the three DC models may include health plans, technology companies, and others interested in taking on risk for Medicare fee-for-service beneficiaries in a specific geographic area, CMS said in a fact sheet. (The agency is collecting comments on that idea through May 23.)

"The market is ripe for transformation and disruption, and this new model lowers the bar of entry and is actually encouraging those new market entrants to play a very active role in this space," Butts tells HealthLeaders.

These newer entrants have already been making moves in primary care. It's not just CVS Health and Walgreens that are expanding services in their retail clinics. It's major insurers, like Blue Cross Blue Shield of Texas, opening clinics of their own. That's in addition to whatever the Amazon-backed healthcare venture Haven ultimately decides to do. (For what it's worth, CEO Atul Gawande, MD, called the CMS Primary Cares Initiative "a big deal.")

"All of those new players in these models for direct-contracting now can actually get in the game as a primary participant and no longer have to sit on the sidelines," Butts says.

"I think we'll probably look back at this moment a few years from now as when the move to value really began to kick up in the healthcare marketplace," he adds.

Related: When Retail Giants Like Walmart and Amazon Invade Healthcare

Related: Direct Primary Care: A Segue to Direct-to-Employer Contracting?

Related: Providers Applaud CMS' Primary Care Initiative

Remember, though, that we are still waiting on CMS to fill in some key details about this initiative.

"What has been revealed so far is fairly general. It's directional, but it is certainly not absolutely clear how all of this will work," Chenven says. "The business model is, again, directional but not definitive."

What We Don't Know

Past experience with Medicare Advantage may serve as some guide for how CMS will proceed with its primary care initiative, but the details are not final until they are in writing. That's why the request for applications (RFA) that CMS is expected to release within the next few months is so important, says Chris Dawe, senior vice president of Medicare partnerships for Evolent Health.

Dawe, who has served as a White House healthcare policy advisor and the director of delivery system reform at Health and Human Services, says he will be looking for several specific bits of information, including how benchmarks will be established and calculated, how risk adjustment will work, and what waivers CMS will allow for participating organizations. The fine print on each of those items could dramatically change an organization's risk/reward assessment.

Dawe advises organizations to keep their options open because CMS has generally been accommodating in the past to those that apply for multiple options and then pick one later.

Related: 5 Steps to Assess Your Readiness for CMS Primary Cares

Don't forget, furthermore, that the CMS Innovation Center's statutory authority is rooted in the ACA, which the Trump administration has urged the Fifth Circuit to invalidate in its entirety. If the entire ACA were to be invalidated or repealed without a replacement, then the CMS Primary Cares Initiative ostensibly would fall with it.

When asked about the possibility that an invalidated ACA could undermine the Trump administration's own healthcare policymaking agenda, an HHS spokesperson said advancing the healthcare system's value-based transformation ranks among Secretary Alex Azar's top priorities, so he will not be deterred.

"This administration will continue to champion that priority in the context of any health reform effort," the HHS spokesperson told HealthLeaders in an email.

While fee-for-service payments will likely remain as a major source of revenue for years to come, industry watchers and policymakers agree that value-based contracting is ascendant once again, regardless of how the details of the CMS Primary Cares Initiative shake out.

"If you want to be able to capture all or mostly all of the value that you're actually creating in the market, you're going to have to take on downside risk," Dawe says. "To me, it's just a necessary part of the end-game here."

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.


Keep an eye on how health plans, technology companies, and others interested in taking on risk could respond to the new direct-contracting options.

Look for ways to incorporate these new primary care models into your full spectrum of contracts, including Medicare fee-for-service and others.

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