Medicare is notorious for its low reimbursement levels, especially at the primary care level. In fee-for-service models, a “Level 3 Established Office Visit” is reimbursed for $77.98 while an “Annual Wellness Visit” pays $176.92.
These reimbursement rates make it nearly impossible for a primary care practice to serve original Medicare patients and stay solvent.
That’s why we’re so excited about the changes that the Centers for Medicare and Medicaid Services (CMS) made last year when they unveiled value-based direct contracting models. Using this mechanism, it’s now possible for providers to make the shift to value-based contracting without adopting a full-capitation model.
We’ve already written in the past about the impact of value-based advanced primary care models on patient outcomes and bottom line costs. Well-run value-based models are profitable while also effective at improving Medicare Advantage and general population patient outcomes.
There’s a simple reason why these value-based models can produce positive outcomes: the primary care provider enters into an arrangement where they share the risk with CMS, but also the reward. And, it’s possible for providers to work with a payer to contract with CMS if they like.
In these models, the healthcare provider is paid a flat fee to provide care to the patient rather than a fee for each type of service the patient receives. As a result, the primary care provider is incentivized to provide the most appropriate care before specialty, ER, or hospital care is needed. If they are successful, they receive a financial benefit of providing care that costs substantially less than the fee they receive for CMS.
The results were summarized by Sebastian Caliri in a recent Medium post:
“... good primary care creates mounds of downstream savings and is now finally being rewarded. Both private payers and Medicare have recently expanded alternatives to fee-for-service reimbursement that pay for effective prevention, coordination, and steerage. If advanced primary care keeps patients out of the hospital, it is possible to earn over $1,000 per patient through these new models in comparison to about $85 per patient in a fee-for-service regime.”
Until recently, this care model wasn’t allowed for the 42 million original Medicare beneficiaries. With the changes CMS has introduced, it now is.
In his article, Caliri outlines how the new direct contracting models work:
| Providers receive funds to care for members in a “medical home.” Providers are incentivized to become the primary care provider for Medicare members. | |
| Voluntary or claims-based alignment: CMS pays direct contracting practices for patients who have explicitly established care (voluntary alignment) with their practice or who receive the majority of their care there (claims-based alignment). | |
| Financial reward for improved outcomes: The financial rewards that practices receive for this approach can be immense. In the example Caliri uses, the practice would receive a $720 profit for reducing third-party spending by just $60 per month. It has the opportunity to turn primary care from a loss leader to a value leader. | |
| Risk delegation: The converse of the rewards story is also true. Risks are delegated to the healthcare practice if the patient needs to seek more costly care (e.g., specialists) because it eats into the potential profits. |
Any primary care practice that invests in providing care through Medicare Direct Contracting stands to gain a great deal, so can payers. And Medicare Direct contracting also benefits the member by giving them time with their provider, maintaining member provider choice, and ideally reducing surprises when it comes to healthcare costs.
Payers who handle a variety of payment models, including Medicare Advantage and Medicare Direct Contracting, can work with a partner like Vera Whole Health to develop a network of care centers for members under full capitation, value-based contracting, and other models. Under the Vera advanced primary care model, clinical teams are especially adept at identifying risk stratifications within populations and closing care gaps, essential skills in any value-based arrangement.
To learn more about the Vera advanced primary care model, download our eBook: Advanced Primary Care: The Front Line Of A Health Revolution.