Note: The information contained in this post is taken from an interview with our Chief Strategy Officer Jeff Bond.
Hospice care plays a crucial role in the US healthcare system. Hospice is a palliative form of healthcare that allows terminal patients to comfortably live out the remaining months of their lives. In 2018, there were 1.55 million hospice patients in the US (1).
Recently, many providers in this critical segment of healthcare have been preparing to undergo significant changes to their payment models. After a long history of experiencing reimbursement cuts under CMS’s Fee-for-Service (FFS) model, providers have considered switching over to the new Primary Care First (PCF) Seriously Ill Population (SIP) component model. However, that component is now delayed and under review, and some providers are turning their attention to the new Direct Contracting Entity (DCE) model.
According to CMS, the PCF model is a five-year alternative payment model that “aims to foster independence for primary care practitioners through greater operating flexibilities and performance-based payments, enabling them to innovate care delivery based on their unique patient population and available resources” (2). This payment model aims to reduce Medicare spending by avoiding unnecessary inpatient hospital admissions while improving the quality of care for all patients. This model marks a shift away from FFS care toward Value-Based Care (VBC), a payment structure in which reimbursements to providers tie to quality measures.
The PCF model’s SIP component applies to patients who are seriously ill (HCC score of 3.0 or higher) and are experiencing fragmented care. Providers caring for these patients receive $325 per beneficiary per month (PBPM) for the first month they are seen and $275 PBPM for every subsequent month they are seen, up to one year.
The DCE model, on the other hand, is a separate five-year payment model created by CMS to encourage a shift toward VBC while experimenting with new “financial risk-sharing arrangements” (3). There are multiple tracks within the DCE model, each with a different shared savings/losses framework, up to a maximum shared savings/losses rate of 100%. Three different types of DCEs are outlined by the model - Standard, New Entrant, and High Needs. High Needs can include beneficiaries with complex needs and are eligible for both Medicare and Medicaid, which makes this model similar to the SIP model.
Given these two models, why might hospice providers be considering the DCE model over the SIP model? The answer is simple - by adopting the DCE model, hospice providers are given the opportunity to innovate their payment model while expanding their care footprint. In the DCE model, hospice providers are able to capture reimbursements for their patients at the top of the funnel before discounts are applied. Providers receive capitation payments earlier by expanding their delivery services to chronically ill patients who can then be moved into hospice care when they fit the criteria. The financial incentives these providers face are powerful because reimbursements for chronically ill patients are often quite large. Already many hospice groups are consolidating their efforts to muscle their way into these areas of care that they’ve historically been left out of. This model provides an opportunity for hospices to pivot toward VBC, which has been largely absent from the hospice industry due to the inability to see long-term outcomes.
However, these new opportunities for innovation do not come without their risks. Although these patients can receive higher reimbursements, they can also incur higher claims costs. In the last year of their lives, chronically ill patients account for roughly 25% of all Medicare spending (4). Furthermore, claims costs for chronically ill patients can be highly variable, which means claim costs and reimbursements will not always align. Despite that fact, a 2020 CMS study was able to show that the R-Squared value of a predictive model for DCE High Needs beneficiary expenditures was 0.4911 (after demographic factors and Performance Year expenditures had been taken into account) (5). This means that CMS was able to predict 49.11% of DCE High Needs beneficiary expenditures accurately. In regard to this R-Square value, CMS noted the importance of the “complete coding of chronic conditions” for high needs members.
That is why it is essential for providers in the DCE model to HCC code their patients. Providers who do not accurately risk adjust their beneficiaries will receive inaccurate reimbursements, which could fall below their patients’ claim costs. Juxly offers a solution to this issue with our FHIR-based EHR workflow application Juxly Vault. By connecting healthcare stakeholders via a consistent patient data source, Vault can help hospice providers code their patients, close gaps with their payers, and guarantee their financial success as they transition to the DCE payment model.
By Harrison MacDonald, Operations Coordinator
- Michas, Frédéric. “Hospice Patients Number Served U.S. 2009-2018.” Statista, 27 Aug. 2020, www.statista.com/statistics/339851/number-of-hospice-patients-in-the-us-per-year/#:~:text=This%20statistic%20displays%20the%20total,as%20emotional%20and%20spiritual%20support
- “Fact Sheet Primary Care First Model Cohort 2 CY 2021 Fact Sheet.” CMS, 16 Mar. 2021, www.cms.gov/newsroom/fact-sheets/primary-care-first-model-cohort-2-cy-2021-fact-sheet
- “Fact Sheet Direct Contracting Model: Professional and Global Options Medicaid Managed Care Organization (MCO)-Based Direct Contracting Entity (DCE) Fact Sheet.” CMS, 17 Dec. 2020, www.cms.gov/newsroom/fact-sheets/direct-contracting-model-professional-and-global-options-medicaid-managed-care-organization-mco
- Riley, Gerald F, and James D Lubitz. “Long-Term Trends in Medicare Payments in the Last Year of Life.” Health Services Research, Blackwell Science Inc, Apr. 2010, www.ncbi.nlm.nih.gov/pmc/articles/PMC2838161/
- “Direct Contracting Model: Professional and Global Options and Kidney Care Choices Model Risk Adjustment.” CMS, 27 Oct. 2020, https://innovation.cms.gov/media/document/dc-riskadjustment#page9