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The Geographic Direct Contracting Model (aka Geo) would have made significant progress in transferring beneficiaries into value based arrangements but was terminated by the Biden administration in March 2021 (before it launched) due to its more ambitious approach in handing over Traditional Medicare beneficiaries to ACOs. If CMS wants to achieve its stated goal of having 100% of Medicare beneficiaries in value-based arrangements by 2030, a heavy-handed approach is necessary.
In this model, geographic alignment would assign all the Traditional Medicare beneficiaries in particular geography (not already aligned to an ACO) to a Geo ACO.* This methodology differs from claims-based alignment (the predominant mode of alignment), in that ACOs are not assigned the patients they are treating; but rather, automatically assigned patients in a given region. Presenting this growth opportunity to ACOs has the potential to shift the pendulum to VBC (or put both of our feet in the FFS canoe), ensuring lasting delivery system reform.
Although the model wasn’t launched, there are lessons to be gleaned from the process. This model should focus on three key areas: (1) reducing program complexity, (2) reducing corporate capture and middlemen, and (3) make the program more enticing for beneficiaries by giving them more than they previously were getting in Traditional Medicare.
The original Geo model required participants submit an application with their proposed benchmark discounts (ranging from ~2-6%). Entities offering higher discounts relative to others in their region receive a higher "Market Cap," which increased the number of beneficiaries they can align. This process was not only administratively complex for participants and CMS, but also favored incumbents, as they had the capital reserves to take on the risks of a higher discount. These incumbents could also set high discounts and use this program as a loss leader, thereby not creating true delivery system reform.
Setting a full-risk discount around 3% would reduce this complexity and make the model more appealing for participants and government officials alike. Additionally, ACOs should have the option to participate in lower risk tracks, such as the Basic and Enhanced tracks of MSSP, as full-risk is only palatable for highly experienced entities.
This graph features all REACH ACOs with losses and savings cut off a -$20M and $30M, demonstrating the consequences of a lower and higher discount. Roughly 1/2 of ACOs with >$1M in net losses leave the program.
Using a standardized discount comes with it’s own set of challenges. A standardized discount must balance government savings with participant success, which is difficult because there is no such thing a the “correct” discount. Using a bid-based program lets the market decide what is “correct,” similar to Medicare Advantage.
“Today, one arm of government, in the form of the Department of Health and Human Services, is advocating for value-based payment reforms, while another arm of government, in the form of the Department of Justice, is apparently concerned about the logical consequence of those reforms.” - Peter Orszag
While VBC inherently requires a large amount capital reserves to compete (~$30M+ in initial funding), there are ways to lower barriers to entry for upstarts and to decrease monopolistic interest. The Primary Care (PC) Flex model and Advanced Investment Payments (AIPs) in MSSP offer a way for smaller ACOs to participate, and the Basic track of MSSP provides a similar value. These training wheels will position ACOs to take on greater amounts of risk, such as a full-risk track in MSSP or a Geo model. To avoid corporate capture, specific policies can be implemented to curb the corporate practice of medicine, such as requiring participating provider to hold at least 75% of the governing board voting rights of the ACO, as required in ACO REACH. More importantly, startups must continue to compete with incumbents to increase competition, and the Department of Justice must prevent monopolies from exercising undue power.
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This illustrative diagram compares funds flow between ACO programs versus MA programs. It also compares primary care as a middleman versus funds going directly to the specialty care provider.
Not only does Geo present the opportunity for a highly competitive program, but also one that reduces the number of middlemen in the system, reducing overall cost (as demonstrated in the diagram above). With fewer middlemen, more money goes directly to the provider or specialists who are effecting patients’ care. ACO REACH mandated FFS reduction and payment to participant providers (i.e., Oak Street in this diagram), limiting the dollars that could go to downstream specialists. Geo does not have this feature, allowing for more flexible payment methods.
The Traditional Medicare program should be a more competitive product for seniors when compared to Medicare Advantage (MA). To make ACO programs more appealing for beneficiaries, programs must offer benefits that exceed Traditional Medicare’s standard benefits. In order to fund these benefit enhancements, ACO programs must have a large enough volume of participants and beneficiaries. Fortunately, a Geo model offers this level of volume.
One key offering that would make Traditional Medicare comparable to MA is a Part D premium buy-down. To accomplish this, CMMI will coordinate with the Social Security Administration (SSA). Alongside a Part D buy-down and the standard benefit enhancements, the next iteration of Geo should offer beneficiary engagement incentives, such as cost sharing support, in-kind items or services, and Part B premium subsidies in the first performance year.
*I will refer to all ACOs that participate in Geo as Geo ACOs, even though they were referred to as Geo Direct Contracting Entities (DCE) in the previous administration.