Fact Sheets

Direct Contracting: Professional and Global

Direct Contracting: Professional and Global

Direct Contracting creates a new opportunity for the Centers for Medicare & Medicaid Services (CMS) Center for Medicare and Medicaid Innovation (Innovation Center) to test an array of financial risk-sharing arrangements to reduce Medicare expenditures while preserving or enhancing the quality of care furnished to beneficiaries. Direct Contracting leverages lessons learned from other Medicare Accountable Care Organization (ACO) initiatives, such as the Medicare Shared Savings Program and the Next Generation ACO (NGACO) Model, as well as innovative approaches from Medicare Advantage (MA) and private sector risk-sharing arrangements.  This model is part of a strategy by the CMS Innovation Center to use the redesign of primary care as a platform to drive broader health care delivery system reform.

Direct Contracting creates a variety of pathways for health care providers and suppliers to take on financial risk supported by enhanced flexibilities.  Because the model reduces burden, supports a focus on complex, chronically and seriously ill patients, and aims to encourage organizations to participate that have not typically participated in Medicare fee-for-service (FFS), Innovation Center models, or both, we anticipate that this model will appeal to a broad range of physician organizations and other types of health organizations.  Direct Contracting provides an opportunity to participate in a value-based care arrangement under Medicare FFS for health care providers that have not previously been eligible for the Shared Savings Program, the NGACO Model, or both due to an insufficient number of assigned or aligned Medicare FFS beneficiaries.  In addition, Direct Contracting offers another model option for NGACO Model participants to consider after NGACO ends in 2020.

CMS will test two voluntary risk-sharing options in Direct Contracting: (1) Professional, a lower-risk option (50% Shared Savings/Shared Losses (SS/SL)) and Primary Care Capitation (PCC) equal to 7% of the total cost of care benchmark for enhanced primary care services; and (2) Global, a full risk option (100% SS/SL) and either PCC or Total Care Capitation (TCC).  Additional information will be provided at a later date regarding a third option that CMS is considering offering, the Geographic option, which is a full risk option (100% SS/SL) for the total cost of care of all Medicare FFS beneficiaries in a defined target region.

The goals of Direct Contracting are to transform risk-sharing arrangements in Medicare FFS, broaden participation in CMS Innovation Center models, empower beneficiaries, and reduce health care clinician burden.  The Model options seek to align financial incentives, provide a prospectively determined and predictable revenue stream for participants, and put a greater emphasis on beneficiary choice.

Who can participate in the Direct Contracting model options?

A key aspect of Direct Contracting is providing new opportunities for a variety of different organizations (Direct Contracting Entities or DCEs) to participate in value-based care arrangements in Medicare FFS.  In addition to organizations that have traditionally provided services to a Medicare FFS population, Direct Contracting will provide new opportunities for organizations without significant experience in FFS to enter into value-based care arrangements.

Under Direct Contracting, there will be three types of DCEs with different characteristics and operational parameters.  These three types of DCEs are:

  1. Standard DCEs – DCEs comprised of organizations that generally have experience serving Medicare FFS beneficiaries, including Medicare-only and also dually eligible beneficiaries, who are aligned to a DCE through voluntary alignment or claims-based alignment. These organizations may have previously participated in section 1115A models involving shared savings (e.g., Next Generation ACO Model and Pioneer ACO Model) and/or the Shared Savings Program.  Alternatively, new organizations, composed of existing Medicare FFS providers and suppliers, may be created in order to participate as this DCE type.  In either case, clinicians participating within these organizations would have substantial experience serving Medicare FFS beneficiaries.  
  2. New Entrant DCEs – DCEs comprised of organizations that have not traditionally provided services to a Medicare FFS population and that will primarily rely on voluntary alignment, at least in the first few performance years of the model. Claims-based alignment will also be utilized. 
  3. High Needs Population DCEs – DCEs that serve Medicare FFS beneficiaries with complex needs, including dually eligible beneficiaries, who are aligned to the DCE through voluntary alignment or claims-based alignment.  These DCEs are expected to use a model of care designed to serve individuals with complex needs, such as the one employed by the Programs of All-Inclusive Care for the Elderly (PACE), to coordinate care for their aligned beneficiaries.

How will DCEs be paid under the model options?

DCEs will be required to have a capitated payment arrangement whereby CMS makes a capitation payment to the DCE, which may be used by the DCE to support population health, for example by allowing the DCE to enter into value based payment arrangements with its downstream DC Participant Providers, and if they elect it, Preferred Providers, or to invest in health care management tools, such as health care technologies.  The type of risk-sharing arrangement the DCE enters into will determine the type of capitation payments. available to the DCE.  For the DCEs participating in the Professional option, CMS will offer Primary Care Capitation (PCC) equal to 7% of the Performance Year benchmark paid to the DCE per beneficiary per month to pay its DC Participant Providers and applicable Preferred Providers.  This payment is intended to cover the Primary Care Based Services furnished to aligned beneficiaries by DC Participant Providers and those Preferred Providers who have agreed to a claims reduction, along with an additional amount for enhanced primary care services, which can include infrastructure, technology, tools, and resources to support increased access to primary care, provision of care, and care coordination.  For DCEs participating in the Global option, CMS will offer the choice of PCC or Total Care Capitation (TCC), which encompasses all Medicare Part A and B services furnished to aligned beneficiaries by DC Participant Providers and Preferred Providers, who have agreed to participate. 

Advanced Payment is an optional payment mechanism only available to DCEs that select PCC and functions similar to the population-based payments available in the NGACO Model.  Advanced Payments are a cash flow mechanism under which CMS prospectively pays DCEs the estimated value of the reduction in Medicare payments for non-primary care claims submitted by DC Participant Providers and Preferred Providers who have agreed to a Medicare FFS claims reduction. Unlike the Capitated Payment Mechanisms, the value of Advanced Payments made to DCEs will be reconciled against the actual value of the Medicare FFS claims for services furnished to aligned beneficiaries after the end of the Performance Year.

How will providers and suppliers be paid under the model options?

For DCEs that elect PCC, DC Participant Providers delivering primary care services will be required to be paid through the PCC. For DCEs that elect TCC, all DC Participant Providers will be required to be paid through the TCC.  DCEs may choose to pay Preferred Providers through the applicable Capitation Payment Mechanism (PCC or TCC) if they consent to this type of payment arrangement. These providers and suppliers will receive payments directly from the DCE according to established agreements with the DCE.  All DC Participant Providers and Preferred Providers will continue to submit claims to the Medicare payment systems.

How is the benchmark calculated?

The benchmark will be developed by: (1) calculating the DCE’s historical baseline spending for its aligned beneficiary population; (2) trending the historical benchmark expenditures forward based on the U.S. Per Capita Cost growth trend; (3) blending the historical baseline expenditures with regional expenditures using an adjusted Medicare Advantage Rate Book; (4) making adjustments to the blended expenditures to account for the risk of the aligned beneficiaries; and (5) applying a discount for DCEs that selected the Global option and holding a portion of the benchmark “at risk” subject to the DCE’s performance on quality measures.  More details on the benchmarking methodology can be found in Section VI.F of the RFA.  Additional detail will also be provided in a Payment Methodology webinar later this year.

How does quality reporting fit into the benchmark?

CMS will assess each DCE’s quality performance to ensure that the DCE meet the model goals of improved quality of care and health outcomes for Medicare beneficiaries.  Similar to the NGACO model, Direct Contracting will include a quality “withhold,” in which five percent of each DCE’s performance year benchmark will be held “at-risk,” contingent upon the DCE’s quality performance.  DCEs have the opportunity to earn back this withhold based on their quality reporting and performance.  DCEs that improve their performance each year and/or are among the highest performing DCEs will earn back higher levels of the withhold, and potentially even more via a High Performers Pool (HPP).  More details on this methodology is provided in the RFA and will be included in a future financial methodology paper.

What quality measures will CMS use for quality reporting?

CMS will assess DCE quality performance based on a core set of claims-based quality measures as well as information from administration of the Consumer Assessment of Healthcare Providers and Systems (CAHPS®) for Accountable Care Organizations (ACOs) surveys.  CAHPS® is a program of the Agency for Healthcare Research and Quality, U. S. Department of Health and Human Services.  The quality strategy for Direct Contracting is designed to provide achievable performance criteria that incentivize practice transformations necessary to reduce utilization and improve quality of care.

How will eligible beneficiaries be aligned to the DCEs?

For the purpose of assigning accountability for risk sharing and the total cost of care, beneficiaries may be aligned to a DCE in two ways: (1) voluntary alignment where beneficiaries communicate their desire to be aligned to a DC Participant Provider, which is a provider who has contracted with the DCE to participate in the model; and (2) claims-based alignment, where beneficiaries are aligned based on where the beneficiary has historically received the plurality of their primary care services.  Eligibility requirements can be found in the Direct Contracting RFA available at Note that the beneficiary alignment options available to a DCE will depend upon the DCE type.

Is Direct Contracting an Advanced Alternative Payment Model (APM)?

Direct Contracting will be an Advanced Alternative Payment Model (APM) starting in the first performance year (PY1), which will be 2021.

Under what authority is the Innovation Center testing Direct Contracting?

The Innovation Center is testing Direct Contracting under section 1115A of the Social Security Act, which established the Innovation Center to test innovative payment and service delivery models that have the potential to reduce program expenditures while preserving or enhancing the quality of care furnished to beneficiaries.

What is the model timeline?

The model will be tested over six years, with an optional initial Implementation Period (IP), followed by five performance years (PY1-5).  For purposes of this RFA, the IP will occur in calendar year 2020, and PY1, PY2, PY3, PY4 and PY5 will occur in calendar years 2021, 2022, 2023, 2024, and 2025 respectively.

When is the application period?

There are two application submission periods for Global and Professional.  CMS will stagger the deadlines for submitting applications so it can process applications from DCEs wanting to participate in the Implementation Period (IP) in 2020 before processing applications for those wanting to start the model in the first Performance Year (PY1), which is 2021. The application for organizations interested in the IP will be made available in early December.  Please continue to check the website for application timeline updates.  The application for organizations interested in starting in PY1 is expected to open in Spring of 2020.

Is an LOI required to submit an application to Direct Contracting?

Yes, an LOI (letter of intent) is required to apply for Direct Contracting.  CMS will be reopening the LOI link for two weeks for interested organizations that did not previously submit an LOI.  Please continue to check our website for timeline updates.  The link to the LOI is

Resources and Support