Big Healthcare Stories. - This week in healthcare: Direct contracting gets controversial, the DOJ targets United/Change deal, Teladoc unveils a new chronic care program, VillageMD's expansion, Q4 earnings releases, and more
The Direct Contracting Debacle and a Value-Based Setback? Disarray: All of a sudden, Medicare's Direct Contracting ("DC") program, a new risk-based capitation model for primary care unveiled by the Center for Medicare and Medicaid Innovation (CMMI) in 2020, is under attack by a progressive consortium of policymakers. - What's DC? At a high level, the program allows primary care providers operating in Direct Contracting Entities ('DCEs') to take on risk voluntarily - through monthly lump sum payments - for their Medicare fee-for-service patients.
- So, CMS and the DCE get to streamline administrative $$$, the DCE pockets a bit more cash if risk is successfully managed, and the patient stays on traditional Medicare as opposed to MA.
- The program is only open to about 50 of these direct contracting entities so far while kinks are ironed out and public commentary is received.
TL;DR: CMS contracts with PCP providers. Seniors on traditional Medicare keep traditional Medicare insurance while the provider (the DCE) gets paid per member per month for that beneficiary behind the scenes. Goal of the program = reduce costs, increase quality of care, move toward value-based arrangements.
The Attack Begins: The cohort of progressives, including Elizabeth Warren, sent a letter to HHS accusing the payment model of catering to 'corporate profiteers.' They assert that the DC model will only serve to further privatize Medicare, which might result in reduced choice for traditional Medicare beneficiaries.
- There's some other nuanced concerns in there too, like taking advantage of risk score adjustments (fair) and that the entities are able to pocket more $$$ if care is managed effectively. Here's a good write-up of their specific grievances from Fierce: (Link)
The Defense: Of course, the letter attracted a frenzied response. Over 200 healthcare entities ranging from Intermountain, agilon, Babylon, a multitude of ACOs, and more, signed a letter urging HHS to 'Plz fix, thx' the program instead of ending the program altogether, arguing that ending any sort of pioneering program like this would severely affect the value-based movement as a whole. (Read the Letter Here)
Hot Take: I find the take by progressives pretty perplexing considering DCE is one of the largest tailwinds powering value-based care in the U.S. - a model that has at least shown promise in predictable cost control for a nearly bankrupt Medicare trust fund.
- Progressives of all people should want to test out new things in healthcare, even if there are kinks in the model currently.
Still, this rhetoric is not going to go away - I'm seeing headlines all over the place, like 'Medicare privatization experiment puts Ohio seniors at the mercy of for-profit entities.' As if damn, they forgot the entirety of healthcare is already for-profit. Let's do some research here folks and at least attempt to align profits with quality incentives.
- This is a pioneering program in Medicare and one that needs to continue forward in some form. The progress of value-based care and related payment models depends heavily on CMMI and Medicare. There's too much momentum (and funding) in the space to back out now.
Keep an eye on the tweaks and mutations of the direct contracting model, because it heavily affects the prospects of companies like Privia, Oak Street, One Medical, and health systems who manage large Medicare populations or are in the value-based care space.
Handy resources & perspectives:
- Olivia Webb wrote a solid overview of the direct contracting program here. She does the best job possible explaining all of the relevant nuances. (Link)
- Here's a viewpoint in opposition to direct contracting. (Link)
- What do you think? If you have a perspective, I'd love to hear it.
DOJ brings down the hammer on UnitedHealth - Change Healthcare Deal Antitrust: After what seems like an eternity since the transaction was announced, the DOJ is allegedly planning to sue to block the $13 billion United / Change Healthcare deal. - Background: The merger announcement brought intense opposition from the AHA and other provider interest groups, claiming that an acquisition of Change would give UNH unprecedented access to data that would cause anticompetitive practices. The DOJ is sympathetic toward those concerns and has a keen eye on M&A in general across most industries. (Link)
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