In our recent overview of the Direct Contracting payment model, we explored its goals as well as participation options and information. Eligible organizations include individual group practices, networks of individual practices, hospitals, federally qualified health centers, rural health clinics, and critical access hospitals.

Now let’s delve into a bit more about the model and the 4 types of Direct Contract Entities (DCEs). Each one has unique characteristics and parameters, and understanding how they function will help your organization understand which option is the most appropriate. 

Standard DCEs

This type of DCE is most appropriate for organizations with clinicians that have established experience serving Medicare fee-for-service beneficiaries and have 5,000 beneficiaries in place. This includes patients with Medicare-only insurance and those with dual insurance aligned with DCE either via voluntary alignment or claims-based alignment.

Important points to consider include:

  • Organizations in this type of DCE may have already participated in section 1115A shared savings models or the Shared Savings Program.
  • This type of DCE may also include a new organization that includes Medicare FFS providers or suppliers.
  • It would likely not be appropriate for organizations with little to no experience with the Medicare fee-for-service setup. 
  • Organizations in this type of DCE will be required to have 5,000 beneficiaries for each performance year.

New Entrant DCEs

This type of DCE is comprised of organizations that have not typically provided Medicare fee-for-service beneficiaries. This type would does not typically serve Medicare beneficiaries and instead relies more on voluntary alignment for the first few performance years

Important points to consider include:

  • This type of DCE may also utilize claims-based alignment.
  • Organizations can identify legacy TINs from the Next Generation ACO model.
  • Organizations can have less than half of their providers with prior experience in an ACO. This includes Next Gen, Shared Savings Program, Comprehensive ESRD Care, or Pioneer.
  • This type of DCE cannot have more than 3,000 alignable beneficiaries during the baseline period of P1 – P3 years. That number
  • Organizations must assume the risk for aligned beneficiaries’ total cost of care.

High Needs Population DCEs

This type of DCE serves Medicare FFS beneficiaries with additional needs that may include dually eligible beneficiaries aligned to the DCE through voluntary alignment or claims-based alignment. It also should rely on 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.”

Important points to consider include:

  • Patients aligned in this type of DCE should have: 1) a condition that impairs their mobility; 2) complex medical needs such as an HCC risk score of 3.0 or greater or an HCC risk score greater than 2.0 and 2+ unplanned hospital admissions in past year; or 3) signs showing they are frail.
  • Patients who are have high needs may be dual-eligible and under 55 years old.
  • The baseline period for this type of DCE “will come from the claims for all beneficiaries voluntarily aligned to the DCE during those earlier performance years (2021–2024).”


MCO-based DCEs

This type of DCE manages the Medicare fee-for-service expenditures of full-benefit dually eligible beneficiaries. These beneficiaries receive Medicaid benefits through a Medicaid Managed Care Organization (MCO). These DCEs “will be a Medicaid MCO or a legal entity affiliated with such an MCO under common ownership.”

Important points to consider include:

  • Organizations in this type of DCE carry a financial risk for Medicaid benefits costs under the Medicaid managed care contract.  
  • Organizations that wish to apply to be this type of DCE must: 1) have a Fully Integrated Dual Eligible Special Needs Plan (FIDE SNP) or Medicare-Medicaid Plan (MMP) contracts with CMS or 2) be affiliated under common ownership with an entity that has the FIDE SNP or MMP contract with CMS.
  • This type of DCE will begin model participation in January of 2022.

Choosing the right type for your organization

Readily identifying your organization’s strengths as well as any areas for improvement is crucial in selecting the DCE type that best fits its needs. The choice will include consideration to several key factors. These include your organization’s voluntary alignment opportunities, beneficiary counts, experience with Medicare fee-for-service beneficiaries, historical benchmark calculations, existing Medicare fee-for-service population, and the level of financial risk it is willing to undertake.

Team Harmony’s experts are ready to put solutions into action that will enhance your organization’s performance under any type.

Stay tuned for more news from the Harmony Trends Team on this payment model! 

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