In September 2020, CMMI released detailed financial methodology documentation for the Direct Contracting (DC) program and published preliminary 2021 regional rates. Milliman has compiled this summary to highlight key changes from CMS since the release of its previously published white paper. A summary of those key changes is outlined here, based on information available as of September 22, 2020.

• Capitation Payment Options: CMS has adjusted the range of payment reduction required by performance year for participant providers in Primary Care Capitation (PCC). Initially, participant providers had a set payment reduction percent of 100% each performance year. The newly released information includes a minimum percent glide path as follows: PY1: 1%, PY2: 5%, PY3: 10%, PY4: 20%, PY5: 100%, and PY6: 100%.
• Adjustments to PY1: CMS is making slight adjustments to the financial methodology for PY1, since the year will only span 9 months. CMMI will implement a seasonal adjustment – separately for A&D and ESRD populations -- to account for this change. Of the 5% quality withhold, PY 1 and PY2 will also now have 1% of the quality withhold tied to pay-for-performance, and PY1 recondition will not occur until mid-2023.
• CY2026 is now a performance year: The 2026 performance year benchmark will be based on a blend of historical claims from 2017-2019 and the 2026 regional rate for claims-aligned beneficiaries. For voluntarily aligned beneficiaries, the benchmark will be based on a blend of 2022-2024 and the 2025 regional rate.
• Risk Score Growth Limit: Risk adjustment in the DC Model will be subject to limits in risk score growth over the performance period. For Standard and New Entrant DCEs, an annual retrospective Coding Intensity Factor (CIF) will be used at the program level in combination with the application of a symmetric 3% cap at the individual DCE level to limit risk score growth from the base to performance periods (High Needs DCEs have a separate CIF calculation not subject to the cap). Risk scores for voluntarily aligned beneficiaries will initially be excluded from this calculation. Previously, there was no mention of a cap on risk score growth.
• Benchmark expenditures for voluntarily aligned beneficiaries: Previously, baseline expenditures were going to be entirely based on regional expenditures for PY1 – PY3 for beneficiaries who are voluntarily aligned. This has been expanded to using regional expenditures for PY1 – PY4. For PY5 and PY6, the recent historical expenditures for these beneficiaries will also be used to calculate the historical baseline expenditures for the benchmark.
• Trend: CMS has provided the following details regarding how trends will be applied and how they may be adjusted:
  • The adjusted version of the USPCC trend will remove costs associated with uncompensated care and add in hospice expenditures.
  • CMS will apply Aged & Disabled trends and end-stage renal disease (ESRD) trends to these populations separately. The collapsing of all non-ESRD categories into a single trend may pose a risk for ACOs that have a nontypical risk profile (for example, a high proportion of dual-eligible beneficiaries).
  • CMS may make additional adjustments under limited circumstances such as for specific populations or in the case of unforeseeable events, such as natural disasters or pandemics. This would prevent DCEs from being penalized or rewarded for major payment changes beyond their control.
• Regional Adjustment Weighting: CMS made some changes to the regional weighting to the benchmark in the Financial Methodology document. For PY3, the regional weighting is now 35% (previously 40%). For PY4, the regional weighting is now 40% (previously 45%). For PY5, the regional weighting is now 45% (previously 50%). For PY6, the regional weighting is 50%.
• Cap to upward adjustment: Consistent with prior documentation, there is an upward adjustment limit on the benchmark due to the regional adjustment equal to 5% of the FFS USPCC for the performance year. CMS has specified in the financial methodology documentation that these caps will apply separately for the A&D and ESRD populations.