Any Benefits for Docs in Government's New Medicare Payment Model?

Elizabeth Woodcock, MBA, CPC


April 20, 2022

Elizabeth Woodcock, MBA, CPC

2026 is an ominous year for healthcare.

It's the year that the Boards of Trustees for Medicare predict the government will run out of money to fund Medicare. It's no secret that the federal government has struggled to contain the burgeoning cost of the Medicare program.

Yet, even the most dedicated observers have a difficult time following the dizzying array of payment models the government has introduced to find a solution that works since Medicare Advantage was introduced in the early 1980s.

Medicare Advantage — often called Medicare Part C — allows private insurance companies to cover seniors. Instigated by the George W. Bush administration, the federal government pays a fixed amount to a private insurer to provide Medicare coverage, in contrast to what is now called "original" Medicare.

Over the years, the government has altered the playbook for delivering nontraditional, private insurance to seniors. One such experiment in Medicare privatization was direct contracting, which infuses a risk-reward system for the entity delivering insurance via a partnership with physicians and other clinicians. Most direct-contracting entities (DCEs) are investor-owned, so many physicians have raised concerns about the profits being extracted from Medicare by commercial interests.

Balancing the budget with providing access for Medicare beneficiaries is no easy task, and regulators have once again decided to make changes to the insurance model to achieve this goal.

What is this latest change, and will it affect your practice?

The Biden administration recently announced the REACH program — a catchy new name for the revamped direct contracting model for Medicare that's been steeped in controversy since its inception. Instead of scrapping it altogether, the government altered it. The new model — essentially, another iteration of an insurance program for Medicare beneficiaries administered by the private market — started accepting applications this spring.

The acronym is derived from the model's official name: Realizing Equity, Access, and Community Health. Participants — the insurers awarded the government's REACH contracts — are required to report on social determinants of health and develop a health equity plan for the Medicare beneficiaries in the plan. Each insurer (the "contracting entity") will certainly have different expectations for the physicians who are seeing patients. In essence, the government issues a set of rules for the insurer, and the insurer then administers that. Physicians may therefore experience different rules of engagement.

The goal is to provide better, more individual, and focused care for people in underserved communities and who have health limits due to socioeconomic factors. To accomplish this, the government is basically offering a higher rate of payment to insurers to cover these patients, but the details of administering it are up to the insurer. The government is requiring robust health equity plans — but it's up to the insurer to create and deliver them. This leaves a lot of ambiguity, and physicians are concerned.

In contrast to the DCE model, there are some high points for stakeholders.

An earlier — and controversial — provision that tied quality to the health of the geographic area in which the plan resided was scrapped. (Meaning, if the plan encompassed a low socioeconomic area, that would be a factor in assessing the quality of health in the area).

The reason that this was controversial is that quality is judged at a "community" level, so if you happened to be in a market where there was a sick group of people, your quality was lower even if the insurer wasn't managing them. The government is basically giving more money to insurers to take care of communities with lower socioeconomic status. No one really knows what this means for the practicing physician, however.

Physicians and other clinicians must constitute the majority (75%) of the governing board, and two positions must be reserved for a patient and a consumer advocacy representative.

The entity can target specifically target seniors with complex needs, with associated funding.

The Centers for Medicare & Medicaid Services released a chart showing the differences between the traditional model and the new REACH model.

Despite the recent changes and goals for better care, critics remain skeptical of the new model. The Congressional Progressive Caucus claims that it enables "third-party middlemen to manage care without seniors' full understanding or prior consent, and often through for-profit businesses with incentives to restrict care." The group recommends ending the new REACH model, purporting that the model just puts money in the hands of investors — at the expense of America's seniors.

The criticism is not without evidence. Post-service record review and inflated risk scoring are common tactics that insurers involved in insuring the nation's seniors use to boost profits. Indeed, many physicians feel the burden of this as Humana, United, and other insurers call their offices to request copies of Medicare patients' records — often in batches of 500 or more.

And insurers are buying physician groups left and right — including the largest physician practice in Massachusetts, Atrius Health, which was sold to United Healthcare in 2021. Many of these purchases are aimed to take direct advantage of the Medicare insurance market. Private equity groups are pouring money into companies aimed at Medicare. Other critics, such as the Physicians for a National Health Program, agree the new model isn't right, but on the grounds that it doesn't go far enough to advance a national healthcare plan.

Yet, some stakeholders are pleased that an alternative payment model still exists. Current direct contracting participants will be automatically converted to the REACH model, unless there are compliance issues.

Physicians who were participating in the incumbent program via an accountable care organization (ACO) may, therefore, feel little change.

And that's the key: Most physicians relate to this program, and its previous iterations, under the umbrella of an entity outside of their practice. In most cases, the relationship is via an ACO.

The ACO may operate in your community; be sponsored by your hospital; be a larger entity within your region; or exist by way of a supergroup with which you participate, like United Digestive or Articularis. It is that entity that will bear the burden of pivoting to comply with the new requirements of the payment model, if it continues to participate in the Medicare Advantage program.

Although you may be one step removed from the government's latest change, the new REACH model signals the government's continued experimentation to find a solution to the soon-to-be-bankrupt Medicare program — and it also stirs new interest from companies aiming to profit from the significant addressable market that the Medicare program encompasses. The addition of social determinants of health is a welcome addition for many, although the devil is in the details of how or whether that reporting will have a positive impact.

Like many of the government's determinations, there are many unknowns about how or whether the newly announced model will affect your practice — or your patients.


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