DCEs in Limbo: What’s Next for the CMS Direct Contracting Program?

By Rebecca Molesworth | April 30, 2021

Value-based care is as essential as it is complex. But while the motivations behind this risk-sharing model – to cut costs for patients, providers, and the federal government while also improving patient outcomes – are admirable, the myriad changes and complicated requirements cause many organizations, even those with experience working within the confines of various capitation models, to hesitate getting involved. With the latest announcement from the Centers for Medicaid and Medicare Services, everyone in healthcare is wondering what’s next for the direct contracting model?

The Current State of the DCE Program

On April 1, 2021, The Center for Medicare and Medicaid Innovation (Innovation Center or CMMI) announced the names of the 53 Direct Contracting Entities (DCEs) participating in the first Performance Year (PY2021) of the Global Professional Direct Contracting (GPDC) Model. In the same breath, the Innovation Center also announced that it would no longer be accepting applications from organizations interested in participating in the 2022 GPDC Model. This unexpected development for this and other CMMI programs has implications through the healthcare industry.  For Direct Contracting participants and Next Generation ACOs (NGACOs), the move to more advanced risk models has been put into a state of limbo.

For some organizations, very little has changed. Those who applied and were accepted to participate in PY2021 but deferred until PY2022, for example, are still eligible to do so – if they continue to meet model requirements. But organizations who were still trying to decide what to do, including NGACOs who face the imminent sunset of their program at the end of 2021, are left with many questions and decisions. The expectation was that these NGACOs would migrate into the direct contracting program at the end of this performance year. Without an equivalent program to migrate to, they are left with lots of questions, including whether to close their initiative down or move back into a lower risk sharing contract with CMS, such as the permanent Medicare Shared Savings (MSSP ACO) program.

Until more communication on the rationale and path forward is shared from the Innovation Center, many are left wondering what caused the change – and what this means for the future of value-based care. Let’s break down some of the more prominent possibilities.

What’s the Root Cause?

Nothing has been publicly credited for causing this sudden shift. And, in fact, it’s very likely that it was a combination of factors rather than just one catalyst, including:

  • Theory 1: Taking MedPac’s Recommendations into Consideration
    On April 1, 2021, MedPac, the nonpartisan legislative branch agency that provides the U.S. Congress with analysis and policy advice on the Medicare program, presented its recommendations on improvements that could be made to CMS’s Alternative Payment Model (APM) program. These recommendations included improving attribution of patients’ lives to a single APM and preventing provider participation in multiple APMs. It’s possible that CMMI has paused the expansion of the GPDC model at this time in order to reflect on these recommendations and come up with a solution to address the challenges outlined.
  • Theory 2: Recognition that a Complex Program Needs Simplification
    Anyone who has tried to understand or learn the intricate details of CMS’ APM program is well aware of the high level of complexity involved – for both overarching organizations as well as the providers and beneficiaries involved. One possible reason for the cessation of applications to the 2022 program is that CMMI recognized that these complexities are barriers to entry and to success for those involved. As MedPac pointed out, CMMI has tested more than 50 different models and only seen four perform well enough to become permanent programs. The potential for physicians to participate in multiple APM programs at one time has the potential to convolute the results of any given program, making the evaluation of multiple simultaneous models very challenging. It is also possible that CMMI is trying to focus on better optimization of the program methodologies before opening the flood gates.
  • Theory 3: The New Administration
    Value-Based Care, as a concept, isn’t new. Presidential and Congressional leaders have been trying to identify ways to decrease healthcare costs and improve patient outcomes for decades. So why is there a pause for new initiatives rooted in this goal? It’s generally well known that, to put their own stamp on their predecessor’s policies, almost every incoming administration takes the time to reevaluate existing programs and establish a new path forward. Both former President Trump and President Biden have proposed slightly altered versions of value-based care. For the Trump administration, DCE models became the alternative to ACOs. Now, in the early days of the Biden administration, it’s possible that halting the DCE model opens the door for Democrats to evolve their version of risk-sharing entities further.


It’s important to note that these theories are just that – theoretical. We can’t say for certain that any one of them is more responsible than others for this pause. However, the common thread between them is that each recommends a series of steps that are meant to improve – not eliminate – future iterations of value-based care. Even during the confusion of the April 1 notice from CMS, the administration has reiterated their commitment to value-based care, so the question remains, “when” and “how,” not “if.”

What are the Next Steps?

Just as we saw a number of different theories as to why CMMI paused their acceptance of new DCE applications, the potential next phases are also plentiful.

  • Possibility 1: The most simplistic outcome is that temporary pause is just that – temporary. It’s possible that the pause will simply end and CMMI will open the door for new applications. Nothing more, nothing less.
  • Possibility 2: Another possibility is that NGACOs, which are set to sunset at the end of 2021, would be extended to allow for the program’s continuation with full capitation. This would be a new evolution of ACOs and DCEs, fresh under the Biden Administration. However, any guidance provided from the industry on this as an option have generally been less hopeful that it will come to fruition.
  • Possibility 3: Because the Democratic Party currently has a majority in the House, Senate, and Executive branches, there is a chance that President Biden will try to pass legislation that Medicare Advantage will be the new (and only) Medicare plan available. Moving to a government-mandated, fully capitated model might make headway toward reducing US healthcare costs. But it would require support from the entire Democratic party – and might provoke further partisan divide. This option is probably the least likely.
  • Possibility 4:  What is more likely, is that the Biden team will revamp the GPDC program to try to compensate for the problems perceived in the current DC program and relaunch a high-risk/high reward program at some point in the future, either using the permanent ACO program or another mechanism to test it.


Again, no one has a crystal ball to help predict what will happen next. But being aware of the potential outcomes allows organizations who are interested in participating in value-based care to determine if the risk is still worth the reward.

Future Implications

Due to the complexity involved in trying to pivot the delivery of care from volume-based to value-based, there are many options and approaches to how organizations might choose to move forward:

  • Current DCEs: If you were accepted to the program but deferred or launched your DCEs in PY2021, you’re in a good place to optimize your opportunity. As part of a very limited group participating in this model, you’re able to build a strong network by selecting the most high-performing physicians and post-acute providers for your network and creating compelling value propositions for your desired partners.
  • Potential DCEs: If you are interested in participating in value-based care but missed the initial deadline to apply, you’re the most in limbo. Take this pause as a chance to focus on planning. Model your network and assess the potential risks before making any final decisions, including whether to move to the MSSP program in the near term as the higher risk program evolves.  Just be sure you model out the implications of the differences in these programs to ensure that your strategy can be executed within the MSSP umbrella.
  • Traditional Fee-for-Service (FFS) Providers: If you’ve never considered getting involved in value-based care, nothing has to change – for now – unless you are ready to dip your toe into the value-based waters.  In which case, there should be ample opportunity to engage with ACOs that already exist or new DCs that are planning for their 2022 launch. However, until new legislation passes or tweaks to the CMMI models take place, you can continue treating and filing Medicare claims as you are today.
  • Value-Based Care Partners and Vendors: If you’re trying to sell into at-risk organizations or partner with value-based care organizations, things may be complicated for a while. Because so many decisions have been put on pause, the market may act a bit sluggish as organizations determine next steps. Stay on top of the trends, though, so that you will know how to reengage appropriately.

Final Thoughts

No matter what the future of the Innovation Center’s programs entail, now is a great time for anyone who is even considering taking part to evaluate their options and their potential risks. To build out your model physician roster and to understand the potential outcomes of forming a direct contracting entity or even just taking on more risk in other models, you need complete visibility into physician-level performance metrics – not just at the Tax ID level. Only Marketscape Strategy from Trella Health can give you that. Work smarter and more strategically in order to evaluate your risks before you take them on. Request a demo of Marketscape Strategy today!


About the Author:

Rebecca Molesworth, Vice President, Product Management

With more than 20 years’ experience working with healthcare information technology companies, Rebecca brings a breadth of knowledge and a passion for innovation to Trella Health as the Vice President of Product Management.   Before joining Trella Health, Rebecca served as the Senior Director of Data Intelligence for Medecision, accountable for data management, reporting and analytics for the portfolio. Throughout her career, her passion for improving patient outcomes through technology and data has grown. By unifying all stakeholders in the ecosystem, she strives to help patients receive the highest quality and most cost-efficient care.   Rebecca graduated from the University of Michigan with an MHSA in Health Management and Policy and has won innovation awards at several of her previous companies. She continued to foster and grow her analytics, data, and interoperability skillsets during the ARRA, HITECH, and PPACA Federal policy implementations.   At Trella Health, she’s excited to drive meaningful change and improve transparency in healthcare by creating market-driven solutions.