Post-Acute Partnerships: ACOs vs DCEs

Choosing the Right Medicare FFS Risk-Sharing Partners for Your Post-Acute Care Organization

By Rebecca Molesworth | March 9, 2021

The first performance year for Direct Contracting Entities (DCEs) begins in April 2021. What does that mean for you and your post-acute business? Until now, options to participate in the Center for Medicare & Medicaid Services’ (CMS) Accountable Care Organization (ACO) risk-sharing payment models were limited to more traditional care providers. With its new DCE model, CMS is hoping to appeal to a broader set of providers, especially those that have experience taking capitated risk, such as organizations that currently serve Medicare Advantage plans. Now that the initial planning phase for DCEs is almost finished, this is a great time to utilize your healthcare data analytics to dive into your risk-sharing options. What are ACOs and DCEs? How are they similar, and how do they differ? Would your business benefit more from partnering with an ACO or a DCE? And what should you look for in risk-sharing partners? We’ll explore all of these questions and help you understand your options.


Defining Accountable Care Organizations (ACOs)

Accountable Care Organizations (ACOs) have been around for a few years now, and they’re familiar with most of the acute and post-acute healthcare industries. ACOs are networks of healthcare providers working together, and sharing healthcare data and analytics, to provide quality, coordinated care to Medicare (part A and Part B) patients. By collaborating and coordinating patients’ care, ACOs help patients get the right care, at the right time, and in the right setting. Coordinated care utilizes healthcare data to help providers eliminate redundant services, prevent medical errors, and decrease healthcare costs while improving patient outcomes and retaining patient choice.

Successful ACOs that leverage their healthcare analytics to help drive down costs and improve performance are rewarded with a portion of the overall shared savings. ACOs that fall short of the CMS benchmarks they agreed to are penalized and must pay out, with the goal being a zero-sum program that decreases patient costs and improves care.

To be successful, all partners within an ACO must be committed to performance improvements and collaboration. Not only that, but the network must be built and maintained based on the needs of the patient population.


Key Metrics for Successful ACOs

Successful ACOs must excel in a few key domains, some of which include:

  • Overall Cost Efficiency
  • Patient/Caregiver Experience
  • Care Coordination/Patient Safety
  • Preventive Health


Metrics to watch in these domains include:

  • Getting timely care, appointments, and info
  • Access to specialists
  • Shared decision making
  • Medication reconciliation
  • Percentage of beneficiaries with diabetes with HbA1c in poor control


An ACO’s performance in these and other key metrics can mean the difference between financial reward or penalty. And, while they measure their performance on tAn ACO’s performance in these and other key metrics can mean the difference between financial reward or penalty. And, while they measure their performance on these metrics, you can also use their healthcare analytics to evaluate whether an ACO is a good potential partner for your post-acute organization.


Defining Direct Contracting Entities (DCEs)

DCEs are the latest risk-sharing program from CMS with the goal of reducing costs for Medicare fee-for-service (FFS) patients. Whereas ACOs take on risk based on their total cost of care, DCEs (as the name suggests) contract directly with CMS to receive an agreed-upon capitated payment each month. The DCE then uses that payment from CMS to create value-based payment agreements with its providers and physicians. Partners are then paid by the DCE each month based on their payment arrangements. These contracts last five years (with an optional implementation year) and are based on healthcare data analytics findings from the Next Generation ACO model (NGACO).

There are currently three basic types of DCEs that health systems can choose from:

  • Standard DCEs
  • New Entrant DCEs
  • High Needs DCEs
  • Medicaid MCO-based DCEs


Standard DCEs are designed for health systems and other organizations with experience serving Medicare FFS beneficiaries. If an organization previously participated in the Next Generation ACO Model or Pioneer ACO Model, it may thrive in a standard DCE. If an organization does not have experience serving Medicare FFS beneficiaries, it may choose to participate as a New Entrant DCE.


Organizations that serve high-risk beneficiaries with complex needs may be concerned about success in a risk-sharing model. That’s why CMS has developed High Needs Population DCEs. For example, this model might work well for an organization with a population that includes a significant number of dually eligible beneficiaries. Because the patients’ needs are more complex, this model includes different performance metrics from other DCEs and ACOs.


Similarly, the Medicaid Managed Care Organization (MCO) direct contracting model is designed to help health systems and healthcare organizations serving dually-eligible populations who receive their Medicaid benefits through an MCO. MCOs already take on increased risk by accepting accountability for the total cost of care in addition to their existing responsibility for participating in a Medicaid-managed care contract.


According to CMS, the geographic direct contracting model was designed to “test whether a geographic-based approach to care delivery and value-based care can improve health and reduce costs for Medicare beneficiaries across an entire region.” The goal with geographic DCEs is to improve care coordination by fostering relationships between providers and community organizations in a defined geographical region. This model has been put on hold recently, and it is unclear if CMMI will ultimately release this model or not.


Key Metrics for a Successful DCE

As with any risk-sharing payment model, success is highly dependent on performance, cost reduction, and patient outcomes. So, to ensure that their organization and its partners get the maximum shared savings for serving its Medicare FFS beneficiaries, DCEs need to track several key metrics. Those metrics may vary, depending on the type of direct contracting model. However, a few healthcare analytics benchmarks that every DCE will need to track include:

  • Cost per member per year for the attributed population
  • Historical baseline spending
  • U.S. per capita cost growth
  • Beneficiary risk rates
  • Physician performance
  • Network leakage
  • Comparative performance against other ACOs and DCEs


Comparing ACOs vs. DCEs

From a partnership perspective, ACOs and DCEs are two slightly varied approaches to solving the same challenge: Improve patient outcomes while decreasing costs.

There is one obvious difference, however: the payment scheme. ACOs are rewarded or penalized based on their performance. This payment or penalization is determined based on what their healthcare data shows is the total cost for a given payment year. On the other hand, DCEs contract with CMS for an agreed-upon monthly payment.


Along with the difference in payment schemes, Direct Contracting offers a global option, which allows DCEs to take on 100% of shared savings or losses instead of the lower percentages offered by ACOs. For a high-performing DCE, taking on that extra risk could prove significantly beneficial.


DCEs also introduce the element of competition into risk-sharing models. DCEs are incentivized to attract and retain loyal Medicare beneficiaries. If a DCE is among the top-performing in the country, according to healthcare market data, it stands to gain a much higher share of the total cost savings. On the other hand, ACOs offer a safer option for some health systems making improvements and preparing for the future of value-based payment models.


 Accountable Care Organizations (ACOs)Direct Contracting Entities (DCEs)
Shared Risk (percentages of savings and losses)– BASIC tracks C, D, and E: 30% of shared losses and 50% of shared savings
– BASIC tracks A, B: 40% of shared savings, no risk for losses
– ENHANCED TRACK: 75% of shared losses and savings
– Professional option: 50% of losses and savings
– Global option: 100% of losses and savings
Payment ModelShared savings/losses risk is calculated based on total cost and determined annually. Providers bill Medicare FFS.The DCE makes a capitated monthly payment arrangement with CMS. This payment is used to create value-based payment arrangements with partner providers.


Decision Time: Should You Partner with an ACO or a DCE?

Once you’ve laid out the pros and cons and differences of each risk-sharing entity, it’s time to decide where to invest the bulk of your partnership bandwidth. No matter which you choose, it’s important to align your organization with the most beneficial and strategic partners. DCEs are still building their provider networks and won’t have aggregate healthcare data available, but there are plenty of details on individual physicians. Start there.


For established ACOs, look at the data to see who has built the strongest provider network, with a proven record of:

  • Closing care gaps
  • Removing costly and time-consuming redundancies
  • Improving patient outcomes
  • Reducing healthcare costs


Ultimately, all ACOs and DCEs rely on healthcare data analytics and transparency to operate effectively – which is good news for you. By accessing key metrics, you can determine which partnerships are the most beneficial for your business and your patients.


Accessing the correct healthcare market data means working with the correct healthcare data analytics company. Trella Health, a leader in healthcare data and analytics, offers the level of visibility you need to make the right choice.


Marketscape Strategy leverages healthcare analytic data to help you identify high-performing players in your market and how their provider network performs against CMS benchmarks. And with access to 100% of both part A and B Medicare claims data, Marketscape gives you the competitive intelligence to show your organization’s strengths and position you as a preferred partner.


Schedule a demo of Marketscape today to learn how you can set your organization up for success in the next evolution of value-based care partnerships.




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.