Medicare Geographic Direct Contracting Model Details Released

A new Centers for Medicare & Medicaid Services (CMS) Medicare and Medicaid Innovation Center model has emerged, which will test the effectiveness of a geographic approach to promoting value-based care in up to 10 metro regions, starting January 1, 2022.

The Geographic Direct Contracting (Geo) Model provides enhanced benefits and waivers that “will enable Direct Contracting Entities (DCEs) to build integrated relationships with health care providers and community organizations in a region to better coordinate care and address the clinical and social needs of Medicare beneficiaries.”

Applicant Entity

The applicant entity is a DCE, which is similar in nature to an Accountable Care Organization (ACO). It’s the convener of a contracted network of Medicare-enrolled preferred providers and assumes financial risk in return for enhanced flexibilities. The Geo DCE coordinates care for its assigned lives, in effort to improve quality and lower costs. The Geo DCE must determine that it meets all applicable state licensure requirements.

Geo DCEs located in any of the 10 target regions can apply for participation within that region. If an entity would like to participate in multiple regions, it must apply separately for each desired location. Prior submission of a Letter of Intent is not required.

Selected Metro Regions

The metro regions that have been preliminarily selected by CMS include:

  • Atlanta
  • Dallas
  • Houston
  • Los Angeles
  • Miami
  • Orlando
  • Philadelphia
  • Phoenix
  • San Diego
  • Tampa

The metro region is defined as one or more selected counties. CMS anticipates that at least four regions will ultimately be selected. If there aren’t enough eligible applicants in a given region, the region won’t be selected. All health care providers and health plans in these regions should familiarize themselves with Geo’s financial methodologies and potential strategic implications.

Model Design Elements

The primary goals of this program are to allow beneficiaries to benefit from:

  • Better care
  • Benefit enhancements and beneficiary engagement incentives
  • Lower out-of-pocket costs
  • Strong beneficiary protections

Geo builds upon other previously announced Direct Contracting models, but is unique in that 100% of Medicare fee-for-service (FFS) beneficiaries residing within each market will be assigned to a Geo DCE. Each region is required to have at least three Geo DCEs.

Each Geo DCE proposes a discount rate—likely 2-9%–that is applied to its historical benchmark cost for each performance year. Additionally, the Geo DCE is required to assume 100% upside-downside risk for its assigned lives, starting at the first dollar beyond the proposed discount. Geo DCEs have the option to choose partial (1-50%) or total (100%) capitation, an up-front monthly cash flow mechanism. It’s considered a mandatory model because patients cannot opt out, however, they retain the right to select their preferred Geo DCE.

Payments will be subject to a 1-3% quality withhold (increasing 1% annually), which can be earned back, contingent on quality performance. There are seven quality measures: a patient experience survey, two claims-based measures, and four clinical measures. A high performer’s pool will redistribute any quality withholds that haven’t been earned back to the highest performers.

Medicare FFS beneficiaries that meet eligibility criteria and reside in the metro region can be aligned to a Geo DCE in a number of ways, in the following hierarchical order:

  • Voluntary alignment
  • Medicaid Managed Care Organization (MCO) alignment for dually eligible beneficiaries
  • ACO-based alignment
  • Claims-based alignment, limited to a cap
  • Random alignment

Program overlap is typically allowed. Beneficiaries aligned to a Geo DCE may be contemporaneously aligned to a Medicare Shared Savings Program (MSSP) ACO, and to participants in other population or episodic models, with the exception of the Global Option of the Direct Contracting Model. All payments that occur under such initiatives for overlapping beneficiaries will be reconciled against the Geo DCE’s cost performance.

CMS anticipates that the Geo Model will meet the criteria to be an Advanced Alternative Payment Model in 2022 and future years.

Applicant Selection

CMS will select participants using a two-step process: first, selection criteria to determine the applicant’s ability to carry out the requirements of the model; and second, by assessing the Geo DCE’s proposed discount, relative to other applicants.

The selection criteria are based on eight domains:

  • Organizational structure and experience
  • Financial plan and risk-sharing experience,
  • Patient-centeredness and beneficiary engagement
  • Quality and clinical process improvement
  • Provider partnerships
  • Care management
  • Compliance
  • IT systems


Geo will be tested over a six-year period including two three-year Model Agreement Periods. The first cohort will launch January 1, 2022, and conclude December 31, 2024. The second period will be from January 1, 2025, to December 31, 2027. Selected applicants must submit a list identifying all proposed Geo Preferred Providers by September 1, 2021, for the first program year.

The Request for Applications has been published, and CMS will accept applications from March 1—April 2, 2021.

We’re Here to Help

Whether you choose to participate or not, it’s important to understand the strategic and financial implications. Please reach out if you’d like to work with our value-based care experts to support your application process, network planning and contracting, competitive strategy, financial modeling, and operational design. We’re here to help you succeed in the context of this new model.

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