Guide to Value-Based Hospice Care (2022)

Written by the Open Caregiving Team - Last Updated: January 3, 2022

Comparing Value-Based Hospice Models

The CMS Innovation Center (CMMI) is currently testing 2 value-based models that eligible hospice providers can participate in.

  1. Direct Contracting for Hospice: Providers come together to create a Direct Contracting Entity (DCE). CMS then contracts the DCE to deliver value-based care to a certain population of Medicare fee-for-service beneficiaries.
  2. Medicare Advantage Hospice Carve-in: Allows Medicare Advantage Organizations (MAOs) to directly contract with hospice providers and offer the hospice benefit to MA beneficiaries bridging the gap between curative and hospice care.
  3. Primary Care First (SIP): Incentivizes advanced primary care clinicians to achieve patient-centered care that reduces acute hospital utilization and per person costs. *As of November 30th, 2021 CMS has decided to cancel the Serious Illness Population (SIP) payment option.
  Direct Contracting MA Hospice Carve-in Primary Care First (SIP)
Risk Level
High Based on MAO contract Low
Risk Factors
Overspending penalties Not hitting goals of MAO contract Up to 10% performance-based penalties
Upside Potential
Retain 50-100% of cost savings Contract specific performance-based upside Up to 50% performance-based upside
Payment Model
Monthly capitation + bonus or penalty Based on contract with MAO Capitation + population & performance-based adjustment
Care Spectrum
Traditional Hospice + upstream services Traditional Hospice + upstream services Traditional Hospice + upstream services
Referrals Yes – from CMS Yes – from MAO Yes – from CMS
Payer CMS –> DCE –> Provider MAO –> Provider CMS –> Provider
Participants 53 DCEs (6 High Needs Population DCEs) 19 MAOs (9 in MA Hospice Carve-in) 827 providers (overall)
Launch 4/2021 1/2021 TBD
Active Yes Yes Paused*

Direct Contracting Model for Hospice

What is the Direct Contracting Model?

Direct contracting is a CMMI risk-sharing initiative aimed at lowering costs and improving the outcomes for beneficiaries currently being served by Medicare fee-for-service programs. The latest program is officially referred to as the Global and Professional Direct Contracting (GPDC) Model.

How does the direct contracting model work?

Individual healthcare providers (Direct Contracting Participant Providers) come together to create a Direct Contracting Entity (DCE). CMS then contracts the DCE to deliver value-based care to a certain population of Medicare fee-for-service beneficiaries.
The direct contracting model is designed to allow fee-for-service beneficiaries to maintain all their benefits under original Medicare while also empowering them to access innovative and cost-efficient care through a VBID model.
Direct contracting also aims to broaden the access of risk sharing and value-based care models to more healthcare providers while minimizing their administrative work through a set of quality measures that emphasize beneficiary outcomes over process.

What are the goals of the Direct Contracting Model?

  1. Create new provider risk-sharing models for Medicare FFS
    • Predictable spending patterns and monthly payments for (capitated and partially capitated)
    • Financial alignment to deliver cost-efficient, quality care
  2. Grow provider participation in innovative VBID models
    • Broaden access to new risk-sharing arrangements for provider types and sizes that do not typically participate in CMS innovation center models.
    • Increase participation appeal by minimizing administrative burden
  3. Increase beneficiary choice and participation
    • Incentivize beneficiaries to engage in their healthcare decisions
    • Chose providers they want to build a long-term relationship with
  4. Minimize administrative work provider
    • Remove procedural processes/metrics that are not directly related to quality
    • Allow providers to spend more time focusing on beneficiaries

What are the two direct contracting payment models?

Each Direct Contracting Entity (DCE) agrees to one of the below risk-sharing options for their provider participants.
1. Professional Direct Contracting
  • Accepts 50% of the shared savings or losses
  • Primary Care Capitation (a risk-adjusted monthly fee per patient equal to ~7% of the total cost of primary care)
2. Global Direct Contracting
  • Accepts 100% of the shared savings and losses
  • Can choose between Primary Care Capitation or Total Care Capitation (a risk-adjusted monthly payment for all care provided equal to ~7% of the total cost of care)
CMS will pay the DCE a monthly fixed payment based on the model they chose. CMS will later pay out a bonus or collect a penalty based on whether the DCE’s spending is below or above the spending target that CMS sets. The DCE will be the one paying out to individual hospice providers.

What are the Quality Measures used for Direct Contracting Entities?

CMMI is proposing a first set of 3 core quality measures in Performance Year 1 that will affect payments in year 2 which include:

  1. Risk-Standardized All-Condition Readmission (ACR) – The number of hospital stays that result in a readmission within 30 days after the patient is discharged
  2. All-Cause Unplanned Admissions for Patients with Multiple Chronic Conditions (UAMCC) – Unplanned hospital admissions for beneficiaries 65 years+ of age with multiple chronic conditions
  3. Days at Home for Patients with Complex, Chronic Conditions (DAH) – The number of days that beneficiaries with complex, chronic disease spend at home rather than in acute and post-acute care settings. For High Needs Population DCEs ONLY*

CMMI also proposed two more measures for Performance Year 2 that will affect payments in year 3 which include:

  1. Timely Follow-Up (for Standard and New Entrant DCEs ONLY*) – is the percentage of ER visits or hospitalizations related to one of six chronic conditions where a planned, out-patient follow-up was conducted in the specified time-window recommended by clinical practice guidelines. The six chronic conditions include
    • Hypertension
    • Asthma
    • Heart failure
    • Coronary artery disease
    • Chronic obstructive pulmonary disease
    • Type I/II diabetes mellitus.
  2. Consumer Assessment of Healthcare Providers & Systems (CAHPS) – the survey is similar to the Clinician and Group (CG)-CAHPS Survey with additional questions to gauge the DCE’s ability to deliver a quality patient/caregiver experience with highly coordinated care.
    • DCEs must contract with a CMS-approved CAHPS Survey vendor for each reporting year to administer the CAHPS Survey.

What is a High Needs Population DCEs?

A high needs population DCE services patients with a hierarchical condition category (HCC) score higher than 3. There are also scenarios where they can serve patients with an HCC score equal to or lower than 3 if the patient has experienced numerous unplanned hospital admissions or has a qualified disability.

This type of DCE should be prepared to coordinate care and serve patients with complex needs. For hospice providers, this may mean providing a single patient with both curative treatment and traditional hospice care at the same. While this is unheard of under the Medicare’s fee-for-service model, a 2019 JAMA study found that there could be significant cost savings by offering patients with both types of care at the same time.

How can hospice providers prepare for Direct Contracting?

A crucial step for Hospice providers prior to joining a Direct Contracting Entity (DCE) is to expand your services and skill sets further upstream than traditional hospice care. This means becoming the main point of contact for patients and families in the years before they enter hospice care and taking total responsibility of a patient’s needs including:
  • In-home primary care
  • Palliative care
  • PACE programs
  • Care coordination
At this time CMS is not accepting new applications for new DCEs interested in participating in the GPDC model. The first performance year will have 53 participants and run from April 1st, 2021 through December 31, 2021.
Any eligible organization that previously applied but deferred their start date will be able to start participating on January 1, 2022.
Stay up to date on when applications may open again through the CMS Innovation Center newsletter.

Hospice Pros and Cons of a Direct Contracting Entity (DCE):

  • Expand your business upstream into programs and services that are not covered by hospice Fee-for-service
  • Minimize procedural administrative work often associated with Medicare fee-for-service programs
  • Build relationships and serve high-needs patients over a multi-year period
  • Develop a consistent referral stream
  • Maintain a predictable cash-flow model with the upside of bonuses
  • Opportunity to innovate in your care delivery
  • Need the capital to invest in new programs outside of traditional hospice and hire specialized healthcare workers to build them out
  • Need to develop business analytics to manage risk and optimize your spending
  • Potential penalties if spending exceeds CMS targets
  • Must learn a totally new insurance model that has operational, financial and quality implications
  • Take on the risk of other providers in the DCE

The Medicare Advantage Hospice Benefit

What is the Medicare Advantage Value-Based Insurance Design Model (VBID)?

The Medicare Advantage (MA) Value-Based Insurance Design Model is a CMMI program testing new components with the goal of reducing costs and improving the health outcomes for MA beneficiaries.

What is a Medicare Advantage Organization (MAO)?

A Medicare Advantage Organization (MAO) is a private company approved by Medicare to offer Medicare Advantage plans (also known as Part C) to Medicare beneficiaries.
In CY 2021 there were 19 Medicare Advantage Organizations, 9 of which are participants in the MA Hospice Carve-In. In CY 2022, there are 34 Medicare Advantage Organizations, 13 of which are participants in the MA Hospice Carve-In.
You can contact or learn more about the MAOs participating in the Hospice Benefit Component through CMS.

What is the Medicare Advantage Hospice Benefit Component?

The Medicare Advantage Hospice Benefit Component (also known as the MA Hospice Carve-in) is a CMMI test that allows Medicare Advantage Organizations (MAOs) to directly offer the hospice benefit to MA beneficiaries.
The goal of the MA Hospice Carve-in is to test whether making Medicare Advantage (MA) plans financially responsible for all Parts A and B benefits (including the hospice benefit) creates a more streamlined experience that improves care coordination, health outcomes and cost-efficiency for MA beneficiaries electing hospice care.
By bridging the gap between curative and hospice care, CMS believes more beneficiaries may get on a cost-efficient path towards quality end-of-life care.
If you have further questions regarding how the MA Hospice Benefit Component works, consult CMS’s Frequently Asked Questions.

Which Medicare Advantage Organizations are Participating in the Hospice Carve-in?

  • AvMed, Inc
  • Cambia Health Solutions, Inc.
  • Catholic Health Care System
  • CVS Health Cooperation
  • Hawaii Medical Service Association
  • Humana, Inc.
  • Intermountain Health Care, Inc.
  • Kaiser Foundation Health Plan, Inc.
  • Presbyterian Healthcare Services
  • Summit Master Company, LLC
  • Triple-S Management Corporation
  • UnitedHealth Group, Inc.
  • Visiting Nurse Service of New York

What are the current VBID Hospice Service Areas?

You can learn more about what states and counties the Medicare Advantage Hospice Carve-in is being tested in using CMS’ VBID CY2022 Hospice Benefit Contact Information (XLS).

Does Medicare Advantage Cover Hospice?

Outside of the MA Carve-in test Original Medicare manages the beneficiaries hospice services while the Medicare Advantage Organization manages supplemental benefits. According to CMS “This hospice carve-out from MA results in a convoluted set of coverage rules for MA enrollees who elect hospice and fragments accountability for care and financial responsibility across the care continuum.”

How can hospice providers work with Medicare Advantage Organizations (MAOs)?

Medicare Advantage Organizations (MAOs) and hospice providers in their service area must work together to forge partnerships around the MA hospice carve-in. It is up to the hospice providers to prove their value and negotiate directly with MAOs on the details of the partnerships.
MAOs are looking to partner with hospice providers who:
  1. Will accept a risk-based payment to help the MAO limit their risk and costs
  2. Have predictable analytics and financial models for the care they provide
  3. Score highly on quality measures
  4. Can deliver a high volume of diversified services further upstream from traditional hospice care
  5. Can build patient-specific care plans of how they will transition the patient across curative, palliative and hospice settings
  6. Will be innovative on their care delivery to find areas of cost and quality improvement
  7. Have interoperable systems set up
Hospice providers that do end up contracting with an MAO should review CMS’ VBID Model Hospice Benefit Component Overview for further guidance on how to report claims and notices.

How should hospice providers prepare to start working with MAOs?

There are key operational and organizational transformations hospice providers need to make when preparing to participate in the MA hospice carve-in. Some important changes traditional hospice providers will need to consider before contracting with an MAO are:
  1. Diversifying services further upstream to palliative and primary care
  2. Staffing up workforce to serve more patients earlier on in their care
  3. Implementing a powerful data collection and reporting system
  4. Bringing interoperability into their electronic systems
  5. Becoming comfortable managing risk
  6. Adjusting to a business model that revolves around capitation and shared savings/losses
  7. Reevaluating their expenses and costs to make sure they can accurately predict spending and are operating the most cost-efficient model
  8. Develop KPIs and competitive benchmarks to prove to MAOs they deserve to be a preferred provider

Primary Care First

*As of November 30th, 2021 CMS has decided to cancel the Serious Illness Population (SIP) payment option.

What is Primary Care First (PCF)?

Primary Care First is a 5 year CMMI program for healthcare practices and clinicians that want to participate in advancing the delivery of primary care for Medicare beneficiaries with serious illnesses.

What are the goals of Primary Care First?

The goal of PCF is to improve patient experience and outcomes while reducing the costs associated with delivering advanced primary care. This is accomplished by:
  1. Focusing on the clinician-patient relationship
  2. Allowing clinicians the flexibility to design their own practice and care delivery based on the population they are serving
  3. Incentivizing clinicians to achieve patient-centered care that reduces acute hospital utilization and per person costs.
While clinicians are empowered to innovate and implement their care delivery as they see fit, CMS offers 5 primary care functions as a foundation to the programs:
  1. Access and continuity of care
  2. Care management
  3. Comprehensiveness and coordination
  4. Patient and caregiver engagement
  5. Planned care and population health

What is the Primary Care First Payment Model?

The payment model for practices participating in the PCF demonstration is based on 3 inputs:
  1. A flat payment for an in-person primary care visit
  2. A population-based payment in addition to a flat primary care visit fee
  3. A quarterly performance-based adjustment with an upside of up to 50% and downside of 10% (based on transparent benchmarks of how they well they achieve the goals of the program relative to other clinicians)

Is Primary Care First an Alternative Payment Model (APM)?

Yes, Primary Care First is an APM. Unlike Medicare Fee-For-Service, the Primary Care First payment model incentivizes added clinicians to provide high-quality and cost-efficient care

What are the three Primary Care First Options?

Clinicians may only participate in one of the three options.
  1. General Component – for advanced primary care practices that want to take on financial accountability in the form of performance-based payments while minimizing their administrative work.
  2. (CANCELED) Seriously Ill Population (SIP) Component – for advanced primary care practices that want to participate in developing a more patient-centered, coordinated and cost-effective primary care program for seriously ill populations (SIP).
  3. Both General and SIP Components – for practices that want to participate in both the general component and SIP component.