Direct contracting in Medicare is a relatively new healthcare model that aims to reduce healthcare costs while improving the quality of care for seniors. The Centers for Medicare and Medicaid Services (CMS) launched the Direct Contracting Model in April 2021 as part of its ongoing efforts to shift the Medicare healthcare system from traditional fee-for-service models to value-based care.

So, what is direct contracting in Medicare, and how does it work? In this article, we’ll take a closer look at this emerging healthcare model and its potential impact on patients, providers, and payers.

What is Direct Contracting?

Direct Contracting is a voluntary, risk-based payment model that allows healthcare providers to directly contract with Medicare to deliver coordinated, high-quality care for beneficiaries. Under this model, healthcare providers assume financial risk for the cost and quality of care for their assigned population, which incentivizes them to focus on preventive care, chronic disease management, and patient outcomes.

Direct Contracting has two payment model options: the Professional option and the Global option. The Professional option is designed for small- to medium-sized organizations, including individual practitioners, group practices, and accountable care organizations (ACOs). This model offers capitated payments for regular primary care services and allows for shared savings and losses based on patient outcomes.

The Global option targets larger organizations that have experience with risk-based payment models. This model provides prospective, capitated payments that cover the total cost of care for beneficiaries, including all primary and specialty care services, hospitalizations, and post-acute care.

How does Direct Contracting Benefit Patients?

Direct Contracting aims to improve the quality of care for Medicare beneficiaries by incentivizing healthcare providers to focus on preventive care, chronic disease management, and patient outcomes. This model encourages care coordination and promotes the use of evidence-based practices, which can lead to better health outcomes and higher patient satisfaction.

Moreover, Direct Contracting makes it easier for patients to access high-quality care. Under this model, beneficiaries can still see any Medicare-covered provider or specialist they want, but their care will be better coordinated and more personalized.

How does Direct Contracting Benefit Providers?

Direct Contracting allows healthcare providers to take control of their financial risk by offering predictable, capitated payments for the care they provide. This model aims to reduce administrative burden and increase flexibility, allowing providers to focus on delivering high-quality care.

Moreover, Direct Contracting allows providers to improve the coordination of care across the continuum, leading to better outcomes and patient satisfaction. Providers can also benefit from the shared savings and bonus payments available through the model, which can provide additional financial incentives for high-quality care delivery.


Direct Contracting is an innovative healthcare model that has the potential to significantly improve the quality of care for Medicare beneficiaries while reducing costs. By incentivizing providers to focus on evidence-based practices, care coordination, and patient outcomes, Direct Contracting aligns the interests of patients, providers, and payers.

If you’re a healthcare provider interested in participating in Direct Contracting, it’s crucial to understand the model’s nuances and requirements. Consulting with experts in value-based care and utilizing healthcare technology can help you navigate the Direct Contracting Model effectively and deliver high-quality, coordinated care to your patients.