Thought-Leaders newsletter

Perspectives on a selected key topic July / August 2019

hat’s next for value based care in the next coming years – has the term become too broad – are providers still on board – and will there be further innovations, approaches, or public program initiatives?

Wendy Gerhardt Dorfman Senior Manager, Deloitte		Continued pressure on the health care industry to be more affordable, reduce costs, and improve quality and outcomes will eventually force hospitals, health systems, and physicians to embrace value-based care at some level. Recent activity on interoperability by the government and regulators can also help accelerate the shift. Proposed rules from the US Centers for Medicare and Medicaid Services (CMS) and Office of the National Coordinator for Health Information Technology (ONC), published earlier this year, are likely to drive the US health care system toward greater interoperability. Taken together with the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) and the 21st Century Cures Act of 2016, the proposed rules continue the push to make health care information more accessible to patients and providers as part of a larger effort toward value-based health care. One of the critical enablers of value-based care is access to reliable and timely data for clinical decision-making, outcomes tracking, financial modeling, and risk assessments. The industry may well be on the cusp of interoperable data. CMS intends for the proposed rules to make it easier for providers, patients, plans, and other stakeholders to “have appropriate access to the information necessary to coordinate individual care; analyze population health trends, outcomes, and costs; and manage benefits and the health of populations, while tracking progress through quality improvement initiatives.” Interoperability and data are just one piece of value-based care, but it may just be a tipping point in the right direction.

Lindsay Resnick
Executive Vice President,
Wunderman Health

Value-based care is a trend with momentum. Pay-for-performance reimbursement arrangements—from risk sharing to accountable care organizations to episodes of care to bundled payments—are moving healthcare toward an outcomes-based financing system. Incentives and disincentives based on quality of care and patient clinical results are becoming the new normal. For many, the transition away from volume can’t come fast enough. However, moving to value-based payment alone is not enough to bend healthcare’s cost curve. Payers and providers must continue to pursue a wide range of solutions: humanize care management programs, address medical errors and fraud, leverage technology as tools versus ‘silver-bullet’ solutions, and deal with social determinants of health, those circumstances that people are born into and live in that impact them as patients, before, during and after care.

One of the biggest challenges of value based care schemes face is bringing key stakeholders along for the ride. Moving from traditional fee-for-service to value-based payment where there’s ‘skin in the game’ means answering the question “what’s in it for me?” Not only for health plan members and hospital patients, but for change adverse providers of care who see a threat to their revenue stream. Living within the guardrails of these intricate, outcomes-centric healthcare finance models means outcomes are the new incomes.

Lastly, the future of value based care hinges on data capabilities: the ability to track, measure and accurately report cost and quality outcomes that demonstrate the value in value based care. These payment models are complicated. Integrating and verifying patient data from various sources such as electronic medical records and claims systems, combined with the sophisticated analytics required to measure individual performance and validate achievement metrics isn’t easy. Value is in the eye of the beholder…the data beholder!

Patrick Horine
President,
DNV GL Healthcare

For providers, if you are among those that have improved reimbursement or those that have been penalized, some may be challenged to agree, but the value-based reimbursement model has been effective in improving care. There is the adage that “If you want to change behavior begin to measure it”.

The more controversial aspects of the current measures are how it is applied. Some hospitals regardless of how well they care for the patient could still be penalized as they care for more complex patients. As a result, this is losing the intended effect and hospitals accepting the fact that they will not achieve the numbers they need to avoid the penalty. The jury is still out as to providers coming to appreciate what is in place and if it is leading to change.

If nothing else, this is creating an awareness to it. It contributes to the transparency that many have demanded, but the public still needs to be better informed. I believe to win more over to make this more acceptable is what comes as a result of what we have now in the historical data that has been collect. Are the analytics such they can be shared? Can we share data through different means to have better analytics?

I believe that what comes about from value-based purchasing in the future to get more attention to participants, payers and patients will be;

- Encompassing other providers that participate with the hospitals that will incentivize parties to work together to avoid penalties and demonstrate improvement of care.

- Adding scale or levels to the incentive payment and other means for incentivizing demonstrative improvement made by providers rather than all or nothing based on a threshold. This could then lead to separate providers for recognizing excellence.

- Getting better data analytics to use for comparative analysis to like organization, not just size and location, but in the scope of complexity to patients treated. This will enable improving the reporting of data and how this is shared. It can also lead to the evidence based approaches being shared through application of the analytics.

- With better analytics it will lead to the ability to apply different payment schemes to develop for bundling or similar means in caring for the patient.

- Engagement and involvement of other payers, State government, and others working with providers to develop different ways of incentivizing excellence in care.

While this was intended to separate the excellent from the mediocre or poor performers, it has not been received with such overwhelming support from the providers. This has evolved and will continue to do so. Without a doubt, this has merit and can be successful. It is not just the attention of CMS, but other payers are looking to apply something similar. This is added accountability but can be effective if applied in a way that can have an impact to encourage others to participate.

Rick Weil, PhD
Director,
BDC Advisors

Has the term “Value-based care” become too broad? HHS was certainly overly broad in its initial application of the term “value” when it said it wanted 90% of its payments tied to “value-based payments.” Commercial payers followed suit lumping a variety of performance metrics under a “value-based” umbrella whether or not risk sharing was involved. Payers and providers are even starting to expand the definition of what constitutes risk by assigning all contract dollars as being “at risk” when the provider in fact has minimal downside exposure.

For example, the annual membership risk survey of the American Medical Group Association has shown a steady increase in risk contracting among their membership since 2015, involving a wide variety of value-care options with varying degrees of downside exposure. The AMGA’s most recent survey estimated that by 2020 70% of their members’ federal revenue and 36% of the commercial revenue will be made through some type of “risk-based” contract. In 2015 only 45% of the government revenue was in a “risk-based” contract, and 22% of their commercial revenue.

Given these trends, providers need to stay on board with risk-based value care, and be thoughtful in deciding how to play across the value continuum.

A key point is that the basis of competition is shifting much more quickly in the government than the commercial market: Medicare Advantage and original Medicare and Medicaid have become risk-based businesses with the growth of Medicare Advantage and Medicaid Managed Care. The most successful and profitable Medicare providers (Iora, ChenMed, CareMore, and Oak Street) are now fully capitated, risk-based models. Those models will proliferate over time at an accelerating rate as increased capital flows into the space, and they develop the ability to scale their models within and across markets. Sensible assumption of risk, the development of specialized primary care with tight payer-provider integration is what will work in the government segment.

The tight payer-provider integration, however, is not nearly as important in commercial contracting as it in the federal segment. Here a strategy of shifting to lower costs sites of services, curating a network of highly efficient specialists, and improving productivity are more important strategy elements. Because the commercial market segment remains highly profitable for providers, a commercial contracting strategy will focus on preserving and growing market share. This should be the basis of a provider’s payer contracting—not about positioning themselves to get more of the premium dollars to make margins on insurance operations.

What is next? Providers should expect a continue transference of risk from payers & governments to providers. Gain-share models will likely give way to risk-share models. Expect more mandatory episode bundles from CMS. But do not expect episodes to be the norm in the commercial space: those models will be replicated primarily by providers in markets where they already have a total cost of care advantage---resulting in market share gains for them without a large corresponding price drop.

But the Commercial market remains the big wildcard. How long will America’s employers continue to subsidize payment shortfalls by governments? Will provider systems begin offering trend guarantees in return for all of an employer’s business? Will employers be willing to give up their broad access PPO networks and instead limit choice for their employees? Will the emergence of ever higher deductibles and full rate transparency in the commercial market usher in the era of retail healthcare for shoppable services?

Mark Lutes Chairman, Board of Directors, Epstein, Becker & Green		There is no doubt about it: the phrase “value based care” has become too hackneyed, and loosely applied in too many contexts, to have much remaining utility. Perhaps most damning is that the phrase has become so overused and abused that readers/listeners cringe upon its use. That said, the problem of, or opportunity for, incenting cost-effective care remains with us. Incenting cost effective care remains the central health policy question today, as it has throughout the almost 50 years that public policy has experimented with a range of forms of health maintenance organization incentivization and “managed care” (a term that, in its time, also became too emotionally charged to retain much utility). Providers remain split—many continue to build capacity for care coordination — in hopes of forging risk assumption partnerships with license holders or licensing their own Medicare Advantage or other top tier risk assuming entities. Of course there remain plenty of providers “waiting in the wings”—strategically planning to hold on to non-risk fee-for-service business and be “fast followers” at such time as they need to be. More often than not, payors are not rushing to create real “arbitrage” opportunities for providers — so providers should be forgiven for their skepticism! Medicare is likely to remain the leader in attempts to move the needle through incentivization. Of course, CMS has also been guilty of “I win you lose” program designs (witness the inherent weaknesses in ACO program). However, you have to at least give it credit for trying. Now, more than ever, it is using its ACA granted authority to conduct the experimentation that the provider incentivization challenge continues to deserve. As has been evident from CMS’ recent flurry of episode payment type proposals and mandates, it is not giving up on the problem. CMS, as “he who cannot be ignored” has the power to create the VBC future that is too often unrealized in private party contract negotiations absent a statutory “nudge” (e.g., perhaps of the self-funded plans through ERISA).

'Peter R. Kongstvedt President P.R Kongstvedt Company, LLC		In some measure (get it? get it? I crack myself up), the term “value based care” came about because the term “pay-for-performance” was sounding a bit like mom singing a-ha’s "Take On Me," an infectious ear-worm of a song (recently performed by Weezer, no less), but an old one. To freshen things up, pundits <ahem> and consultants <double-ahem> re-coined the term “value based care.” But as the late Uwe Rheinhardt deftly pointed out, we never really agreed on what particular value to focus on or how to define it, even when we pretended to agree. What undercuts any system of paying for healthcare is that we Americans are endlessly inventive about maximizing our revenues. And if inventiveness isn’t enough, we are happy to add brute force through the use of market power. And by happy I do not mean we are all happy about it, but societally we seem to be content to allow money and policy to meet up in closed rooms to allow it to go on. We even abet the process by considering medical costs to be like a natural phenomenon; but they are not: your cost is somebody’s revenue. Said another way, value based care, which means value based payment for care (or drugs or devices), can rarely if ever be as strong as pricing power, unbundling and add-on fees (thanks, airlines and telecoms!), self-referral and other forms of charging that places the real value on increasing revenues. This does not mean that continually focusing on value as we want to define it is futile – it isn’t because the alternative is to get less quality for more money rather than improvements in quality like we have gotten. Said another, another way, it is still better than nothing. But rebranding it can do little unless we start to reduce the means of subverting it.

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