Contracting for Primary Care and Value Improves Patient Outcomes and Lowers Costs

April 6, 2018 1:31 pm

The total cost of care for patients covered by value-based Medicare Advantage contracts was 4 percent less than those in Humana’s standard Medicare Advantage contracts—and 15 percent lower than patients covered by fee-for-service Medicare.

Humana’s push into value-based Medicare Advantage (MA) contracts with primary care physicians (PCPs) is resulting in more preventive services, fewer hospital visits, better health outcomes, lower total cost of care—and better pay for PCPs.

“We benefit financially, Humana benefits financially, and the patients benefit by having better health,” says Jeremy Chrisman, DO, medical director of care transformation, Vancouver Clinic, Vancouver, Wash. “I hate to be corny but when that all aligns, that’s when magic happens.”

In 2016, PCPs in value-based agreements with Humana received 16.2 percent of all the money the health plan spent for the patients covered by those contracts, according to a report issued late last year. By comparison, PCPs in fee-for-service agreements with Humana received just 6.9 percent of the health plan’s total payments for the patients in those contracts.

The emphasis on primary care is paying off. The total cost of care for patients covered in value-based MA contracts was 4 percent less than those in Humana’s standard MA contracts—and 15 percent lower than patients covered by fee-for-service Medicare.

More importantly, members in valued-based MA plans are receiving better care and, in some cases, achieving improved outcomes (see exhibit below.) For example, consider the following results:

  • Physicians in value-based arrangements had 26 percent higher Healthcare Effectiveness Data and Information Set (HEDIS®) scores than those in fee-for-service contracts.
  • Patients treated by physicians in value-based contracts had 6 percent fewer hospital inpatient admissions and 7 percent fewer emergency department (ED) visits than those treated by patients in fee-for-service contracts.
  • The rate for physicians in an MA value-based contract performing or recommending breast cancer screening was 78 percent, compared to 69 percent for those in an MA fee-for-service contract.

How Value-Based Care Payments Affect Patients

Humana’s attention on primary care has been building for more than five years, says Mike Funk, vice president, Office of the Chief Medical Officer. 

“Everyone went in with the hope that we would see a redistribution of the pie over time,” he says. “The old [payment] system paid for treating illness. The new system is about shifting more emphasis to prevention and early identification that allows the primary care practice physicians to serve in a quarterback role.”

An added benefit: Physicians are making more money while devoting more attention and time to the patients who most need them. That will make primary care an increasingly attractive specialty, says Andrew Renda, MD, Humana’s director of population health.

“In traditional fee-for-service, where you’re cranking through as many patients as you can, physicians get burned out,” he says. “When they are working towards better outcomes as opposed to seeing more patients in a day, their quality of life improves, the burnout factor goes down, and all that comes together to generate better health outcomes.”

What Value-Based Care Means for Physicians

Humana has about 2.9 million individual MA members; about one-third of those members receive treatment from PCPs in standard fee-for-service contracts. The other 1.9 million individual MA members are cared for by approximately 52,200 primary care physicians working in one of four types of value-based contracts.

Humana’s Value-Based Care Physician Payment Options


Model practice. In this program, physicians can earn a year-end bonus for their performance on HEDIS measures and clinical measures such as ED utilization and medication adherence rates.

Medical home. To participate in Humana’s “medical home program,” physicians must be accredited as patient-centered medical homes or working toward accreditation. To offset some of the up-front investment needed to create medical home care models, Humana offers up-front coordination fees to practices. “Then we are looking for performance improvements on the back end” to calculate any year-end bonus, Funk says.

Full value. In these contracts, physicians have upside and downside financial risk for Medicare Part B expenses and possible shared savings for Part A and Part D.

Global value. Through this program, physicians are paid monthly capitated payments and expected to meet Humana’s quality standards.

Within the framework of contract types, Humana works with physician practices in customized ways. For example, Renda directs the health plan’s Bold Goal population health initiative, which seeks to improve members’ health by 20 percent by 2020, through both individual-level and community-level interventions and by addressing social determinants of health as part of a broader clinical model.

“In some communities, we may say to a physician ‘If you are able to screen for food insecurity, we’ve got resources and interventions to connect patients to food sources,’” Renda says. “That, in the end, is going to help patients with their diabetes outcomes because they are eating healthier.”

How It Is Working in Tennessee

The move to value-based payment is certainly encouraging to the physicians at Summit Medical Group, the largest primary care organization in Tennessee. 

Based in Knoxville, the physician-owned group includes about 350 providers, including physicians, nurse practitioners, and physician assistants. All physicians specialize in primary care except for a few rheumatologists and hospitalists.

An early participant in the federal government’s Medicare Shared Savings Program, Summit has been positioning itself to succeed in value-oriented arrangements for years, says Eric Penniman, DO, executive medical director. It is currently participating in the Center for Medicare & Medicaid Innovation’s Comprehensive Primary Care Plus program; recently decided to participate in the Centers for Medicare & Medicaid Services (CMS) Next Generation ACO Model; and is eager to enter into value-oriented contracts with commercial payers.

“Strategically, we believe in value-based care and that’s where we are headed,” Penniman says.

Summit’s biggest value-based relationship is its Humana MA “full value” contract—a contract with upside and downside risk—which covers about 28,000 lives. In the first year of the arrangement, Summit did not qualify for shared savings but the second year was a resounding success, Penniman says. The bonus—above all fee-for-service payments—will be substantial.

“Most of our primary care providers, as a result of the Humana contract, will see a 10-20 percent increase in their salary and some will see above 20 percent,” he says.

The group has 164 physician owners, and each practice site has a lot of autonomy in how it operates. But all buy into the mind-set that more and better primary care services results in lower overall medical spending—and financial success in a value-based contract, Penniman says. That means providers put top priority on keeping their patients out of an ED or hospital bed, as much as possible.

“When you think about your patients who are more fragile, no longer do you just hope they don’t get admitted,” he says. “You are activating various resources like care management or social workers to make sure they do not.”

Payer-provider collaboration. “In a value-based agreement, the payer is a partner, not an enemy,” Penniman says. “The tighter that collaboration can be, the more successful you are.”

Summit provides upload feeds from its electronic record system so Humana can monitor HEDIS measures. Humana provides claims data so Summit can stratify its patients by risk and target interventions appropriately. “We meet with their quality improvement people and work together to improve some of our quality metrics,” Penniman says. “When you partner together on strategic initiatives, you share a lot of ideas.”

How it is Working in Washington State

Vancouver Clinic, a 300-provider multispecialty clinic with five sites in southern Washington, is similarly enthusiastic about value-based care.  The physician-owned practice—about 60 percent of providers are specialists while 40 percent provide primary care—has upside/downside risk in about 10 percent of its payer contracts. That includes its Humana MA contract, which covers about 2,000 patients.

The bonuses and shared savings from its value-based contracts contribute to the financial well-being of the overall practice, rather than flowing directly to PCPs. Those revenue sources allow Vancouver Clinic to pay its providers above median salaries, Chrisman says. “Without contracts like this, we are not profitable [as an organization] unless we start paying all of our physicians less,” he says.

The clinic originally partnered with a hospital to jointly contract with Humana, but that did not prove successful. It then entered into its own contract with the health plan, gradually assuming more financial risk. “We had to show [Humana] that we were going to be successful before taking on significant risk, and that allowed us to get our feet wet without an overwhelming amount of risk,” Chrisman says.

Over time, Vancouver Clinic has learned to control costs, positioning it to succeed in value-based arrangements. Indeed, the practice’s total cost of care is 5 percent lower than the market average, Chrisman says.

Success factors. The practice’s top strategy is increasing primary care access by actively managing panel size. “If you’re being taken care of by a Vancouver Clinic primary care doctor, you’ll be able to see one of us today usually or within three days maximum,” Chrisman says.

Another key is avoiding inpatient admissions, where appropriate, by treating and monitoring patients in skilled nursing facilities. The practice employs hospitalists to care for its patients in the hospital as well as nursing facilities.

Chrisman uses the example of a patient with cellulitis that has failed oral antibiotics. “As long as their vital signs are stable, they do not need to be in a hospital bed,” he says. “We can round on them daily in the skilled nursing facility. We can make sure they get the IV antibiotics that they require and they are doing well but they are in a $400-a day-bed vs. the $4,000-a-day bed.”

Payer as partner. For the past three years, Humana and Vancouver Clinic have worked through a joint operating committee with the goal of appropriately risk-coding all patients and, based on those codes, making sure their complex needs are being addressed. The Medicare program adjusts its payment to MA plans like Humana based on the medical complexity of patients covered by the plan. Thus, a patient with chronic comorbidities must have those conditions coded and addressed each year for Humana to receive the appropriate premium payment from CMS.

“Their experts in coding and quality are here on-site on about a bi-weekly basis working with our clinical support staff to pull in patients who have not yet been coded this year, which means that their chronic medical conditions have not yet been addressed this calendar year,” Chrisman says. “We can bring those patients in and make sure they are adequately cared for.”

The appropriate codes are generating more than $1 million in additional revenue a year for Vancouver Clinic, while supporting proactive care to patients with complex conditions.

Lola Butcher is a freelance writer and editor based in Missouri.

Interviewed for this article:

Jeremy Chrisman, DO, is medical director of care transformation, Vancouver Clinic, Vancouver, Wash

Mike Funk is vice president, Office of the Chief Medical Officer, Humana, Louisville, and a member of HFMA’s Kentucky Chapter.

Eric Penniman, DO, is executive medical director, Summit Medical Group, Knoxville, Tenn.


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