Payment Models

Optimizing Financial Performance Under Value-Based Care

October 2, 2017 10:13 am

With the potential to significantly affect payment, new value-based care models are challenging for medical groups and physician practices. The experiences of participants in the Oncology Care Model can serve as a roadmap for how to adapt operations.

The industry is awash in studies attesting to the lack of readiness for value-based care among physician practices. Consider a survey conducted by the American Medical Association and KPMG earlier this year, which found that fewer than one in four physicians feel prepared to meet Quality Payment Program requirements in 2017. 

In fact, providers of all kinds are struggling to optimize financial performance under new payment models. With the introduction of the Medicare Access and CHIP Reauthorization Act (MACRA), providers eventually face a potential swing in payment of 28 percent or more depending on which value-based care programs (the Merit-based Incentive Payment System [MIPS], Advanced Alternative Payment Models [APMs], or both) that they choose to participate in—as well as their relative performance against peers on clinical and financial measures. 

This scenario presents a great financial opportunity but also introduces uncertainty and risk. To perform optimally under value-based care models, providers will be required to make cultural and operational changes, as well as substantial investments in new clinical capabilities, skills, and staff. 

This transformation is well underway for some providers, such as those participating in the Oncology Care Model (OCM), a Centers for Medicare & Medicaid Services (CMS) program (and an Advanced APM under MACRA) that was developed to provide higher-quality, more coordinated oncology care at a lower cost to Medicare. The experience of those providers can offer useful lessons to other physicians for navigating these changes. 

Understanding the Stakes

Beginning in 2019, providers participating in MIPS face up to a 4 percent penalty based on their performance in 2017—and these maximum adjustments will increase by one percentage point annually through 2022. To put this in perspective:

  • The average annual collections for oncology practices per provider is $4.7 million.
  • CMS can account for 35 percent (or more) of collections, which equates to $1.65 million per provider.
  • Factor in the 4 percent negative adjustment, and that represents a potential top-line loss of $65,800 per provider.
  • The potential 8 percent swing—4 percent negative or positive—represents a total income variation for the average oncology practice of $131,600 per provider in 2019.

Performance on individual MIPS measures compared to peers adds complexity to the value-based care equation. Because providers are graded on a curve, with the top 10 percent earning maximum payment, they must carefully weigh their choices in terms of which measures to report on. The advantage of making the right choices is clear: optimal payment. However, the consequences of making the wrong choices are less clear and depend on providers’ appetite for risk and on current practice-performance indicators. 

Providers participating in the OCM have additional financial considerations. They receive a $160 per member per month payment from CMS for qualifying six-month episodes of cancer care. Far from “found money,” this sum is intended to be invested in cost and quality improvements. Practices that successfully meet desired cost targets will be further rewarded with a share of savings. Those that fail risk being dropped from the program. 

Ensuring optimal decision making and maximum payment under value-based care models such as the OCM requires both strategy and finesse by providers. Although it may sound overwhelming to determine which measures to submit, how payment will be impacted, and what changes are needed to succeed, tools and best practices are emerging to ease the process.

A Prescription for Change

Substantial changes are needed to transform and to succeed financially with value-based payment directives. Both MIPS and APMs (such as the OCM) challenge practices to reorient around key metrics and standards of care to meet required quality and cost targets. In the case of the OCM, CMS requires these providers to assume holistic responsibility for the health of their attributed patient populations, across settings of care and between visits. Those that do not generate savings by the third year will be dropped from the program and may have their payment rates reduced. 

With such high stakes, OCM practices are emulating payers—the traditional risk-bearers—and embracing the tenets of population health management. This approach entails developing new capabilities in areas such as care coordination and case management, episode cost and savings tracking, and value-based financial incentives management. 

Practices also need to:

  • Adhere to evidence-based care pathways
  • Make drug regimen decisions based on holistic cost and quality impacts, rather than drug margins
  • Enhance patient access
  • Manage emergency department (ED) use and referrals
  • Expand the use of palliative and hospice care for patients with advanced illness

For most providers, this is all unfamiliar territory. 

Rethinking Governance, Technology, and Culture

OCM program participation is at the practice (i.e., TIN) level, not the individual level. Individual practitioners thus are required to act as an integrated, coordinated group in managing an attributed patient population. Strong medical and financial leadership at the practice level is essential. 

Optimal payment under the OCM model, as in other value-based payment programs, requires real-time performance visibility, continuous quality improvement, and proactive management of staff priorities, for which leadership should take responsibility. Real-time analytics capabilities will be key to efficiently monitor clinical and financial KPIs, identify outliers, and prioritize improvement activities, in addition to reinforcing the importance of the initiative across the organization. 

In addition, as value-based care shifts accountability and risk, providers need new technologies and clinical capabilities to effectively manage care quality and cost. In the case of the OCM, for example, participating oncologists need a means of holistically managing patients and of tracking the practice’s clinical and financial performance while complying with complex reporting requirements. 

For small practices, most data for reporting will come from the electronic health record (EHR), wherein data must be captured in a structured field for easy analysis—assuming it is even documented in the first place and in the right location. Yet EHR data alone does not provide a complete picture of a patient’s care. Hospital admissions, ED visits, care by other physicians, and oral drugs filled at an outside pharmacy may not be in the record.  The first step is to obtain the tools and skills to integrate and analyze data from across disparate sources. 

Integrating available clinical, financial, and event data enables practices to form a holistic patient profile that identifies an individual’s risks, care gaps, and needs. Given that most cost is driven by a small percentage of high-risk patients, these individuals must be proactively identified. Then, appropriate care plans can be developed to address risk factors and align with case management, with the goal of avoiding unnecessary ED visits and hospitalizations while ensuring efficient care-path compliance and appropriate involvement of palliative and hospice care. Finally, practices must monitor and report to CMS on data for the required OCM (or other APM, or MIPS) quality measures at the practice, site, and provider levels. 

These changes require a shift in the culture of an organization. Among OCM participants, this often begins with top-down communications, perhaps even “road shows” or “boot camps,” as clinical and administrative leaders educate teams about the importance of value-based care and its impact on the practice. These messages are reinforced as practices redouble their commitments to implementing new processes and guidelines—financial and clinical—to elicit behaviors that improve organizational performance. 

Specifically, OCM practices are designing individual provider incentives that align with required cost and quality targets. Some are established at the organizational level, while others are provider-specific and informed by the output of analytics. Finally, an increasing number of practices are succeeding in value-based care with incentives that address patient engagement as captured through surveys and other tools for gauging satisfaction.

Practices are bolstering culture change by installing new team members to fill gaps in value-based care skills, which for physician practices most commonly center on care coordination and management. The most successful strategies employ integrated team-based care, with clinical, social work, behavioral health, and pharmacy staff as extended members of the team. Experienced care navigators and managers are needed to advance personalized care plans based on diagnoses and assessments. The impact of care management activities is directly related to the skill, training, and adequacy of personnel. 

Looking Ahead

The ability to thrive in the era of value-based care depends on a practice’s ability to understand the current state of its business, identify opportunities for improvement, and assess the efficacy of newly implemented programs in real-time. Providers will undoubtedly need support in many forms—from aligned incentives to education to integrated technology—to foster and accelerate the sort of transformation that is required for long-term success.

The experiences of OCM practices offer valuable lessons to providers in value-based care programs about the importance of making the right investments. Providers that follow in their footsteps on the journey toward improved costs and care quality can take comfort in knowing that while the path can seem long and winding, success is attainable.

Charles Saunders, MD, is CEO, Integra Connect.


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