Payment Models

Health Plans, Providers Collaborate on Payment Transformation in Hawaii

June 20, 2018 11:08 am

More than 500 primary care providers have moved to per-member, per-month payments for patients covered by Hawaii’s largest health plan. The initiative may provide a roadmap for smaller physician practices to participate and flourish in the transition to value.

Hawaii Medical Service Association (HMSA), the dominant commercial health plan in the state, is moving away from fee-for-service payments to a new system that incentivizes primary care providers (PCPs) to improve the quality of care they deliver while controlling costs.

Payment Transformation, as it is called, was offered as an option to all PCPs beginning in 2017, following a pilot. About 550 providers are participating in the program this year.

The transition to a per-member, per-month (PMPM) payment system that holds providers accountable for the quality and total cost of care for an ever-changing panel of patients is challenging, and many details are still being refined, says Kim Takata (pictured at right), HMSA’s program manager. But early results show that the model can support preventive care, disease management, patient engagement, and cost control—while rewarding physicians who provide high-value care.

Forward-thinking providers are seizing the opportunity to be part of the massive change. Castle Health Group includes 43 primary care providers that have been participating in Payment Transformation since the concept was piloted in 2016.

Most of Castle Health Group’s primary care practices had already worked to become patient-centered medical homes under an earlier HMSA initiative, and they consistently ranked in the top quartile on quality performance, says Brijit Reis, MD, the group’s medical director. For that reason, they felt well-positioned to move to value-based payment.

“Our board has a philosophy that we would rather lead change than follow,” says Kate Saavedra, Castle Health Group’s executive director. “We knew that the transition would have its drawbacks, but we would much rather help frame the way it was going to be by being in that pilot. And sure enough, that’s exactly what happened.”

How It Works

HMSA, an affiliate of the Blue Cross and Blue Shield Association, is the dominant payer in Hawaii, accounting for at least half the revenues for most physicians. 

Most primary care physicians in Hawaii work in small, independent practices that could not afford the infrastructure needed to succeed in value-based payment. For that reason, HMSA contracts with Castle Health Group and nine other designated “physician organizations” (POs) that work on behalf of a group of physician practices; each practice decides which PO it will affiliate with.

“Most of these small providers don’t have the time or the resources to really identify where the opportunities for improvement are, so we expect the POs to do a lot of that analytic work,” Takata says.  

Each practice operates autonomously, but the POs provide support and implement strategies—for example, offering disease management seminars, or urgent care arrangements to curtail avoidable emergency department (ED) visits—that can improve the value of care. They track and report quality and cost measures and provide the data that physicians need to proactively manage their patients’ care needs. Some POs send consultants to practice sites to help streamline workflows, make sure coding is being done appropriately, and coach staff on best practices.  

Most importantly, perhaps, the PO serves as the intermediary between the health plan and the physicians, who may be scrambling to adopt to new practice protocols and new payment methodologies while caring for their patients. If a physician has a question or complaint about the Payment Transformation model, the PO fields it and, if appropriate, advocates on the physician’s behalf.

“Physicians need to feel very comfortable that the people working with them are truly supportive of the physicians and their patient care,” Saavedra says. “We contract with HMSA, but we’re clearly a physician-centric organization and everybody knows that.”

Physicians participating in Payment Transformation receive a PMPM payment for each attributed HMSA member. They can receive bonuses for performance on quality measures; those with high quality scores are also eligible for a shared-saving bonus if the total cost of care—calculated at the PO level—is below a certain threshold.

The PO is also scored on certain patient-engagement and quality measures, such as ED utilization rate, with bonus payments then being disbursed to the individual practices.

The payment strategy offers three key benefits to physicians, Saavedra says:

  • Reliable monthly income from their largest payer
  • The opportunity to be reimbursed for interacting with HMSA-covered patients via phone call, email, or text
  • The ability to structure their schedule so that the sickest, most complex patients can have longer appointments while the healthiest patients are treated via text or email. “It allows the physician to decide how they can best serve their patients without worrying that they have to see X number of patients per day,” Saavedra says.

Success Factors in PMPM Payment

Because practices operate independently of the PO, they can determine how they want to work on the Payment Transformation goals of improved patient engagement, prevention, and disease management; increased access to primary care; and better care coordination. Reis identified several success factors for Castle Health Group PCPs:

  • Extended hours and an after-hours access strategy. This approach gives patients an alternative to an ED visit.
  • New approaches to patient care. Some physicians set aside time in their schedule to return phone calls to patients who do not require a face-to-face visit. Reis, who owns a pediatric practice, increased the time allotted for patient visits so that a patient’s needs can be addressed in a single visit rather than multiple trips to the office.
  • Collaborations. “We collaborated with a couple different urgent cares in the neighborhood so that they understand what our initiatives are and we make sure that they send information back to our offices,” Reis says.
  • Increased use of nurse practitioners and physician assistants, freeing physicians to concentrate on the sickest and most complex patients.
  • Strict management of the patient panel to make sure care gaps are identified and addressed and that patient care is well-coordinated.

Outcomes to Date

Four POs, including Castle Health Group, participated in the Payment Transformation pilot in 2016. An evaluation found that 96 percent of HMSA members reported it was easy to get the care, tests, or treatment they needed, and 86 percent were able to meet with their PCP within 24 hours when needed, says Emily Oshima Lee (pictured at right), director of payment transformation, Hawaii Medical Service Association.

Meanwhile, quality scores of participating practices improved. In 2016, the median performance on quality measures was 87 percent, up from 82 percent in 2015. More significantly, perhaps, no pilot practice scored below 75 percent on quality measures in 2016; two years earlier, 75 percent was the median performance for those practices.

At Castle Health Group, only about 70 percent of patients with diabetes had satisfactory control of hemoglobin A1C levels in 2014, Saavedra says; three years later, nearly 90 percent had achieved control. “The advantage of that is not just for an individual patient but their family as well,” she says. “It means fewer amputations, less end-stage renal disease, less healthcare costs.”

Castle Health Group’s total cost of care for 2016 was 1.56 percent higher than in 2015—significantly below the targeted limit of 4 percent. Although Payment Transformation did not include incentives for cost control during that pilot year, the group’s physicians are being financially rewarded for their performance. 

“They are doing OK,” Saavedra says. “If their quality is good, they get a bonus—and we are here to make sure that their quality is not just good but super-good.” 

Challenges of the Transition

Moving to a new payment system is difficult in ways both big and small. It’s one thing to empower physicians to replace face-to-face visits with phone calls and emails to patients; it’s another to configure workflows to accommodate that change, Reis says.

Payment Transformation does not eliminate the administrative tasks that most practices find burdensome. For example, even though they are paid on a PMPM basis, physicians must submit claims to HMSA as before. “Proper coding becomes critically important, not for billing but for risk-adjusting and closing care gaps,” Saavedra says.

Beyond that, challenges include:

Patient attribution. Physicians need to know who is in their patient panel to ensure that HMSA pays them for the right number of patients and that they are managing the care of the patients for whom they are responsible. But HMSA members can see any physician they want without notifying either the insurer or the providers—and, of course, patients often change insurers. That makes it difficult for physicians to know which patients are assigned to them by the health plan.

“Our whole system of managing our population falls apart if we don’t have the proper attribution,” Reis says. “It affects the practice’s finances, it affects the quality of the patient’s care, and it affects total cost of care because we’re not managing patients if we don’t even know they’re on our panel.”

Castle Health Group is addressing that challenge by having PO staff review each physician’s patient panel every week. “We spend, at the very least, eight hours per care coordinator making sure patients are assigned to the right physicians,” Saavedra says. “It’s tedious, but it’s important.”

Risk adjustment. As of this year, HMSA is beginning to adjust its PMPM rates based on the clinical risk, age, and sex of patients in a physician’s panel, Lee says. Figuring out how to do so appropriately is no easy task.

“We’re really challenged with that right now,” Reis says. “You have to get people coding correctly, and you have to come up with a system that’s fair.”

The goal of the program is for physicians to interact efficiently—supported by phone, email, telemedicine, and the like—with their healthy patients to keep those patients healthy, freeing up their schedule to spend more time with their sickest, most complex patients. Payment Transformation will eventually extend to specialists, so getting the risk-adjustment calculation correct is essential. “What we don’t want to see happening is that our higher-risk patients get avoided because the risk factors are not properly risk-adjusted,” Reis says. “That is really going to apply to specialists, perhaps even more than the PCPs, because their outcomes may not be as good, or their utilization may be higher because they are taking care of our sicker patients.”

Pivoting to prevention. Most primary care physicians, particularly internists and family medicine specialists, are trained to diagnose and treat rather than to prevent illness. Being held responsible for wellness—not just preventive-care tasks but motivating patients to adopt healthy habits—is a tough transition for many providers, Saavedra says.

“But what we actually see happening is that physicians do have the power to make changes,” she says. “I think everybody else has failed at reining in healthcare costs. So maybe starting with the physician who has the relationship with a group of patients is the way to go.”

Working Together

Patient attribution is one of the areas in which Castle Health Group is collaborating with HMSA to fine-tune the Payment Transformation model.

“One of the reasons we are so involved with HSMA on various committees is because we don’t think the risk-adjustment calculations are accurate yet,” Saavedra says. “We spend a tremendous amount of time to make sure we understand how HMSA got their calculations and then advocating one way or the other.”

Unlike in payer-provider negotiations of old, Reis and Saavedra are not focused on getting the most money for primary care practices but rather on creating a system that will be sustainable. The majority of physicians in Castle Health Group are specialists, and they will thrive under Payment Transformation only if the risk-adjustment calculations are appropriate.

“We believe in fairness,” Saavedra says, “and we’re constantly making sure that we understand these calculations. Can we explain them to our physicians? And can we support them?”

Lola Butcher writes about healthcare business and policy topics for several HFMA publications.

Interviewed for this article:  Emily Oshima Lee is director of payment transformation, Hawaii Medical Service Association; Brijit Reis , MD, is medical director, Castle Health Group, Honolulu; Kate Saavedra is executive director, Castle Health Group, Honolulu; Kim Takata is program manager, Hawaii Medical Service Association, Honolulu.


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