Value Based Payment

The Cost of Delaying the Move To Value Based Care

April 6, 2017 8:56 am

In 2017, the pace of value-based care will accelerate. A calculation tool can help providers make the case for action.

While the Trump administration likely will bring a host of changes to the healthcare industry, many analysts don’t expect it to significantly slow the shift from fee-for-service to value-based care models.

For example, Tom Price, the new U.S. Department of Health and Human Services Secretary, is on record as desiring to simplify, not end, value-based care models. He favors voluntary bundled payment models over mandatory ones. He also has said he will consider new models put forth by language already passed into law and within pending bills like the Chronic Care Act, which seeks to expand telehealth benefits to current Medicare accountable care organizations.

Overall, the rising cost of healthcare services makes it unlikely that the Centers for Medicare & Medicaid Services (CMS) or private payers will abandon the trend toward shifting more risk to providers under quality reporting programs. CMS exceeded its 2016 goal to tie 30 percent of Medicare payments to alternative payment models (APMs), and it is on track to meet its 2018 goal of having 50 percent of its payments in APMs.

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Although the implementation schedule of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) was modified to a slower pace based on provider feedback, its launch this year accelerates the need for providers to understand what they stand to gain and lose by participating—or not—in APMs. The first performance period of the Quality Payment Program (QPP) under MACRA launched in January 2017. Most providers will participate in the Merit-Based Incentive Payment System (MIPS) track of QPP, where they can earn a performance-based payment adjustment. Nonparticipating providers will be penalized with a 4 percent negative adjustment to their compensation.

Private Payers Playing a Bigger Role

In addition to federal government initiatives, commercial payers are creating new incentives for providers to participate in APMs. Humana is one private payer that has most embraced this trend, claiming that more than 60 percent of its membership is served by nearly 50,000 providers in a value-based care model.

A growing number of public-private partnerships also are underway. For example, the Comprehensive Primary Care Plus (CPC+) program, which will include more than 13,000 primary care clinicians in 14 regions and will serve more than 1.76 million Medicare beneficiaries, with 54 aligned private payers, will offer participating providers a monthly care management fee plus a performance-based incentive payment.

Although most providers are aware that these programs will affect their compensation, it can be challenging to project the impact on the bottom line. To help organizations predict this impact, a free tool called the Cost of Inaction (COI) Calculator demonstrates the cost of delaying the shift to value-based care models.

Calculating the Cost of Inaction

The COI Calculator was built to help healthcare financial executives understand and make the case for what their organizations stand to gain—or lose—by delaying or adopting a value-based strategy.

Understanding the impact of value-based care provides a strategic framework for organizations to assess what programs may be beneficial and clinically relevant to participate or invest in. Although risk-based payment models aren’t necessarily right for every provider, knowing that participation in a given program could yield significant upside benefits for a practice’s revenues might help leaders decide that it’s worthwhile to invest the necessary time and resources. Some providers may experience a shift in mindset from viewing new payment models as negative impacts on bottom lines to thinking of them as funding sources for continued transformation.

Using the Calculator

The COI Calculator combines national benchmark data with data from the specific healthcare organization, for both commercial payer and government-based incentive programs. After entering in contact information, users are directed to the calculator, where they can select between hospital or provider group tools.

Next, users are instructed to enter their organization’s total annual revenues and payer mixes.

The calculator estimates the cost of penalties such as those in MIPS and Chronic Care Management (CCM), with the assumption that organizations’ participation or compliance in these programs increases over time.

It generates a report that first demonstrates the federal program incentives and disincentive payments for each year through 2019. A similar analysis is provided for private payer incentives and disincentives. Because a significant number of commercial payers offer a wide range of incentive programs, the calculator applies conservative estimates of the upside opportunity for private payer incentives.

The calculator also segregates primary care incentives from those for specialists, with the assumption that half the providers are primary care focused and half are specialists. It also assumes that primary care physicians have at least a 5 percent upside potential for participating as of 2017 and that the incentive payments grow by 1 percent per year. The calculator uses the assumption that specialists would receive a 3 percent bonus in 2017, with an annual growth of 1 percent.

A Physician Group Example

A hypothetical example of a large physician group with 350 providers, a payer mix of 30 percent Medicare and 30 percent commercial carriers, and annual revenues of $200 million that used the calculator found that if this group were to decline participation in incentive programs, it could stand to lose $20 million over a five-year period. Seeing that impact in black and white could spur the group to reconsider the value of gearing up for value-based programs as no amount of handwringing in the absence of data could do.

The Rewards of Action

Accelerated adoption of value-based incentive programs makes it more important than ever for providers to understand the cost of nonparticipation in APMs, with a rough estimate of the dollars they stand to lose. Projecting costs and benefits under different scenarios is essential for organizations that wish to plan for the future, and the calculations can be used to champion change organizationwide.

Disclaimer: The use of the calculator does not guarantee results.


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