Value Based Payment

Provider Nimbleness Required for Diverse Value-Based Healthcare Models

February 26, 2019 9:29 am

Many providers are in the throes of implementing strategies for value-based health care. But now they must adapt to an environment characterized by diverse value-based care models, new players, and more data to discern provider value.

To weather the next decade, the key attribute providers will need is nimbleness—a challenge in an industry not known for being nimble. Nevertheless, adaptation to multiple value-based care models will require new and different maneuvers. Providers also must improve responsiveness to consumers desiring lower costs, for price transparency and to garner their participation in decisions.

How Value-Based Care Is Shifting

Medicare accountable care organization (ACO) options clarify just how complex value-based care has become. Although all such models are implemented through contracts between providers and purchasers, the variation in arrangements is extreme. Payment is advancing toward financial risk with an expenditure target, or a predetermined fee. But that’s not the only shift.

Commercial health plans segment benefit plans and provider networks based on efficiency, steering patients toward low cost. In some cases they are splitting networks to contract with individual providers. Some regional health plans are moving forward with private ACO risk arrangements aggressively, excluding providers who won’t agree to cost control.

Employer-to-provider direct contracting is increasing. Self-funded employers are the leading edge, but alliances of smaller employers are entering the fray. Accessing comparative pricing data through vendors, they exclude providers with higher costs and steer patients to less expensive imaging and to outpatient diagnostics and surgery.

Providers Are Confused and Challenged by Value-Based Care

Most providers are not sure what value-based models of care and payment will dominate the future. A health system may have its own ACO with an inclusive all-provider network for Medicare but have direct employer contracts for only some physicians and facilities—with differences under each employer arrangement. Managing multiple value-based arrangements requires technology and resources to assess cost benefit.

The entry of big business into health care has encroached on traditional providers and will ultimately affect profitability and contracting options. The recent collaboration between Aetna and Apple sets goals for patients but bypasses physicians. Retail pharmacy clinics provide primary and preventive care but leave traditional providers with older, higher-risk patients who require specialty care.

The recent Medicare demand for price transparency could be a game changer for decision-making by purchasers, flawed as it is.

Consolidation Will Prove Double-Edged Under Value-Based Models

Providers have consolidated to secure a larger market share of patients, to improve negotiating power with health plans, and to fuel ACOs to achieve growth and savings. Yet larger health systems often cost more. Downside risk will require streamlining. Health systems will have internal fractures in their networks as they cut costs and exclude providers.

Multispecialty physician organizations will compete by specialty and bundled payment packages. Groups may reorganize their providers to be attractive to contractors. Primary care and specialty physicians may have different contracting avenues, possibly not together. Facilities must cut ancillary and outpatient expenses, or face exclusions due to lower community-based prices.

Small organizations and communities, often with lower costs, also have fewer resources for managing under a variety of risk arrangements with unique needs and costs.

All value-based care models will strive to reduce payment through downside risk. That effort requires each organization to diagnose specific problems and be nimble enough to resolve them.

Value-Based Care Models Are Likely to Prevail, or Morph

Although poor savings from Medicare ACOs has led to skepticism about their longevity, ACOs are certain to continue to exist because they are advanced providers that have created infrastructure for cost control and quality.

Health system ACOs often started with clinical integration networks (CINs) developed for contracting with commercial health plans. These CINs pursued data aggregation, quality measurement, and adopted technology. Even health systems ACOs that failed to meet Medicare Shared Savings Program targets remain viable contracting entities for Medicare and commercial health plans and are in a position to reduce costs in the long term. Physician-driven ACOs also will last; many are successful independent providers in addition to being lower-cost ACOs.

It’s not clear whether Medicare will retain a policy promoting ACOs, however. Medicare’s ultimate policy will rest on the expansion of ACO entities and savings results over the next few years. But even if the Centers for Medicare & Medicaid Services (CMS) abandons a pro-ACO strategy, ACOs can be included in Medicare direct contracting with providers. CMS floated the idea of direct provider contracting in 2018.

Another Medicare value-based care model that will survive and expand is Medicare Advantage (MA). CMS has created advantages for MA plans because of their success in capping Medicare expenditures. MA plans may well become the premier model for care delivery and reimbursement.

Bundled payments built on episodes of care are growing, with many specialties now included in Medicare’s mandatory bundles or episodic field tests. Only a fraction of services are yet included, but eventually these will expand into risk-based payment for high-volume specialty care. Driving specialty costs down has been a goal of health plans.

Value-based care in commercial health plans—including ACO models and narrow network contracts—are expanding. So is direct employer-to-provider contracting. The availability of data and the eagerness of vendors and providers to bypass insurance companies will stimulate more contracts.

The industry should expect to see rising consumer activity in value-based care, but how this growth will materialize is uncertain. Employer alliances and consumer-directed health plans both are possible avenues for consumer activity.

3 Essential Steps to Facilitate Nimbleness

No matter where providers are in implementing value-based care models, there are three steps they can take to improve cost accountability within the organization and flexibility for health plan and employer contracting.

Re-evaluate and reconsider the structure of provider networks. Historical precedent, ease of administration, and group quality reporting favored physician groups under one tax identification number. But such grouping by tax ID creates inflexibility in contracting and usually maximizes costs. Providers should examine their provider networks and optimize their value and appeal to purchasers. This effort should include reconsidering facility services that are cost centers.

Create a physician learning environment on value-based care. Under fixed payment, productivity is less important than patient-physician decision-making, reduction of patient risks, and cost awareness. Physicians must be educated and coached on influencing behavior change in patients so patients can choose wisely.

Improve information and participation of consumers and patients. Patient experiences turn into costs but are affected by the information patients receive and whether it facilitates value-based decisions. Improving medical literacy, embarking on shared decision-making projects, and providing cost transparency should be part of a well-envisioned consumer strategy, with patient input.

There has been a pendulum shift to purchasers in value-based health care, and a proliferation of such models. Nevertheless, nimble providers can create synergistic strategies to enhance network appeal, promote physician partnerships, and reduce costs.

Theresa Hush is the CEO and co-founder of Roji Health Intelligence, Chicago.


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