Value Based Payment

Assembling the essentials for successful population health management

May 29, 2019 6:30 pm

Value-based payment can be a winning proposition, so long as an organization has all the right pieces in place.

In the new era of value-based payment contracts, health systems will require a business and clinical model designed to help them assume increased risk. If value-based payment contracts with a health system’s sponsored accountable care organization (ACO) or clinically integrated network (CIN) are to be more than simply the next incarnation of pay-for-performance, they must lay the groundwork for a comprehensive population health management strategy, with all the pieces in place to effectively manage the cost of care.

Balance the use of traditional and new metrics

The challenge for most health systems pursuing the value-based payment model is that they must do so while continuing to operate in a fee-for-service (FFS) world. That means they must continue using traditional FFS metrics focused mainly on volume while also developing new metrics and skill sets, such as:

  • Analyzing measures such as episodes of care for chronic conditions, utilization rates and practice pattern variations, deviations from care pathways and errors in outcomes reporting
  • Becoming proficient in benefit design, product pricing and curation of care networks
  • Understanding how the benefit design and payment rate changes described in the contracts will affect utilization rates and financial performance

Where to start?

One of a health system’s first tasks will be to develop an ACO or a CIN to assume risk of managing the health of a population.

See related sidebar: A timeline guide to developing an ACO/CIN

Health systems then should turn their attention to developing a population health management strategy and organization. (See exhibit below.)

Key elements of an effective strategy

To ensure a value-based payment model can be a winning proposition, health systems should focus on the following five key elements, which are building blocks of an effective population health management strategy.

Enhanced data analytics and revenue capture platforms. Investment in systemwide population health management requires the creation of an infrastructure that allows for data exchange across multiple systems and EHRs. It also requires a closer working partnership among finance/revenue capture, administration and clinical leaders. In addition to accurately forecasting FFS collections, finance staffers must expand their focus to track value-based program measures on cost and quality, using actionable analytics dealing with clinical as well as financial indicators. Revenue capture should now be a strategic concern that is projected and tracked to prospectively manage performance.

With the shift to population health management, value-based payment modes from Medicare, Medicaid and commercial payers are putting a premium on the analysis of utilization data to identify key areas of practice variations. ACOs and CINs will need access to utilization data to set achievable and clinically appropriate clinical targets. As organizations pivot toward risk, ACO, CINs and insurers will increasingly need not only to understand utilization history, but also to incorporate social determinants of health (e.g., income, job opportunities, education and social support) into their databases to identify the resources and supportive activities needed to improve population health.

Attributes of a high-performing payer-contracting organization

A high-performing clinical network. To develop a high-performing clinical network, physician recruiting should be focused on meeting emerging supply needs and building around culturally compatible physicians. The business model should include defensible methodologies for selecting participants who share the health system’s strategic objectives and for culling low performers. Infrastructure requirements include analytic capabilities for identifying practice variations based on detailed, condition-specific episode data. A key focus should be to understand physician variations in efficiency and cost effectiveness. The organizations should be able to measure overall effectiveness and efficiency at the provider or provider group level, while controlling for case mix and non-specific diagnosis codes.

The network management support also should be scalable. UMass Memorial Health Care, the largest system in central Massachusetts, has developed a universal population health approach it describes as a “population health strategy that scales.” The UMass Office of Clinical Integration (OCI) manages multiple ACO risk programs including the Medicare Shared Savings Program, various bundled payment programs, commercial ACO contracts and a pilot Medicaid ACO. The program now covers 150,000 attributed lives across the service area, connecting its three system hospitals, three outside community hospitals and 1,700 clinicians under the OCI umbrella.

The Health Care Transformation Task Force (HCTTF), a Washington, D.C.,-based industry consortium of payers, providers and purchasers committed to accelerating the spread of value-based care, reports that ACOs successful in Medicare and commercial value-based payment contracting use a combination of centralized and embedded care management services to make the most efficient use of clinical resources.a Allina Health in Minneapolis, for example, has launched a team-based approach to care management, with teams comprising primary care physicians, advanced practice clinicians, special care workers, care guides and even pharmacists. Care managers (typically registered nurses, social workers and advanced practice clinicians) have become indispensable in caring for patients with chronic disease and complex conditions.

High-performing ACOs generally use claims and clinical data to test and refine their risk models. A major challenge they face is to make patient risk scores actionable, which requires being able to communicate the data effectively to discharge specialists and clinicians. 

See related sidebar: Characteristics of high-performing ACOs

A focus on patients presenting high or emerging risk. An effective disease management program has two pillars. The first is a strong focus on implementing evidence-based treatment protocols for patients with chronic conditions and identifying and closing gaps in the care continuum. The care model requires ongoing refinement in three areas, in particular:

  • Integrating behavioral health with primary care
  • Broadening patient focus to include moderate-risk as well as high-risk patients
  • Expanded EHR use across the continuum of care

The HCTTF points to various approaches. Some ACOs have developed algorithms on the likely treatment plan for specific diseases. Others have delegated chronic disease management to condition-specific teams. Still others have used physician-led groups to establish consensus treatment protocols for priority conditions.

The second pillar of chronic disease management, of course, is patient self-management, which can take various forms, including online websites and personal coaching.

Leadership, physician and patient buy-in. Senior executives should lead the charge for the cultural and behavioral change required to move from FFS to a population health mindset. Ongoing education and communication are essential to build support. Tools for this purpose include:

  • Senior leadership site visits
  • Social media and patient engagement tools
  • Social services and community outreach
  • Board engagement and education
  • Blogs from CEOs
  • Webinars to educate the clinical networks and community

Bringing physicians on board for the transition to value may require investment in practice-improvement facilitators. The integration of analytic and performance improvement staff working with clinicians may be necessary to design improved workflows or pilot new delivery models. Partners Healthcare in Massachusetts, for example, has adopted the team approach to providing care, making a commitment to have all its primary care physicians certified as a National Committee for Quality Assurance Level 3 Patient Centered Medical Home and offering financial incentives to achieve the certification and maintain it.

Continuous performance improvement aimed at generating value. For the long term, a value-focused organization should have a multi-year payer strategy built from appropriate data, aligned with various organizational interests and broadly understood by the entire organization. The population health strategy should be aligned with the sponsoring system’s overall goals. And it should include an operational infrastructure that can provide the backbone for performance improvement. Financial metrics include contract performance, including opportunities to enhance revenue by reducing outmigration, improving care transitions, earning Merit-Based Incentive Payment System quality bonuses and capturing care management fees.

  • Generally, there are six ways an ACO or a CIN can deliver value:
  • Preventing avoidable ambulatory and inpatient complications resulting in unnecessary hospital emergency department (ED) visits or readmissions or a lack of effective post-acute care planning
  • Reducing duplicative and unnecessary diagnostic testing such as multiple magnetic resonance imaging and unnecessary lab diagnostics 
  • Promoting use of appropriate lower-cost treatment alternatives, such as drugs, surgical alternatives, psychotherapy or medical devices
  • Improving continuum-of-care processes to ensure patients are directed to the most cost-effective and appropriate sites for care (e.g., freestanding ambulatory facilities versus hospital surgery sites, urgent care centers versus EDs and skilled nursing facilities [SNF] versus post-acute home care
  • Managing referrals to ensure patients stay in the network and receive care from the most appropriate sources
  • Promoting use of the highest-value SNFs and home health agencies

With its ongoing focus on improving value, the organization also can benefit from tapping into its population health management team’s skill sets regarding benefit design, product pricing and network adequacy to effectively design insurance products. And beyond the usual contractual arrangements with directly employed clinicians, the population health strategy should include a plan for offering physicians incentives for continuous performance improvement.

It’s also important to recognize different types of population health interventions require different amounts of time to show results. For example:

Efforts to reduce readmissions by improving care management transitions or to reduce ED visits by using case management for high-risk patients with targeted conditions may require as little as six to 12 months.

Efforts to improve use of specialists or reduce testing can show results in 12 to 18 months.

Interventions for low-risk chronic disease patients, preventive care screening and promotion of lifestyle changes can take several years to show results.

Final considerations

Health systems with experience in value-based payment are more optimistic about the future of the new business models in which they have heavily invested. A major academic health system in the Northeast, for example, having gone “all in” on population health, has tracked performance since 2014 and is just beginning to see its savings surpass its infrastructure investment. Experience is showing that a value-based payer/provider partnership properly structured and having long enough investment and time horizons can reduce total cost of care while enhancing patient care 
and experience. 

See related sidebar: Summary checklist for assessing readiness for value-based care


a. HCTTF, Levers of Successful ACOs: Insights from The Health Care Transformation Task Force, Nov. 8, 2017.


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