The healthcare value imperative: All eyes on North Carolina’s move to value-based payment
The journey to value-based payment is well underway in North Carolina, and it may well serve as inspiration for those who see it as a test run for a national rollout of value-based care, in which fee-for-value finally supplants fee-for-service as the prevailing payment model.
As a joint effort of the state’s public and private sectors, the value-based payment initiative has the goal of ensuring that in five years an estimated 70% of the state’s healthcare payments will be made through alternative payment models.a And a driving force is the strong endorsement of the initiative by North Carolina Blue Cross and Blue Shield (Blue Cross NC), the state’s leading health plan.
Three North Carolina health systems — Cone Health in Greensboro, UNC Health Care in Durham and Atrium Health in Charlotte — have made a commitment to the value-based payment model, and they have demonstrated this commitment by signing on as members of Blue Cross NC’s Blue Premier Network.
A commitment to value
“We believe the economics say that healthcare has got to change,” said Terry Akin, CEO of Cone Health. “Fundamentally, it’s untenable for us to be in a nation fast approaching 20% of GDP being dedicated to healthcare. Economists on the right and left sides of the aisle may not agree on the how, but they certainly agree the current trajectory is not sustainable. So we believe no one will able to run away from the value imperative.”
For Akin, value imperative means the need to ensure the right care is delivered at the right time and in the right place. It involves a focus on managing chronic diseases and partnering with people in communities to address upstream issues like social determinants of health status.
“A little less than a decade ago, we looked around at the environment and saw that change was coming,” Akin said. “As one of our physician leaders at the time put it: ‘We could either shape it or react to it.’ And we’re fortunate in that our board of trustees, members of our medical staff and other team members are all aligned around the idea that we have an opportunity to be a laboratory to benefit those we serve and to serve as a model for others. So we are all in, and we’ve got measurable performance to show for it.”
Akin attributes his organization’s readiness for the move to value to its work with physicians to create a thriving accountable care organization (ACO) that succeeded in the Medicare Shared Savings Program. As one of the first participants in the Next Generation ACO program, it accepts both upside and downside risk and has become a top performer nationally in terms of savings achieved on elevated quality metrics. “Together with our physician partners and leaders, we demonstrated that it’s possible,” he said. Cone Health’s performance has enabled it to receive a significant payment back to share with its physicians and other providers.
Akin acknowledges not all organizations share Cone Health’s commitment to value. “Some organizations, like us, are all in,” he said. “But there are others that believe they need to ride out the fee-for-service world as long as they can and then try to make the switch.”
There is a statewide need for a focus on value, Akin suggested. “I think in many ways rural healthcare is a whole other category unto itself; we need to be particularly attentive in this state to the needs of folks who live in rural areas,” he said. “The old Hill-Burton, hospital-centric model needs to give way to fundamental value-based care redesign in many of these smaller communities. Here again, I think compared with other states, we are a very interesting laboratory. We have some forward-thinking health systems, physicians and other providers in this state. And we also have some forward-thinking payers in this state.”
Derek Wildman, president and CEO of UNC Physicians Network, also strongly supports North Carolina’s decision to move providers into a value-based payment environment. “I think it’s the right environment to be in and the right direction. For those trying to deliver care in the state, it would not be prudent to ignore different innovative models for delivering care in places in which our citizens need it.”
The powerful effect of value-based payment is in enabling providers to free themselves to better explore how they deliver care, Wildman said. “That means getting outside of the brick and mortar and trying to engage with consumers in more meaningful, enriching ways instead of waiting for something acute or a chronic disease to develop. So you think up and down that continuum, how do you engage with people who could be costly — even before they have an acute condition, or a precondition before it becomes chronic — in a way that is a true partnership in their health?”
Pace of change
Nonetheless, the journey to value will be incremental over time, said Ruth Krystopolski, senior vice president, population health for Atrium Health in Charlotte. “From what I have witnessed in healthcare, nothing ever changes as quickly as we think it’s going to change. So although I believe the direction is correct, I also believe the pace of change to value will be slower than what people are expecting because of the complexity of the technical systems, the new platforms and the information requirements, as well as the need for the exchange of information across a multitude of entities. Some of the data integration needed to be successful isn’t as far along in the state as people will need it to be.”
During her three years with Atrium Health, Krystopolski has seen the health system move further along the path to value than many organizations from a capability, process and platform standpoint. “Atrium Health has made a significant investment in developing the capabilities needed to be successful in a value-based environment,” she said. “Value is one of our strategic priorities.”
Krystopolski also noted that not all the state’s payers are ready for a value-based world. “Pacing and adapting as the market evolves is the sweet spot for organizations going through fundamental changes,” she said. “Value is a key priority from a strategy standpoint, but we still have a lot of work to do as an organization — and as an industry — to get there.”
Not one of the executives discounted the scope of the effort required for the transformation. Wildman cautioned against thinking the move to value is easy or can happen overnight. “I don’t think anybody would want to say they’re at the finish line, because things continue to change. We are in our sixth year of quality metrics for our primary care. In the beginning, it was tough getting people to understand that, although we were still fee for service, quality matters.”
But UNC’s investments in primary care have paid off, Wildman said. “Today, I think, from a primary care standpoint, people are ready to move to outcomes. Our physicians are data hungry, which I imagine is what you’re going to see throughout North Carolina and the nation. They want to know whether these changes are having the impact that was intended. And if not, we need the physicians at the table thinking through other ways or places that maybe we’re missing that might further impact, or truly impact, what we’re trying to achieve.”
The continued pervasiveness of fee-for- service payment remains a key factor slowing the state’s move to value. “We’re facing the same dilemma that many organizations have been struggling with for years — trying to navigate in two worlds simultaneously,” said Akin. “So we are being diligent and rigorous in the value-based world where we want to decrease utilization and reduce hospitalization, while a big part of our compensation is still based on volume and activity.”
Akin said Cone Health deals with this dilemma by cultivating leadership and creating organizational agility to make course corrections and judgment calls to ensure sustainability.
Akin describes it as a learning journey. “It’s like a mountain with no top. I don’t think we’re ever going to be done learning. We’ve come a long way, and we’ve been successful. We’ve also failed our way to success in some ways; we’ve been willing to take risks and make mistakes and learn from those.
“Getting into arrangements with our payers where incentives are aligned helps tremendously,” he said. “We’re at a point now where over 50% of our contracts have some significant risk-based component.”
The role of physicians
For all three organizations, physician leadership is paramount. Wildman underscored the importance of physician leadership: “I represent UNC Physicians Network. Think of it as the community physician arm of the healthcare system and a separate LLC. We spent the past few years, since 2012, developing programs for physician leadership. We looked at ourselves and said we need to have more physician leaders at the table, guiding the system around different initiatives, value-based payment being one.”
In addition to a physician leadership program developed with the Medical Society of North Carolina, the health system has worked on developing programs around physician well-being. “You can’t keep a relationship with physicians if you’re not going to consider their day-to-day work has changed,” Wildman said. “The work follows them home, which is a major shift from how they have worked in the past. So we’re developing real rigor and structure around well-being. And that can be from having a scribe program to having forums in which physicians can sit around and just talk.”
Clinical integration also is a critical strategic element for Cone Health, including the fact that the health system’s ACO, Triad HealthCare Network, is physician led. “We were fortunate at the inception of our ACO to have a number of visionary physicians around the table,” Akin said. “We told them that we wanted to support their leadership. It was a bit of a hard sell for some; they were thinking, ‘We’ll believe that when we see it.’ But I think we’ve proven over the past seven or eight years that we were serious in saying we wanted this to be provider-led.”
Like UNC, Cone Health also has partnered to promote physician leadership, by investing in an arrangement with The Center for Creative Leadership, an internationally renowned leadership training organization headquartered in Greensboro. “We created what we call our ‘Physician Leadership Academy,’” Akin said. “And we are now on our seventh cohort of about 20 physicians. These are both independent, private practicing physicians and some who are employed in our own medical group. We train them in leadership science, and there’s a strong experiential component. Partnering with physicians and bolstering physician leadership are a huge part of our DNA, and I think it has contributed a lot to the success we’ve enjoyed with value-based care.”
Krystopolski underscored the importance of providing data and data analysis to support physicians: “We have historically thought that if we give information to physicians, they’re going to understand what to do with it. But it’s not enough for us to get it to them; we also have to assist in the interpretation of the data and then help them identify the greatest opportunities, such as where they should focus their patient care efforts. It’s going to be a different world.”
Role of the healthcare CFO
All three executives agree that healthcare finance leaders nationwide have an important role to play in the value transformation.
Akin said, “Being an effective CFO today takes a combination of abilities that’s probably a departure from the past. It requires understanding the traditional nuts-and-bolts financial aspects of operating an effective health system while also being a visionary and understanding and appreciating where the industry is headed and how things are changing. CFOs need to be prepared to accept uncertainty and a lack of predictability. It can be unnerving for a traditional CFO (and others of us for that matter) to live in a value-based world where you are working to reduce utilization, when you have been accustomed to a world that’s all about compensation for that utilization.”
Wildman also suggested it’s a challenging time for a CFO: “CFOs should be students of the environment they are in and be actively engaged in understanding value-based payment arrangements,” he said. “You must not only understand the fee-for-service world but also make sure that, if this is a sliding bar, you are not sliding over and trying to align resources and make investments into value-based care before there’s dollars. Meanwhile, you must ensure the organization is well positioned to make that switch whenever you do get those contracts.”
Krystopolski emphasized the need for CFOs to be able to see the big picture and identify opportunities to invest more or redirect resources. “Building automated solutions for some of the processes that we’ve historically done manually will be important in supporting the need to redeploy resources,” she said. She emphasized the need to obtain immediate access to financial information to support rapid decision-making and the ability to perform effective modeling.
“As with any change of this magnitude, many operational, financial and patient challenges must be addressed to ensure readiness for value,” Krystopolski said. “These range from undertaking comprehensive communication and education campaigns to retooling technical and operational processes at the point of care to reflect the new environment. I think these challenges are magnified in some of our rural communities due to constraints in resources and supporting capabilities.”
Lessons for other states
All three executives believe other states can learn from North Carolina’s move to value. But they also are open to learning from what’s happening across the nation. “I have never in my 30-year career seen a more challenging time in healthcare, or a time with greater opportunity,” Akin said. “This conversation is inspiring and exciting. Sharing the successes, challenges, opportunities and failures as these models are implemented will provide an opportunity for consistent improvement and alignment in a U.S. system of healthcare that is ripe for transformation.”
For CFOs in other states who are watching developments in North Carolina and thinking about preparing their organizations for a shift to value, Wildman suggested embracing a willingness to pilot in different areas. “The learning curve can be steep, so you want to start by dipping your toes in different areas of risk that aren’t too large, so if you fail, the cost of failure is offset by the value of learning.”
He also cautioned against being idle. “Don’t wait by the phone for a payer to call you. Actively seek out those partnerships. And in states where payers are not in a lot of the value-based talks, this is a real chance to partner with the payers and get out front and really write it with them, because they are looking for help, as well.”
Wildman advised CFOs to monitor what’s going on in their states, keeping in mind that even though the payers are national, their services are delivered at the state level, and every state and its population offer something different. “Here’s an opportunity for those CFOs in other states to start forging a relationship in a way that’s meaningful for both sides to understand,” he said.
“Risk arrangements are here to stay,” said Wildman. “It’s exciting for it to be in North Carolina because we can engage with our patients in ways we couldn’t previously under any kind of standard fee-for- service model. I think what care looks like in the future, and how it’s delivered, will be in the context of value-based payment arrangements. That’s what’s coming for North Carolina.”
a. McClellan, M.B., Alexander, M., Japinga, M., and Saunders, R.S., “North Carolina: The new frontier for health care transformation,” Health Affairs, Feb. 7, 2019.
Additional perspectives on North Carolina’s move to value
Read highlights of our conversation with Keith Moore, CEO of McManis Consulting in Denver, who provided additional insights based on his experience working with North Carolina providers on value-focused strategies.
6 value-based elements vetted by North Carolina
North Carolina has a confluence of favorable factors helping to pave the way to a predominantly value-based payment system. Those components include providers that continue to show commitment to the value-based approach. The strategies for transitioning to value shared by Cone Health in Greensboro, UNC Health Care in Durham and Atrium Health in Charlotte can provide useful examples for any organization preparing for such a journey.
Looking ahead, if the move to value is to be successful, health systems and physician groups will need to do the following:
- Grow the market share of value-based payments
- Elevate physician leaders
- Find answers to primary care burnout
- Integrate behavioral health further into the care process
- Find ways to leverage virtual visits and artificial intelligence
- Recognize that this is a hard undertaking and it takes time
About Cone Health
- More than 12,000 employees and 1,300 physicians
- 6 hospitals, including The Moses H. Cone Memorial Hospital
- Triad HealthCare Network
- Several ambulatory care, outpatient surgery and urgent care centers
About Triad HealthCare Network
Next Generation ACO performance for 2017:*
- 4th overall for quality with a score of 96.95%†
- 5th for total shared savings with savings of more than $13 Million
*Out of 44 participants; 2017 results are the most recent results released by CMS.
† It is important to note that of the 44 NGACOs, only 16 were in their second year of the program where quality was based on actual performance and not set at 100%.
About UNC Physicians Network
- The physician arm of UNC Health Care*
- More than 300 providers in over 90 specialty areas
- Full range of primary and specialty services
*The larger health system also includes the clinical programs of the UNC School of Medicine and 11 affiliate hospitals and hospital systems across North Carolina.
About Atrium Health
- More than 65,000 employees
- More than 40 hospitals and 900 care locations across North Carolina and South Carolina
- More than 14 million patient encounters each year