An HFMA-FORVIS survey found that although 59% of healthcare organizations plan to participate in additional two-sided risk value-based care (VBC) models, only half have clearly defined protocols (e.g., clinician sponsorship, financial projections and operational support) to assess new VBC opportunities. Creating a formal VBC strategy that addresses operations, analysis, governance, oversight and infrastructure will be paramount. So will provider, payer and regulator collaboration.
Most healthcare organizations (59%) say they plan to engage in additional two-sided risk VBC models in the next 18 months, but only 50% say they have the right protocols in place to assess new opportunities with confidence, according to new research conducted by HFMA and FORVIS on behalf of the Value-Based Healthcare Innovation Council. The 2023 survey includes responses from 35 healthcare finance, accounting and revenue cycle executives. Here are a few other important findings:
- Almost all (93%) of healthcare organizations participate in some type of VBC program (i.e., fee- for-service with a limited link to quality and value, upside-only risk or two-sided risk).
- On a scale of 1 to 10, healthcare organizations rated the alignment of VBC aspirations with operational risk tolerance as 6.8 on average.
- On a scale of 1 to 10, healthcare organizations rated their ability to take on more VBC contracts as 7.8 on average.
- Leveraging a system-wide approach to care management was the top-rated benefit of VBC followed closely by addressing gaps in the continuum of care.
“During a time when some industry experts say value-based care is failing, these survey results clearly indicate the opposite,” said Michael Wolford, principal at FORVIS. “More specifically, the results reflect the ongoing shift to VBC models while also acknowledging the clinical and operational challenges associated with doing so. Easing the burden — and tying 100% of Medicare payment to value by 2030 — will require provider, payer and government regulator collaboration. We see Medicare’s recently updated strategy and road map toward VBC as a call to arms.”
Wolford also points to the Health Care Payment Learning & Action Network’s (HCPLAN) goal of tying 50% of all commercial payments to two-sided risk alternative payment models (APM) by 2025. The HCPLAN, launched in March 2015 by the U.S. Department of Health & Human Services (HHS), unites public, private and non-profit sectors to provide thought leadership, strategic direction and ongoing support to accelerate the adoption of APMs.
Still, the contentiousness between payers and providers cannot be ignored.
“Both sides blame the other for not doing more value-based care,” said Wolford. “Payers say that providers aren’t ready and aren’t willing. Providers say payers aren’t willing and don’t play fair. It’s a classic he said/she said scenario that the industry needs to address.”
Providers: formalize a VBC strategy
At Roanoke, Virginia-based Carilion Clinic, value-based care contracts continue to increase thanks to an organization-wide strategy centered on what Donna Littlepage, senior vice president of accountable care strategies, said is this fundamental philosophy: “If we do what’s right for the patient, the finances will follow.”
In 2024, Carilion plans to take on additional risk related to partnering with a national Medicare Advantage payer on a co-branded plan. It will also continue numerous value-based programs, including its Medicare Shared Savings Program (MSSP)-Enhanced Track as well as value-based payment contracts with all major Medicare Advantage plans, most of its Medicaid Managed Care plans and some commercial plans.
“We are willing to take on more risk and responsibility related to the work we do … but since we are a non-profit community healthcare provider and not an insurance company, we believe having some guardrails around the level of risk we take is prudent when spending what our CFO refers to as ‘our community’s money,’” said Littlepage.
These are the questions Carilion considers before entering a value-based care contract:
- Do the payer’s incentives align with our organizational objectives to create win-win scenarios?
- Are there reasonable targets and thresholds at which we may earn additional dollars to support our work and the clinicians performing it?
- Are there equitable rewards based on the work performed?
- Will the payer be a good partner in this effort?
Looking ahead, Littlepage said Carilion hopes to align its work across all payers by focusing on a limited number of universal value-based care metrics rather than payer-specific ones.
“We are not there yet, but we continue to make progress toward that goal,” she added.
Each year, Nebraska Health Network’s value-based care strategy is also based on a strategic theme, said CEO Lee Handke, PharmD, MBA. In 2023, that theme was ‘Expand the foundation and frame the future.’
“The foundation refers to advancing our core competencies in data capabilities as well as our focus on medical risk coding, annual wellness visits and quality care,” said Handke. “The future is a nod to the capabilities we will need to develop to remain successful in the next generation of value-based, pre-paid models.”
Nebraska Health Network is currently in 14 different value-based agreements, including an MSSP-Enhanced Track Accountable Care Organization.
“Our focus for 2024 was to negotiate changes to existing contract parameters to put us in a better position to succeed,” he added.
The network’s Value-Based Performance Advisory Committee, which includes clinical and administrative leaders from the health system as well as independent physician practices, oversees strategies to achieve success and maximize the ROI of value-based contracts. That includes focusing on diagnosis coding, patient engagement and gap closure.
“Going forward we know we will need to have a stronger focus to address social determinants of health, engage specialists, build post-acute care partnerships and improve primary care connections,” said Handke. “We have always maintained that value starts with a consistent focus on quality. We strive to exceed all of the quality parameters in our agreements to unlock our potential for shared savings and enhance patient outcomes.”
Moving toward a larger VBC strategy is imperative
Wolford said organizations must move away from viewing each VBC program as a limited opportunity or what he terms ‘popcorn projects’ toward a larger VBC strategy supported by a budget line.
“Popcorn pops, it’s hot for a minute, but if you don’t eat it within the first 30 minutes, it’s stale and you throw it away,” said Wolford. “A lot of organizations treat alternative payment models like popcorn. They say, ‘I’m going to do it while it’s hot, take what I can and when it’s over, it’s over.’ They don’t actually invest the time to create capabilities that build momentum.”
When executed correctly, VBC programs have many benefits, including:
- Opportunity for a more system-wide approach to care management
- Gaps in the continuum of care are better addressed
- Leverage data and technology to track care
- Stronger communication and alignment among physicians
- Gain traction ahead of anticipated mandatory programs
“Patients in VBC models ultimately receive a more seamless experience from hospitalization to post-discharge and in between doctor visits,” said Wolford.
Questions CFOs should address
To promote maximum ROI, CFOs must address these critical questions:
- Do we have the right physician leaders in place to promote VBC?
- What are our known thresholds for financial viability of VBC programs?
- Do we have properly trained staff in place to manage and provide VBC?
“Organizations need to answer these questions long before the VBC opportunities come up, so they’re not romanced by the sweet nectar of dollars in the moment,” said Wolford. “Set up your protocols now and execute faithfully on them later.”
Creating a VBC infrastructure takes time, he said. “This is not something you pop up in a series of three meetings. This is something you should prepare for over the course of six to 12 months before your next budget cycle.”
Payers: Increase provider incentives, simplify VBC programs
At the macro-level, provider incentives are often not sufficient to justify a complete shift in business and operating model fundamentals, said Wolford.
For example, in 2019, practices spent an average of $12,811 per physician to participate in the Merit-based Incentive Payment System (MIPS), according to a qualitative study published in the Journal of the American Medical Association Health Forum. A separate study conducted by the Medical Group Management Association (MGMA) found that 87% of physicians said any positive payment adjustments they received as a result of MIPS did not cover the costs of time and resources spent preparing for and reporting under the program.
Wolford also cites several FORVIS clients that revamped workflows and invested in new infrastructure and technology to participate in TennCare’s (TN Medicaid) mandatory episode of care program only to ultimately receive very minimal incentive payments. This is despite improvements in quality and significant reductions in cost as a result of the program.
“Most providers still operate their practices and businesses through a fee-for-service lens in which there’s more incentive associated with productivity than wellness or value or quality. No doubt, healthcare institutions seek to do the right thing for patients, but financial incentives do not reward altruism,” said Wolford. “Payers need to make it easier to match financial incentives with the work that’s required. They need to make the business opportunity more palatable with lower risk thresholds.”
In its refreshed road map for VBC, for example, Medicare draws on its decade of experience launching VBC models to provide several lessons learned for all payers. Some — but not all — of these lessons include the following:
- Address implicit bias in model design, implementation and evaluation.
- Assess current participation requirements with an aim of reducing administrative burden.
- Design VBC models to target and increase participation among providers that care for underserved populations.
- Improve sharing of more timely and actionable data with providers to support decision-making at point of care and to identify successful care delivery practices for dissemination.
- Improve testing and analysis of benchmarks and risk adjustment methodologies prior to model launch.
- Make model parameters, requirements and other critical details as transparent and easily understandable as possible for participants.
Regulators: Discourage fee-for-service payments
Eliminating fee-for-service payment is not the answer, but regulators must continually find ways to incentivize value-based payments, said Wolford.
“Right or wrong, the fee-for-service payment structure has become the backbone of American healthcare finance,” he added. “Abandoning the fee-for-service structure would be a decades-long and extremely disruptive undertaking. However, there must be scenarios in which the level of fee-for-service rate depression combined with the value-based care lift will discourage the former and promote the latter.”
The CMS Innovation Center that develops and tests new healthcare payment and service delivery models will continue to explore VBC models to see what works best, said Wolford.
“Over the last few years, the Center has narrowed its focus,” Wolford said. “While some claim fewer models will yield more industry-wide adoption of common practices, this would only be true if these models were designed around a series of commonly accepted, industry-wide norms for value-based care that don’t currently exist.”
Wolford said the healthcare industry remains well-positioned for continued innovation but only if all stakeholders can be on the same page in terms of making the shift.
“Time will tell if government regulators, payer executives or leading healthcare organizations will move the industry toward more consistent application of value-based care,” he added. “It’s certainly possible, but it will take transparent conversations and an industry-wide approach.”
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