Insight from an HFMA executive roundtable shows that COVID-19 could be a “triggering event” that accelerates adoption of value-based payment.
What happens when provider revenue largely depends on patients receiving in-person treatment, but patients can no longer walk into a healthcare facility for care?
It’s a situation most hospitals and health systems have struggled with during the pandemic.
Because the majority of healthcare payment continues to be based on a fee-for-service payment model, “when demand for in-person care dries up, fee-for-service presents challenges for providers, financially,” said Lynda Rowe, senior advisor, Value-Based Markets, InterSystems.
Although the percentage of value-based payments from commercial insurers rose to 53% in 2017 — up from 10.9% in 2012 — most of these payments were based on a fee-for-service model. Just 6% came from value-based models in which providers take on downside risk.a
Now, as healthcare organizations navigate their “next normal” following the coronavirus outbreak this past springb, some leaders have begun to wonder: Will the pandemic accelerate the shift to value-based payment?
“COVID-19 really left healthcare organizations that relied on fee-for-service payment with very little in terms of incoming revenue streams,” Rowe said. As providers that participated in per member per month models continued to record cash flow during the first months of the pandemic, “The rest said, ‘It really would have helped our margin if we had seen continuous funding coming in through a capitated model.’”
In this HFMA executive roundtable, seven executives for health systems and health plans share how the pandemic has impacted their organization’s move toward value — and what it will take to foster transparency and trust under these models.
Has the COVID-19 pandemic changed your organization’s plans around participating in or offering value-based payment models?
Michael Funk, Vice President, Office of the CMO, Humana: I think the COVID-19 pandemic has the potential to be that propellant to perhaps push value-based payment model adoption much more aggressively than the government has up to this point. One of the things that we may be underestimating is that Medicare insolvency could occur as early as 2023 — three years earlier than projected by the Medicare trustees — due to the financial impact of COVID-19, according to recent reports. Given the national debt, once we come outside of this pandemic and we realize the spending that has taken place, I think there is going to be an extreme amount of pressure on the federal government to do something. The other thing that we have seen is the split between the cash flow that our capitated providers saw under risk-based arrangements during the first months of the pandemic, when patients were unable to receive elective care and the struggle that many of our fee-for-service providers faced. There is a better realization of the benefits of a capitated model, and we have found more interest from our providers on that front.
The other thing that we saw emerge from the pandemic was greater recognition of the importance of addressing social determinants of health. During the pandemic, disparities in health outcomes often occurred when social determinants of health, such as inability to access food or struggles with loneliness, were not addressed. When the COVID-19 outbreak occurred, providers under risk-based arrangements immediately reached out to their vulnerable populations to address patients’ holistic care needs. That is not to say that these efforts weren’t taking place in the fee-for-service world, but providers under risk-based arrangements understand their most vulnerable populations very well and were especially effective in designing care interventions that met their needs.
Kelly Hamilton, CEO, The Ohio State University Health Plan: What I’ve seen is that there was so much change that the pandemic brought about, operationally, in a short period, especially in getting telehealth services established. There’s an enthusiasm around taking the lessons learned from this experience and changing care delivery for the better. As we look at our expenses during the pandemic and consider ways that care can be delivered more efficiently, there are new opportunities to engage a lot of people in the discussion around value and a desire for change, especially when it comes to addressing disparities in care and social determinants of health.
Tripp Shubert, Vice President, Bon Secours Mercy Health: Prior to the pandemic, the pace of the shift toward value-based payment models was described as “glacial” by another leader in the field. I don’t know the extent to which the pandemic or other economic events will be a burning platform to accelerate the pace of change, but I expect that the pandemic will lead to increased adoption of value-based payment models. I’m curious to hear other providers’ thoughts on whether this could be a triggering event.
Martin D’Cruz, Vice President, Managed Care and Value-Based Care, Baptist Health System — Kentucky & Indiana: We’re doubling down on value-based care initiatives with attributed lives from Medicare Advantage plans. I think one of the biggest challenges we faced because of COVID-19 was that so much was put on hold. Now, we’re trying to accelerate initiatives with our patients around health and wellness. We’re actively reaching out to chronically ill patients with multiple comorbid conditions so that we can really manage this population after two months of more limited programming.
Mark Meyer, CFO, UT Southwestern Medical Center: One of the things we’re looking at is how to expand our reach virtually using telehealth, both to drive expansion and improve value. By and large, our patients like telehealth: We ranked in the 99th percentile for patient satisfaction relative to telehealth visits during the pandemic. What we haven’t determined is whether telehealth results in the same amount of inpatient or outpatient procedures. Since our ambulatory clinics have opened back up, we are running about 100% of our previous volume, but 25% of the work is now virtual. In terms of using telehealth to manage vulnerable populations, we have a Next Generation ACO that is jointly owned with our partner in Dallas-Fort Worth. We’ve got a lot of ideas, but we’re still gathering data, so a lot of our decisions are still up in the air.
We’re also looking at accelerating the shift toward non-hospital-based activities — enabling patients to receive care in the home, for example, and empowering them to receive care in their community rather than having to drive to Dallas for care. This will expand our reach and our presence and the way in which we provide care. Payers are directing patients to these models for obvious reasons. What we don’t know — and we have competing theories around this — is whether the pandemic will accelerate the shifting toward non-hospital-based activities.