Live Webinar | Costing and Managerial Accounting
Live Webinar | Legal and Regulatory Compliance
Live Webinar | Health Plan Payment and Reimbursement
Live Webinar | hfma:content/topic/behavioral_ethics
Blog | Value-Based Payment

Looking beyond CMS: How to accelerate the transition to value in healthcare

Blog | Value-Based Payment

Looking beyond CMS: How to accelerate the transition to value in healthcare

  • The policy community and healthcare industry trade press have talked a lot about how capitated providers are faring better financially during the pandemic, with little discussion about what policy changes are needed to make this happen.
  • Mulvany identifies an Aug. 10 Premier Inc. blog, “How to Pandemic Proof Our Health Care Payment System,” which details the five key steps that CMS and Congress need to make.
  • More than 10 years ago, HFMA identified four key capabilities  providers should be proficient at to succeed in risk-based APMs: People and culture, business intelligence, performance improvement and contract and risk management.

There’s been a lot of chatter in the policy community and healthcare industry trade press about how capitated providers are faring better financially during the pandemic.

The implication is that all providers should accelerate participation in capitated and other risk-bearing payment models. However, that’s typically where these articles stop. There hasn’t been serious discussion about what policy changes are needed to make this happen, until more recently when a couple of excellent blogs, including this Health Affairs blog, discussed specific actions CMS, Congress and providers could take to accelerate the transition and make it sustainable.

One blog I specifically want to mention was written by Premier Inc.’s Aisha Pittman, vice president of policy, and Seth Edwards, vice president of strategy, innovation and population health. Their Aug. 10 blog, “How to Pandemic Proof Our Health Care Payment System,” identifies in detail the five key steps that CMS and Congress need to make. I provide a summary of each of their points below:

1. Continue incenting providers to participate in APMs

My summary: Congress should instruct CMS to expand the time frame for when the 5% APM bonus is available and relax the qualifying requirements. Currently there aren’t enough models, particularly for specialists, and the revenue or patient count bars are too high for many providers to qualify.

2. Set clear timelines for a transition

My summary: CMS’s lack of communicated transition timeline/plan has led many providers to procrastinate and view participation as an experimental activity and not a training camp for the upcoming regular season. Setting a timeline for Medicare fee-for-service (FFS) would create a sense of urgency and help providers better time their investments in the required infrastructure to manage APMs.

3. Enhanced flexibility in existing and new APMs

My summary: This is one HFMA has repeatedly asked CMS for over the years. If you’re in a risk- bearing APM ,where there’s the potential for material repayment and responsibility for patient outcomes, CMS should eliminate the mountains of regulatory barriers aimed at ensuring the right setting of care, preventing fraud and abuse and ensuring the patient receives the right care. These are all things that more or less make sense in FFS. However, once the incentives are properly aligned, these regulations are at best superfluous, at worst millstones that prevent the delivery of high-value care at the right place and time (e.g. providing low-acuity hospital services in a patient’s home).

4. Ensure adequate payment

My summary: There are currently benchmarking issues with the Medicare Shared Savings Program, and really all models, that disadvantage certain types of providers. Given the way benchmarks are set, it’s a race to the bottom where participants are penalized when new benchmarks are set if they were efficient during the baseline period. This is particularly problematic if you’re already in a low-cost region or are market dominant.  

5. Ensure a level playing field for all providers

My summary: CMS’s MSSP program favors physician-led ACOs over hospital-led ACOs by creating separate policies for high-revenue ACOs (e.g. hospital-based ACOs) and low-revenue ACOs (e.g. physician-led ACOs). Low-revenue ACOs have the option of taking a slower track to bearing risk (ironic isn’t it that the organizations in CMS’s mind that perform better aren’t required to do so on an accelerated timeline). CMS claims physician-led ACOs are more efficient because they’ve generated more savings on a PMPY basis. However, what CMS’s analysis fails to consider is that physician-led ACOs start with higher benchmarks (and also have historically been more inefficient) than hospital led ACOs. While it’s good to encourage physician practices to participate, CMS’s current policy is actively discouraging hospitals in lower-cost regions of the country from forming and leading ACOs.


A couple of thoughts here. First, I couldn’t agree more with Pittman and Edwards. Much of what they recommend is included in recently introduced bi-partisan legislation, the Value in Healthcare Act (the bill is available here, section-by-section here). HFMA’s own Rich Daly conducted an excellent podcast interview with one of the bill co-sponsors – Representative Susan DelBene.

My conversation with Daly helped crystalize something for me: The changes to the Medicare MSSP included in the Value in Healthcare Act are necessary but insufficient from a payment policy perspective. It’s well understood that for the transition to value to occur in a sustainable manner, providers need the vast majority of their revenue in payment models with material upside/downside risk.

What about the private sector?

So even if you fix the issues in Medicare, what about the private sector? Only 30% of commercial revenue from payers is in APMs based on fee-for-service architecture or population-based payments (on an all-payer basis, only 35.8% of revenue across all payers). And two-thirds of that is in upside only models. So not only is there not enough revenue in APMs in the commercial sector, the incentives aren’t strong enough. Based on a 2019 survey of HFMA’s executive members, that 35.8% of total revenue flowing through APMs translates into 2.7% of net patient service at risk in either a one- or two-sided APM. And five years from now, that’s expected to increase to 6.34%, a percentage that did not change materially when HFMA recently resurveyed its executive members.

One of the challenges in the private sector is a scale issue. Most employers, even large national employers, don’t have enough lives in any one market to make a difference to the provider or make it worth the administrative expense to the employer.

But in many markets, do you know who does? The Federal Employee Health Benefit Program (FEHBP).

When will Congress step up and require FEHBP administrators to use APMs as a requirement to secure participation in the plan? You know who else has enough lives in many markets? The state and local government employees.

When will states, localities and the unions that represent these employees step up and require plan administrators to use APMs as a requirement to secure the contract?

And finally, when will Congress incent (or require) ERISA plans to use APMs to realize the full tax income tax benefit for both the employer and the employee? If Congress were to take action, there would need to be a three- to five-year transition period so that plans and providers could be thoughtful about the payment models they deploy, the benefit designs used, the data sharing, and allow providers time to make investments in infrastructure and capabilities.

4 key capabilities providers need to succeed 

Second, if providers are going to succeed in risk-based APMs, they need to have demonstrated proficiency at four key capabilities that HFMA identified more than 10 years ago during our initial Value Project research. Those capabilities are summarized below.

1. People and Culture: Developing and maintaining the right culture requires alignment of staffing, incentives and effort.

2. Business Intelligence: The ability to aggregate and analyze cost and quality data from across the care continuum and clearly communicate the resulting knowledge to providers, performance improvement teams and network partners.

3. Performance Improvement: The ability to deploy a variety of techniques based on the identified opportunity to eliminate unwarranted process variability by developing and implement standardized care protocols and pathways.

4. Contract and Risk Management: This capability has two parts. First is the ability to develop a network of provider-partners across the care continuum and manage the flow of funds and information across that network. The second part is the ability to accurately understand and price risk to ensure adequate payment based on the value of services provided. 

About the Author

Chad Mulvany, FHFMA,

is director, healthcare finance policy, strategy and development, HFMA’s Washington, D.C., office.

Sign up for a free guest account and get access to five free articles every month.


Related Articles | Value-Based Payment

How To | Cost Effectiveness of Health

Cost Effectiveness of Health Report, September 2022

In this September issue of HFMA’s Cost Effectiveness of Health Report, sponsored by Kaufman, Hall & Associates, LLC, an innovator describes a practical solution for addressing the daunting problem our nation faces around the unhealthy eating due to social determinants of health. Also included is an update of an expert-reviewed feature that described a value-focused health system merger in the Pacific Northwest.

How To | Cost Effectiveness of Health

Cost Effectiveness of Health Report, August 2022

In this issue of HFMA’s Cost Effectiveness of Health Report, sponsored by Kaufman, Hall & Associates, LLC, an industry thought leader and advocate for improving treatment of mental illness offers insights into why we need to change our nation’s approach to mental health. Also included is an expert-reviewed feature that examines a new approach to developing a stable, cost-effective workforce.

Column | Value-Based Payment

Paul Keckley: 2 major changes in the value agenda require finance leaders’ attention

The value agenda in U.S. healthcare is critical to its future, but there are two key areas in which it is likely to be redirected in years to come.

Trendsetter | Value-Based Payment

Rethinking population health management: Why successful risk-based contracting requires provider empowerment

Find out how one company hopes to solve challenges of industry shifts from fee-for-service to value-based care by reversing the long-standing narrative that population health management isn’t possible or profitable.