As Medicare reimbursement evolves, one can predict how the rest of healthcare in the United States will follow.
Following the U.S. Department of Health and Human Services' (HHS) announcement on transforming how it will pay for healthcare services provided to millions of Medicare beneficiaries, several of our nation's largest healthcare systems and private insurance companies introduced the formation of a new Health Care Transformation Task Force. Together, they are championing the move to manage 75 percent of healthcare business to value-based arrangements by 2020.
Additionally, The Centers for Medicare and Medicaid Services (CMS) just announced plans for the Next Generation ACO, a new payment initiative designed to achieve the highest quality care standards. The model will also offer providers who had success with the Medicare Shared Savings Program (MSSP) or Pioneer Model a greater opportunity for financial growth.
If these initiatives all take hold, we'll certainly be able to see the effects of value-based care (VBC) across all providers and it will no doubt dramatically change how patients receive care.
- Greater value in healthcare, and improved health in communities across the country, is possible through VBC arrangements because of four main factors:
- Providers are rewarded for making their patients healthier;
- Patients take responsibility for their healthcare actions;
- Healthcare costs are stabilized by standardizing treatment protocols; and
- Price and quality information are transparent to all.
Given this invigorated focus on VBC, some are touting that these arrangements only work for large providers – with large patient groups from large payers. However, Valence Health's 20 years of VBC experience and the fact that many smaller, more independent providers have been successfully using VBC for years proves otherwise. And for those who have not, the transition, or transformation, is equally as possible as it is for larger providers, albeit with different implications and unique opportunities. In fact, smaller providers, which are more tightly networked with local physicians and have longstanding relationships with their patients, can move even more nimbly toward VBC arrangements than larger entities. For example, community hospitals and their partners benefit from being able to drive innovative care coordination changes in more cost-conscious ways.
Regardless of an organization's size, the objective of shifting to VBC arrangements is to put providers in charge of the care they deliver, both clinically and financially. To be successful, this move must be synchronized with a provider's unique market dynamics and allow for flexibility in how they will advance clinical excellence, stabilize or capture new market share, and grow financially. The following principles are critical for smaller, independent providers that are planning for and making the shift to VBC models.
Look forward. Forge your own path. Contrary to fee-for-service reimbursement methodologies of the past, VBC allows providers to do what they do best – deliver quality care to communities and patient populations – in a way that is fiscally rewarding and sustainable. To begin, providers must carefully analyze their long-term vision and competitive position in the market, including their relationships with local and national payers. Clinical and administrative leaders must participate in consensus-building exercises to ensure that all voices are heard, bottom up and top down, prior to moving forward with any programs. What results is physician alignment, support, and accountability for improved clinical care processes – arguably, three factors that are critical to smooth operations in any reimbursement environment.
This industry-wide perspective shift toward value over volume turns the tables in another important way. It's now just as reasonable, and oftentimes better for patients, for providers to step into payers' shoes in two ways. For one, they can sponsor their own health plan, thereby taking full responsibility and risk for their patients. Many providers see significant advantages in sponsoring their own health plans, including better alignment of incentives, first dollar capture and increased clinical coordination. Or, as a second option, providers may opt to go directly to payers and initiate talks regarding new VBC contracts – rather than the other way around.
As an example, Valence Health worked alongside Phoenix Children's Care Network (PCCN) executives to design and negotiate value-based payor contracts that will enable PCCN's providers to take on greater responsibility for the care and management of key populations. In parallel, Valence Health has also begun helping PCCN tailor aspects of its care model to further ensure its patients benefit from improved health outcomes at lower costs. Early work has concentrated on three clinical priorities – Asthma, Preventative Health, and Attention Deficient Hyperactivity Disorders.
Think positively. Change your perspective on risk. VBC can actually help to stabilize and stem some of the uncertainty inherent to patient care delivery. The key is to choose the right type of risk and establish or redesign care and quality metrics to achieve financial rewards.
There are approaches available to providers looking to limit the financial risk of arrangements they enter, including stop-loss provisions, the exclusion of selected high-cost cases, and risk-adjusted capitation. At the same time, advances in technology and predictive modeling have evolved to where providers can apply proven actuarial analysis without employing armies of actuaries like insurance companies do. Now more than ever, providers have the tools to not only predict financial risk, but also account and plan for it.
As the largest physician hospital organization in Northwest Illinois, Centegra Health & Wellness Network has successfully united more than 350 physicians to improve care delivery for 400,000 Illinois residents. Its clinically integrated network of employed and independent physicians leverages a robust technology platform to combine data from its physician members' practice management and electronic medical records systems with other data sources to provide a comprehensive clinical view of patient care.
This effort is part of Centegra's commitment to enhance the quality and efficacy of healthcare, and the network has taken on risk for their patients' health outcomes under an HMO contract from Blue Cross Blue Shield. This year, Centegra was awarded an MSSP contract to coordinate care for an estimated 15,000 Medicare eligible individuals.
The specifics aside, the status quo of avoiding risk is simply no longer an option. Providers have to start somewhere – whether that means piloting a program in a certain geographic area or confining it to one value-based contract with the ability to evolve into a broader model later. While a hospital might relinquish some of its financial upside by taking a tiered approach, this method does remove some of the pressure to transform overnight. It's also important for providers to remember that their assumption of risk is actually less risky than what a payer does since more than half of its costs are fixed, and predictive analytics can help to model for changes in capacity and demand.
Mine your data. Trust what you find. Value-based care works best when the provider's program is finely tuned to the unique ecosystem that exists among its network, payer partner(s) and patient population(s). In most cases, providers know intuitively where their strengths and opportunities lie for implementing VBC programs, and physician performance and patient care data will usually support those instincts. When providers employ a truly integrated data analytics platform, one that draws and aggregates information from the hospital's employed and independent physicians' EHRs, practice management systems, lab results, pharmacy data, and more, they can see and learn about:
- Gaps in patient care that can be addressed through outreach and follow-up
- Opportunities for improved collaboration among physicians, nurses, pharmacists and other clinicians
- High-risk patients and patient populations who will benefit from disease management programs or greater engagement with their providers
- "Trigger" events, e.g. incidents common to readmissions and secondary interventions that could have been prevented
- Usage patterns by providers, which could signal opportunities for greater training so that all clinicians use the platform to the fullest advantage for their patients and the provider entity
Remember you're not alone. If the HHS, Task Force and CMS announcements weren't enough indication that our healthcare system is truly headed in a bold new direction, look to your peers for how they're experimenting and achieving success with VBC. Transformation to a value-based payment model isn't just for large, government payers like Medicare or multi-state healthcare providers. The benefits are absolutely scalable and achievable for smaller, independent providers and their communities.
In the end, there is no "one size fits all" approach. Achieving success with VBC requires a provider to carefully study its competitive landscape, patient population and relative risk, and appropriate payer partnerships.
Smaller healthcare providers may do well to look for expertise to navigate these promising, yet uncertain, tides of change. This effort will arm organizations with a sustainable path to new revenue streams, as well as a stable transition to new clinical and payment models for their staff, physicians and patient populations.
Philip H. Kamp co-founded Valence Health in 1996 and leads the company's efforts in creating patient-focused, data-driven solutions that can be implemented across a health care organization. Mr. Kamp has more than 30 years of managed care experience focusing on integration strategies for health systems. As a partner in the consulting and accounting firm of PricewaterhouseCoopers, he led the formation of numerous IPAs, PHOs and provider-sponsored Health Plans. Mr. Kamp has served as interim CEO and CFO for several risk-bearing PHOs/IPAs and HMOs. Mr. Kamp and Valence Health co-founder Todd Stockard, were selected for induction into the 2010 Chicago Area Entrepreneurship Hall of Fame.
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