The Shift to Value based payment: The Long and Winding Road

By October 27, 2015 February 24th, 2020 HCEG Top 10, Value-Based Payment/Care

The long and winding road
That leads to your door
Will never disappear
I’ve seen that road before
It always leads me here
Lead me to your door
-The Beatles

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Teresa DiMarco – Strategic Advisor at Leverage Health

If you?ve been around the health care industry for the last 30+ years, you know that the ACA and HHS? efforts around value based payment, ACOs and the like, are not new ideas. ? They have as their goal the same outcomes we?ve all been striving for over the past five decades: to achieve better health outcomes and patient care experience, cost-effectively.? We didn?t call it the Triple Aim at the time, but it?s the same thing.

The development of HMOs in the 70s and 80s was the mechanism, at the time, to re-organize health care delivery and financing in order to achieve what is now called the Triple Aim.? The initial and, some would argue, the most successful models early on were closed panel staff-model and group-model HMOs, where the providers took on full-risk and were also the payers?responsible for patient care, health outcomes and managing costs under a fixed budget, responsible for adequate patient access and for patient satisfaction, retention and growth.? We then expanded some of the principles of the staff model HMO to broad networks of providers which weren?t integrated clinically or financially, and thus had to use externally imposed controls to manage cost and quality.? We did so under the banner of managed care.

But, managed care hasn?t achieved all that we wanted, and managed care?s geographic and population reach has its limits.? Fee for service is still very alive, but not ?alive AND well? in terms of achieving our objectives.

So, now we are back to the future?or the future is back to the past?trying to figure out how we bring together providers of care, their patients and responsibility for financial and quality outcomes into one organization that is fully accountable and ?at risk?.? Thus, ACOs and value based payment models are introduced.? New names for the same concepts.

Now, CMS is tackling the unmanaged Medicare FFS program, which still represents a significant proportion of all Medicare program expenditures. ? Sylvia Burwell of CMS has announced that its goal is to have 85% of Medicare fee-for-service payments tied to quality or value by 2016, and 90% by 2018.? And, the target is to have 30% of Medicare payments tied to quality or value through alternative payment models by the end of 2016 and 50% by the end of 2018.? Alternative payment models, per CMS, include ACOs and bundled payment arrangements. Beyond CMS, the commercial managed care payers have been expanding their use of value-based payment arrangements for years.? The pace is accelerating.

What Does This Mean for Providers?

What does this mean for providers?? It changes everything–how they think, how they operate on the ground, how they make clinical decisions at the point of care, what information and tools they need, what data they evaluate, what metrics and outcomes they focus on, how they invest their capital, and how they make money or avoid losing money. Providers need to lead the coordination and management of patient care across the continuum of settings and specialties, for entire episodes of care.? They also need to understand the aggregate populations for which they are now accountable and to focus and manage all the health care resources to achieve broad population-based goals for quality and cost.? It is the long and winding road.

With all the focus on ACOs and value-based payments, you?d think that was the lynchpin of change. Yes, it?s a critical and fundamental element.? It is a required catalyst to undo the thinking and unwind the systems of care that were built and optimized under 75 years of FFS payment. But, these elements, while important, won?t get us there by themselves.? They alone won?t change behavior or create the systems of care that produce the outcomes we desire.

The Lynchpin to Change

The biggest tasks ahead, which are required to change the system, are also the most critical ones?changing the care delivery processes, workflows and point of care decision processes inside provider organizations. It?s transformational.? It?s a huge job. It will take significant resources, both human and capital, to execute. These process changes represent a total care re-design and a total change in how providers THINK about patient care, which now must include financial resource management and a long-term view of outcomes.

While this payment evolution is taking place, a challenge for provider organizations will be navigating across two very different financial models?FFS for some patients and value-based payment for others.? Practically speaking, it?s unworkable to manage patient care differently and have clinicians think differently depending on each patient?s payment arrangement.? Providers, at some point, will need to make a commitment to the new care delivery processes consistent with value-based thinking.? Likely, they will experience short-term hits on revenue and profitability on the FFS patients until the new models dominate.? This transition period will be painful, but the sooner providers ready themselves for success in a value-based world, the better positioned they will be to lead in their markets.? Ready-providers can actually help to drive more payer and employer business to the new models sooner, thus reducing the amount of time and business in the uncomfortable transition.

Interdisciplinary Work?Pulling the whole system of care together

Today?s world has providers operating in silos.? Primary care providers don?t coordinate effectively with specialists.? Hospitals don?t coordinate the transitions of care–from acute to post-acute to home care settings to ensure stabilization and recovery.? Behavioral care providers operate independently of primary care, but the two are interdependent for patient well-being.? Pharmacists and dentists operate on islands all to themselves.

What needs to happen in this care redesign for the value-based world is the coming together of clinicians of various disciplines, with experts in patient-service-experience and financial leaders.? Working in teams, the different perspectives will redefine the care protocols and workflows on the ground. ? Collaboration inside the delivery system, and outside the delivery system with new partners in the community, will take time, energy and, most of all, leadership.

Information technology and new analytic systems will play a critical role in supporting care delivery teams with the dashboards, long-term system-wide insights and patient-specific point of care data needed for decision making and care coordination.? Putting the right data in the right hands at the right time will be crucial. ? For example, a nurse case manager who is coordinating patient discharge needs to know what the most appropriate and cost effective SNF or ICF or rehab or home care options make sense for this patient, and have at his/her fingertips the data about which specific providers have the best outcomes and cost so the best choice can be made.? Then, he/she will need to facilitate, manage, educate, coordinate all elements of the execution of that care plan across a multitude of provider entities, partners and community resources.? And have the systems to track it.

Providers need to think and act like payers

Providers don?t need to design the new world order from scratch.? Much of the expertise and way of thinking about care at the macro-economic and system-wide level resides inside the managed care payers today. Population health thinking, care coordination and case management processes, reimbursement design, and other mechanisms for operating in a risk-based world has been the work of managed care/payers for decades. ? The population health information, the metrics, the claims systems, actuarial expertise, business processes, coordination of care tools and IT systems all exist there.

Some providers may think of managed care/payers as their nemesis. It?s understandable.? The payers had to insert themselves in the FFS system, trying to manage their risk from the outside; often, they imposed their management processes too late in the process to be optimal, and it all felt and was intrusive.? But, in an ACO environment, this thinking about value needs to move into where the patient and the provider live, and where care decisions are made.? What payers have, and what payers know, and what processes payers use, can all be brought to bear to help providers succeed in the value-based world.

So, collaboration opportunities exist not just across the health care delivery system of providers, but also with the payer world, in order to accelerate this transition to a value-based system.

The Long and Winding Road

Whether its primary care and PCMH models, Pioneer ACO models, or new BPCI (Bundled Payments for Care Improvement) programs coming soon from CMS for hip and knee replacements?. it?s all moving in the right general direction.? But, at the detail level, it?s still a great experiment.? CMS is trying new structures, algorithms, and payment formulae.? Providers are trying new structures and methods to manage care under the new reimbursement models.? Payers are trying a multitude of collaborative and control oriented models.? It doesn?t always work.? It will continue to evolve and improve.? It will ultimately lead us all to the value-based outcomes we seek.

It?s the long and winding road. We?ve seen that road before. It always leads us to that door [achieving value].

Teresa has 30 years of executive management experience in health insurance, managed care, healthcare IT, and in government-funded health care systems and BPO services (Medicaid, Medicare). ?Over her career, she was CEO of three tech-enabled health care services companies where she led them to market leadership positions and successful exits. ?She also advises companies, private equity, health care start-ups and venture-backed firms on growth strategies and operations. ?Teresa has a B.S. in Nursing and MBA from The Darden School of Business at the University of Virginia.