DH Blog

How to Succeed in Value-based Care

07/12/2017

Jonathan M. Niloff, MD, MBA
Chief Medical Officer, Diameter Health

Healthcare providers have predominantly been paid in a fee-for-service model, where the clear financial incentive was volume-based.  The more you did – the more you earned.   Despite “managed care” experience from the 80s and 90s, contract models based on providers assuming risk for the cost of care of a population are back, now referred to as value-based care.  This new wave of provider risk-based contracting was initiated by CMS in the latter part of the last decade with the introduction of the Pioneer Program and Accountable Care Organizations (ACOs).  CMS now offers multiple value-based models with progressive levels of provider risk.  The MACRA legislation and associated MIPS program provide strong financial incentives for providers to transition to value-based contracts and the risk reward balance in the shared savings programs are structured to encourage providers to assume a greater proportion of the total risk as they gain experience and grow their competencies.

Value-based contracts are not only offered by CMS through the ACO programs. About one-third of Medicare beneficiaries are enrolled in Medicare Advantage. In this program, an entity assumes total cost of care risk for a population of Medicare beneficiaries.  The risk-bearing entity may be a provider or an insurance entity.  When the latter, it is common that providers share a portion of the risk.  Medicaid programs in most states have value-based programs.  And more and more commercial payers are promulgating value based arrangements.  Adoption is accelerating and projections are that value-based contracts will be the predominant model by 2020.1

Some question whether the new administration will derail the progression to value-based care.  This seems unlikely as legislative focus has been primarily on the funding side of healthcare.  The need to control delivery side costs remains strong regardless of how healthcare is funded.  If anything, if Medicaid funding is reduced, budget challenged states will have even greater need to manage costs for that program.

So, if the current trend continues and value-based contracting becomes the dominant provider payment model, what do providers need to succeed?  The first thing is to recognize that their fundamental business models and how they deliver care will need to change. Some have already begun and are far along in transitioning their care and business models.  Others are clinging to FFS for as long as they can.  But change of the magnitude required cannot happen overnight.  Organizations that prepare early will have an advantage.  What is required to be successful?

Organizational Alignment

Transitioning between two financial models that have diametrically opposed incentives is challenging.  Resolving the tension between volume and value requires strong leadership to achieve organizational alignment among all constituents; administrative and professional.  This is especially difficult early in transition when most patients are still under FFS.  Mixed messages will sabotage the process and compromise provider engagement.  Aligning internal incentives, including compensation for all constituents, are key to achieving the required buy-in, as are strategies that mitigate interim adverse impacts on key executives.  For example, hospital CFOs will be more enthusiastic leaders if programs to reduce leakage are implemented to offset declines in facility admissions.

Implement a Population Health Care Model

Success in value-based contracts requires that care be delivered efficiently, including providing care at the lowest cost, clinically appropriate venue.  It is also essential that quality objectives are achieved because meeting quality targets is commonly required to maximize earnings based on cost savings.

The key tactic is to transition from a transactional care model, where each patient encounter with a provider is separate and not related to others, to a population health model.  This new approach includes two essential characteristics: (i) each patient’s care is coordinated across the continuum and (ii) the patient population is managed proactively.

Care coordination is commonly accomplished by implementing a primary care-based team model.  Effective care coordination is dependent not only on the right staff and processes, but also on the effective sharing of clinical data across all provider professionals and all venues of care.  Easier said than done because of the isolated data silos found across most health systems and the associated interoperability barriers.  The ability to share a patient’s clinical information digitally among all providers and make that information easily consumable in the context of a clinical visit is an important success factor.  The latter is best accomplished with a complete multi-sourced, aggregated, de-duplicated longitudinal patient record that can be viewed at any and every clinical encounter.

Proactive management of a patient population requires processes to identify and predict patients who will consume the most resources.  Programs are implemented to more intensively manage these patients with the goal of avoiding high cost events, such as emergency department visits and hospital admissions, while improving quality of care.

Proactive population management also requires processes to identify patients with gaps in care and address those gaps in a timely fashion.  This is, of course, good for patients, but assuring that required care is provided during a contract period also maximizes quality metrics which are often an important determinant of financial performance in value-based contracts.  For example, in the CMS Shared Savings Program, meeting quality targets is required to be eligible for shared savings.

Successful population health programs are highly dependent on sophisticated software solutions, including predictive models to identify high risk patients and enterprise registries to manage quality metrics.  These solutions are, in turn, highly dependent on robust, complete clinical data.

Understand and Manage Key Cost Drivers

Success in value-based contracts requires a deep understanding of costs and opportunities to realize savings.  Common analyses focus on variations in care patterns among providers, prescribing practices and identifying high utilizers of avoidable services, such as emergency department visits. Implementing improvement programs often is challenged by required behavioral change.  Credibility in the analyses is key to engaging physicians.

Recognize How Physicians Practice in the Field

Physicians are challenged every day and sensitive to what the perceive as “extra work.”  Many are also frustrated with their EHRs.  Success is dependent on physician behavior change.  It is best to “make it easy” to do the right thing.  This includes presenting clinical and non-clinical data in easily consumable formats.  Workflow integration of new technology is important as is modifying clinical processes, including allocating tasks to the most appropriate team members- other than the physician.

Prioritize and Secure Early Wins

As healthcare transitions from fee-for-service to value-based payment models, health system leaders face many challenges. They need to achieve multiple stakeholder buy-in, adopt a population health model and secure many new capabilities.  They typically do not have the resources to simultaneously implement all the programs needed for success in value-based care, nor can the provider community absorb so much change at one time.

Prioritization and development of a progressive transition plan is recommended. Building a robust technology infrastructure is foundational, including clinical data interchange and analytic solutions and expertise.  Achieving and celebrating success with a few initial programs will drive organizational buy-in and engagement.

1 https://healthpayerintelligence.com/news/58-of-payers-providers-adapt-value-based-care-reimbursement

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