Payers and health plans are pushing for reimbursement models that move away from fee-for-service and move to paying for “value.” At our 2018 OPEN MINDS Performance Management Institute in February, our health plan faculty members reiterated that while primary care is further along than specialty care in this evolution, specialty care wouldn’t be left behind for long—most of the faculty saw specialty care reimbursement moving to value-based models within a three to four year window (see “A Commercial Health Plan’s Perspective”: Magellan’s Philosophy & Approach To Value Based Payment Arrangements and Overcoming The Impediments To Value-Based Reimbursement).
Our recent health plan survey, Trends In Behavioral Health: A Reference Guide On The U.S. Behavioral Health Financing & Delivery System, supports this sense of market timing—42% of health plans are using episodic or bundled payments for specific acute care episodes, including 95% of commercial health plans use episodic payments, 2% of Medicare health plans, and 47% of Medicaid health plans. And 93% of health plans have behavioral health provider partner models that utilize a FFS reimbursement structure that also includes a pay-for-performance (P4P) component.
The reasons for the shifting reimbursement preferences of health plans are straightforward. The focus on value can improve consumer outcomes, reduce administrative complexity, and reduce health care spending. Some recent examples of reporting on the impact include UnitedHealthcare’s Bundled Payment Program For Joint Replacement Cut Readmissions 22%, 57% Of Hospitals Earned Medicare Value-Based Purchasing Bonuses For Fiscal Year 2018, and Humana Reports Lower Medicare Costs After Implementing Value-Based Payments For Physicians.
But the health plan executives I’ve met with talk about the problems in finding provider organizations that are willing to accept value-based reimbursement (VBR) contracts—either because the provider organization will not accept the proposed rates/service package that the health plan needs for a particular population, or because they don’t think the provider organization is “ready” to manage risk-based contracts.
On the flip side, my colleagues who are entrepreneurial executives of specialist provider organizations report tell me that it is not that easy to find health plans who are willing to accept their innovative proposals for value-based/risk-based reimbursement arrangements. Their perspective is that even within the same health plan organization, there is not alignment about the populations, the programmatic approaches, the reimbursement models, and the rates.
So how to navigate this seeming stalemate? I turned to a couple of my OPEN MINDS colleagues who were responsible for these arrangements at health plans. OPEN MINDS Senior Associate Darryl Donlin, formerly the Vice President of Network Operations with New Directions Behavioral Health, is a fan of “shadow testing” or piloting programs at a small scale with a fee-for-service (FFS) reimbursement model in place, before putting the health plan or provider organization at risk for the service model. He explained:
As a way to reduce fear, suspicion, and inexperience about committing to a value-based contract, I recommend shadow testing or piloting these concepts now, via FFS reimbursement. The term “shadow testing” means establishing a value-based reimbursement contract now as if it were live. However, it would use fee-for-service claims to measure the VBR performance. This approach provides a financially risk-free way to modify staffing training, clinical practice patterns, work flows, adherence to evidence-based practices, reporting, etc. It will help avoid potential growing pains a possible loss in revenue that may occur under a VBR contract without the necessary infrastructure to make it successful. This provides a safe, non-risk environment to work out any issues.
At the same time, it is important for your organization to demonstrate your ability to manage performance. This usually involves establishing process measures for management activities like scheduling a seven-day follow-up appointment after hospitalization for mental illness, notification of inpatient admissions, and depression monitoring via PHQ-9. And it involves measurement, including measuring reduction in 30 day readmission rates and seven-day kept appoints. Achieving improved outcome measures will be a by-product of following through on process measures.
Once provider organizations have shadow tested their plans, how do they speed this process with health plans to get a value-based contract? OPEN MINDS Senior Associate and former Senior Vice President of Network Strategy for Optum recommends asking four questions:
The savvy provider organization executive absolutely can speed up the process of executing value-based contracts with managed care plans—if you can “yes” to these questions:
1) Are you developing relationships and working with senior level health plan contracting staff? While managed care organizations are setting high goals to increase the proportion of medical costs tied to value-based reimbursement, the re-alignment and training of contracting staff may lag behind the company’s vision. Don’t discount the power of relationships.
2) Are you addressing the health plan’s pain points? This could be lack of psychiatric access, a need to expand outpatient medication-assisted treatment in key markets, and lack of services for specific specialty populations. The proposal has to resonate with what the health plan needs to meet their payer requirements, improve member outcomes, and achieve health care savings.
3) Does your proposal incorporate metrics that resonate with the health plan? Is what your collecting and offering consistent with the performance improvements expected by the health plan’s payers, such as HEDIS, or others that might be rewarded by state payers?
4) Are you taking into account that the health plan is looking for a net neutral approach to VBR? Since the goal of the VBR is both improved member outcomes and health care costs savings, the financial reward is most likely funded through targeted savings (e.g., reduced readmission, fewer hospital/residential days, and higher use of community-based resources). Does your proposal highlight health care cost savings potential as well as member outcome improvement?
I think the lesson should be taken to heart. Success with value-based arrangements can only happen if provider organizations are already stable—but “stable now” and “stable for VBR” aren’t the same thing. If your organization has never done this kind of work, sorting out a way to practice before putting your financials on the line might be a necessary step. A ~5% margin, good process management and productivity, a 95+% success rate with revenue cycle management, a solid marketing plan in place, and use of performance metrics to guide management throughout the organization will need to be mastered in real time (see The Value-Based Reimbursement Steeplechase).
For more specifics on the competencies required for value-base contracting, check out these articles from the May edition of the OPEN MINDS Management Newsletter:
- How To Prepare For Value-Based Reimbursement: Four Key Competencies For Success
- Value-based Proof Of Concept: Q&A With Orville Mercer, Chestnut Health Systems
- Managed Behavioral Health & Value-Based Reimbursement: Q&A With Allison Hill, Lakeview Center
- Finding A Value-Based Champion: Q&A With Andrew Vitullo, BioCare Recovery
And for more, join John F. Talbot, Ph.D., Chief Strategy Officer at Jefferson Center for Mental Health, and OPEN MINDS Advisory Board Member, on September 19 at The 2018 OPEN MINDS Executive Leadership Retreat for his session, “The New Leadership Challenge: Culture & Change Management In A Value Based Market.”