To what extent is value-based reimbursement really happening? And is it working for payers? For provider organizations? It’s hard to tell given different surveys with widely varying results published within the last couple of months. Here’s what we know (or don’t)…
First, provider organizations report widely fluctuating rates of payment via value-based reimbursement. Earlier this year, OPEN MINDS surveyed provider organizations about payment via value-based reimbursement – and found that only 15% of health and human service provider organizations reported having some payment through pay-for-value arrangements (see Where Are Behavioral Health & Social Service Organizations With Value-Based Reimbursement? The Numbers Are In). Other surveys have reported different results. Two-thirds of respondents to Modern Healthcare’s annual Hospital Systems Survey reported that either 0% or 1% of their net patient revenue was generated from risk-based contacts (see Under Construction: Risk-Based Reimbursement). This contrasts with a recent study from ORC International where hospitals reported that half of their business was via value-based reimbursement, up from 46% in 2014 (see Value-Based Reimbursement Models Used For Over Half Of Health Plan Payments). Interestingly, all of these studies were published in just the past few months.
Second, for service provider organizations, value-based reimbursement can threaten margins – and outcomes have come into question, too. KPMG released survey data earlier this year showing that 52% of provider organizations with value-based contracts in place expect those contracts to lead to a drop in operating profits (see Healthcare Organizations More Pessimistic About Value-Based Healthcare: KPMG Survey). And an earlier study published in Health Affairs found that while performance scores among hospitals participating in pay-for-performance projects were higher than a comparison group in the beginning of the project, in the long-term, performance scores evened out. The net effect was that hospitals participating in the pay-for-performance projects had performance that was even with those not participating (see The Effect Of Pay-For-Performance In Hospitals: Lessons For Quality Improvement).
Third, the experience of accountable care organizations (ACO) is variable. Among organizations participating in the Medicare accountable care organization (ACO) programs, there were a range of winners and losers in the initial round of payments. About 25% of Medicare accountable care organizations (ACOs) earned shared savings bonuses for their 2014 financial and quality performance. In total, 97 of the ACOs that generated savings above their savings threshold and met quality standards qualified for shared savings payments of more than $422 million in savings (see About One-Fourth Of Medicare ACOs Earned Shared Savings Bonuses).
But, of the 34 ACOs that signed up to participate in the Pioneer model, 19 left the program. Those that left made the decision in part due to a lack of shared savings or worse, having to share in losses (see How Is The Medicare ACO Performance Payment System Structured?: An OPEN MINDS Market Intelligence Report, Half The Pioneer ACOs Have Left The Program, Some Gearing Up For Next Generation ACO Program, and ACO Results: What We Know So Far). A National Association of ACOs survey reported that 43% of ACOs in Track 1 of the MSSP (which features shared savings opportunities but no down-side risk) would leave the program if it required down-side risk – meaning the ACO would be responsible for paying CMS for a portion of ACO beneficiary expenditures if the expenditures exceed the benchmark and the minimum loss rate (see ACO Cost & MACRA Implementation Survey).
What’s going on with these numbers?
We know that value-based arrangements are certainly working for some organizations, and that despite the challenges, it remains a key goal for all the major payers. What separates a successful shift to value from an unsuccessful one, is an organization embracing a new way of doing business – from top to bottom. From a strategic perspective, having a culture that embraces change is key. From an operational perspective, the organization must have an infrastructure geared toward value and improved outcomes. This includes changes to clinical workflows; adoption of team-based, person-centered care management practices; and having access to the right data and meaningfully using that data to produce improvements in care.
The improved use of data is key – from accessing data, to using data for operations and decision support, and to using data for reporting outcomes to payers and consumers (see The Business Model Transition To Value-Based Care). Provider organization executives must have the right data on their patient populations to inform a better understanding of their overall health, must use that data to inform a patient-centered care management plan, and must be able to use data to track their progress toward care management goals. But the issue of data is a common hang-up every step of the way. It starts with the contracting process between payers and provider organizations – among health systems that responded to the Modern Healthcare survey, the two most common reasons given for delaying the adoption of value-based models were an aversion to risk and the inability to find a payer willing to share data needed to negotiate fair contracts. From there, provider organizations struggle to combine fiscal and clinical data in a meaningful way that will allow them to use data to analyze performance and develop and implement solutions (see What Do You Need To Demonstrate & Manage Your Value?).
We are in the midst of the transition of one of the largest components of health care spending from volume to value – the Medicare fee-for-service program. Federal Department of Health & Human Services Secretary Sylvia Burwell is overseeing a monumental shift of at least 50% of Medicare payments tied to alternative payment models or population-based models by the end of 2018. Interestingly, many professsionals are not aware of this, according to a recent study by Deloitte (see: Deloitte: Only Half of Physicians Have Heard of MACRA). Like previous Medicare reforms, this one promises to bring the rest of the field with it. Key to making these goals a reality is improvements in access to and meaningful use of data (see Medicare Bets Big On Pay-For-Value).
For more examples of the payer/provider partnerships in value-based contracting arrangements, join Deborah Adler, Senior Vice President of the Network Strategy Department, Optum and Maurice Lelii, Vice President of Outpatient Services at Gracepoint, Inc. for a free web briefing from PsychU on August 4 – Paying For Value In Mental Health Services: Perspectives From The Field.