Most executive teams of specialist provider organizations think of value-based reimbursement opportunities in terms of new payment models for their current services—case rates for an acute episode or monthly payments for care coordination. But for any provider organization that has a demonstrated track record in coordinating care for consumers with complex needs, I think there are some interesting opportunities on the horizon for an executive team that also has a more entrepreneurial bent. The opportunities fall into the near term and long-term.
The “down the road” opportunity is the (very slow) move to value-based reimbursement for devices and medications. One of the most recent examples is Pennsylvania-based health system/health plan Geisinger, and Medacta International, hip replacement device vendor. Geisinger, in coordination with Medacta, is launching a pilot program to cover consumers’ lifetime costs for hip replacement surgery. Under this pilot program, Geisinger Health Plan members who undergo hip replacement surgery utilizing the Medacta device will be eligible to receive future surgical revisions at no charge when all services are delivered by Geisinger provider organizations. These costs will be proportionally shared between Geisinger and Medacta International, including the device itself and all hospital costs (see Geisinger Launches ‘Guaranteed For Life’ Hip Replacement Pilot Program Through Partnership With Medacta).
There is also a growing trend to utilize value-based contracting for medications. For example, Harvard Pilgrim health plan as twelve different outcomes-based contracts in place for medications. In one, Harvard Pilgrim pays Eli Lilly a lower price for its Type 2 diabetes drug Trulicity if patients do better on competing diabetes drugs (see Value-Based Contracts Key To Solving U.S. Drug Pricing ‘Crisis’). And, in April, both Harvard Pilgram and Highmark health plans announced separate partnerships with AstraZeneca to monitor outcomes of health plan beneficiaries who are taking asthma medication, Symbicort. If beneficiary outcomes are not as expected, AstraZeneca will provide the health plans with savings (financial details of the arrangements have not been released, see Highmark Health strikes outcomes-based contract for asthma drug and Pushing ‘value,’ Harvard Pilgrim tests outcomes deals).
New medications with high prices are also using outcomes-based pricing to address “sticker shock.” A great example is Luxturna, a one-time gene therapy treatment for retinal dystrophy which costs $850,000 ($425,000 per eye). Harvard Pilgrim negotiated a contract with manufacturer Spark Therapeutics for a cost that is dependent on sight improvements in the beneficiaries at 30 to 90-day intervals and at a 30-month benchmark. Essentially, if a Luxturna treatment fails, Harvard Pilgrim would receive a rebate (see Outcomes-Based Contracts Offer Payers New Pharmaceutical Options). Another example is Novartis’ Kymriah, with a list price of $475,000, which developed a contract with CMS based on outcomes achieved for pediatric and young adult leukemia patients by the end of the first month of treatment. Novartis will only receive reimbursements for Kymriah if patients respond to it after the first month of treatment (see Drugmakers See A Pricing Blueprint In An $850,000 Gene Therapy and Is $475,000 Too High a Price For Novartis’s ‘Historic’ Cancer Gene Therapy?).
The “here and now” opportunity is the Centers for Medicare & Medicaid Services (CMS) bundled rate initiative for Medicare, which pays for acute care hospital stays and related post-acute services through episodic payment mechanisms, and depending on the model, bundles include designated episode lengths of 30, 60, or 90 days. Essentially, health systems are assuming more risk for the entire episode of care – not just the acute inpatient stay. (For a look at the list of covered procedures and conditions, check out Bundled Payments for Care Improvement (BPCI) Initiative: General Information).
What does this mean? For device makers and pharmaceutical companies, there are three paths. The first is to take on risk for the medications and devices across the market (see The Chain Continues – Value-Based Payment Moves To Devices & Pharma). The second path is for pharmaceutical and device companies to form more cooperative relationships with provider organizations and payers to assume ‘best practice’ use of the intervention. And third, the vertical integration that is creating integrated and exclusive provider networks expand to include specific pharmaceutical agents and devices (see Catching The Wave). And, for the health systems enrolled in the bundled rate initiatives, strategies to decrease readmissions and the use of more expensive post-acute care settings are keys to success.
If you’re one of those executives with a behavioral health provider organization, you may be asking yourself exactly what is that opportunity here? The short answer is that the success of most medical interventions—whether hospital-based, medication, or device—is dependent on consumer activation, consumer engagement and motivation, consumer mental health, consumer use of addictive substances, and consumer connection with social services. These are skill sets where physical health professionals (and organizations) specialists have a limited repertoire and a collaborative relationship with an organization with behavioral health expertise could be great for all stakeholders.
To pursue these types of opportunities requires a measured approach. First, are these types of collaborations a service area of strategic interest to your organization? What would the ideal service package concept look like? Second, who are the “players” in your service area that are participating in the CMS Medicare bundled rate initiatives (these are likely hospital-owned integrated delivery systems and Medicare ACOs) or health plans with outcomes-based contracting for medications or devices? Third is market research—are any of those “players” interested in care coordination/wrap around services for this population? If so, how similar or different are their needs from your ideal program? Fourth, is the opportunity worth the expense of developing a specialized program and a “proof of concept” pilot program in conjunction with the health plan or health system? While these are complicated questions to answer, for the right behavioral health organization, they represent a great market opportunity. For too long, executives of behavioral health organizations have said they need to get past just getting paid for the behavioral health services and are in the value they bring to the health system. This is one of those opportunities.
For more, check out The Value-Based Reimbursement Steeplechase and The Chain Continues – Value-Based Payment Moves To Devices & Pharma. And be sure to join my colleague, OPEN MINDS Advisory Board Member Richard Louis, III on September 17 for his 2018 OPEN MINDS Executive Leadership Retreat Executive Seminar, “How To Build Value-Based Payer Partnerships: An OPEN MINDS Executive Seminar On Best Practices In Marketing, Negotiating, & Contracting With Health Plans.”