If you are at the helm of a provider organization, the slow march towards value-based reimbursement (VBR) is familiar territory by now. But in the latter half of this year, we’ve seen new movement from payers and health plans that indicate the pace seems to be accelerating.
There has been a consistent uptick in the number of health plans that have adopted VBR—and the volume of their reimbursement models that are shifting to VBR. A Healthcare Financial Management Association (HFMA) survey found that health plans’ use of value-based mechanisms has doubled since 2015 from 12% of all payments to 24% of all payments (see HFMA Executive Survey: Value-Based Payment Readiness). In addition, in 2018 survey, about 46% of provider organization executives expect that value-based reimbursement will increase profitability, up from 23% just two years ago (see 46% Of Health Care Leaders Expect Value-Based Reimbursement To Increase Profitability).
In addition to more health plans using value-based reimbursement models, the proportion of provider organization payments in these models is on the increase. For example, United Health Group (UHG) reports that year-to-date, half of its reimbursements are through value-based care (VBC) models, amounting to $69 billion in value-based contracts for the first nine-months of 2018. By 2020, UHG plans $75 billion in reimbursements through value-based care models (see UnitedHealth Moves Half Of Reimbursement To Value-Based Models). And this month, Humana announced that 66% of their Medicare Advantage members were affiliated with physicians in value-based arrangements (see Humana: The Intersection of Health + Care). This year they also expanded specialty programs relying on value-based arrangements-including their Medicare Advantage bundled payment model for join replacements and their bundled payment initiative for pre- and post-natal maternity care (see Humana Expands Value-Based Orthopedic Specialty Care Model To Seven More States and Humana Launches Bundled Payment Model For Maternity Care).
The health plans are also extending VBR to pharmaceuticals and medical devices. For example, UPMC Health Plan recently announced two new initiatives with pharmaceutical companies-tying reimbursement to performance outcomes among members prescribed medications. In August, UPMC announced a value-based contract with Alkermes for VIVITROL®, a long-acting injection of naloxone for medication-assisted addiction treatment (MAT). Reimbursement will be linked to positive clinical outcomes among UPMC Health Plan members who use the drug (see UPMC Health Plan Enters Value-Based Contract With Alkermes For VIVITROL®).
And in September, UPMC announced it started a value-based contract with Boehringer Ingelheim for Jardiance, an oral medication to reduce the risk of cardiovascular death in adults with type 2 diabetes and established cardiovascular disease (see UPMC Announces Value-Based Care Contract With Boehringer Ingelheim For Jardiance). The contract, which goes live in January, links reimbursement of the drug to costs associated with clinical outcomes among UPMC members who use Jardiance. Reimbursement for the medication will be linked to total costs of care for all people with diabetes treated and UPMC Health Plan will engage all stakeholders to create a wraparound care model to ensure maximization of treatment and removal of many of the traditional barriers to care.
Why this acceleration? There are a few factors at play. First, after years of testing VBR models, health plans can now take those arrangements to scale. Recent studies have shown that VBR is producing positive results when it comes to reducing costs and improving performance outcomes. Humana recently reported that their Medicare Advantage value-based arrangements resulted in improved preventative care, reduced emergency room admissions, and reduced hospitalizations-and about a 15% reduction in costs compared to traditional fee-for-service reimbursement models (see Humana’s Investment in Holistic, Value-Based Care Improves Care and Health of MA Members and Value-Based Reimbursement Reduces Costs 15.6%, Improves Quality).
Second, federal and state policy is leading the charge towards more VBR, leaving many health plans no choice but to follow. In recent months, Centers for Medicare and Medicaid Services (CMS) has even been throwing around the word “mandatory” in relation to VBR. Just last month, the U.S. Department of Health and Human Services (HHS) announced that it intends to launch new mandatory bundled payment models in the near future (see HHS To Launch New Mandatory Bundled Payment Models). While the HHS didn’t provide any additional information about what this mandatory bundled payment models would actually be, it did announce four primary objectives for the model: empowering consumers, holding provider organizations accountable for navigating the health system, paying for outcomes, and preventing disease before it occurs.
This push towards VBR from health plans means that provider organizations need to ramp up their preparations and position their organization to compete in this new market. Finding a place in these new VBR models is the number one strategic priority facing health and human service provider organizations. And successfully meeting that priority will mean understanding that VBR readiness isn’t about believing in the idea-it’s about preparing for a complex payment mechanism that will demand sweeping changes to an organization’s culture, contracting, staffing, workflows, and operations. (To see if your organization is prepared to make the shift, check out our new Value-Based Reimbursement Readiness Assessment—available at no charge to all Elite OPEN MINDS Circle members.)
I think the comments from Christine Marsh, Vice President for Market Access at Boehringer Ingelheim Pharmaceuticals goes a long way at framing the implications for specialty provider organizations. Referring to their relationship with UPMC, she said, “Through this unique partnership with UPMC Health Plan, we have the potential to systematically change the way people are treated.” And with that change lies new opportunity.
For more on specialty provider organization participation in VBR arrangements, don’t miss the release of our 2019 survey on February 14, 2019 at The 2019 OPEN MINDS Performance Management Institute. (To look at last year’s survey results, check out The 2018 OPEN MINDS Performance Management Executive Survey: Where Are We On The Road To Value?.) And to find out how ready your organization is for the era of VBR, join me on February 14 at The 2019 OPEN MINDS Performance Management Institute at our session, “Have You Optimized Your Organization For Value-Based Reimbursement? The OPEN MINDS VBR Assessment,” featuring John F. Talbot, Ph.D., Chief Strategy Officer, Jefferson Center for Mental Health and OPEN MINDS Advisory Board Member; and Donald J. Dauman, MBA, LCSWR, Chief Financial Officer, Spectrum Health & Human Services.