Value-based reimbursement is the talk of the town. In March, HHS announced the agency reached its goal of tying 30% of Medicare payments to alternative payment models valuing quality over quantity of care. The agency attributes the figure (ahead of its year-end goal) to changes made via the ACA. Additionally, HHS’ sister organization CMS highlighted last week how Aetna has set a goal to have 75% of its spending to go through value-based contracts by 2020. While some have given a side-eye to that projection, it does speak to the rallied efforts backing behind value-based reimbursement (VBR).
Two recent studies anchor this movement toward VBR. Results from a recent Merritt Hawkins survey of 3,342 physicians and advanced practitioners found physicians “typically are paid on value/quality through production bonuses that feature metrics such as patient satisfaction, Meaningful Use, and others.” In the 2016 review, value/quality metrics accounted for 29% of the total bonus amount for respondents and for about 6% of total compensation. Forbes’ Bruce Japsen noted the 6% figure is up from 5% in 2015.
More payments are being made to physicians via value-based reimbursement models but fee-for-service (FFS) is still the lay of the land. However, Andrei Gonzales, MD, director, value-based reimbursement initiatives at McKesson Health Solutions, doesn’t think that’s indicative that VBR is struggling; he sees it as being consistent with HHS’ goals. The agency has set the goal of tying 50% of traditional Medicare payments to alternative payment models – including ACOs and bundled payments – by the end of 2018. HHS also set a goal of tying 85% of all traditional Medicare payments to quality or value by 2016 and 90% by 2018 through programs such as the Hospital Value Based Purchasing and the Hospital Readmissions Reduction Programs.
In a recent survey of 465 payers and hospitals commissioned by McKesson – released this Monday in concert with AHIP’s institute and expo this week – payers are reporting they are 58% along the continuum towards full VBR, a 10% increase since 2014. On the hospital side, 50% are reporting they are along the value continuum, up 4% since 2014. “We really think VBR is clearly at a tipping point where it’s gone beyond an early experimentation stage and is now entering more of a scaled implementation phase,” Gonzales told Healthcare Dive. “Certain components of those two groups are actually further along the continuum depending on some of their regional aspects.”
Looking to the next five years, payers estimated nearly 60% of payments will be a mix of capitation/global payments, pay for performance (P4P), and episode of care/bundled payments, with bundled payments growing fastest. Health plans project bundled payment will grow 6%, edging ahead of capitation/global payment and shared risk growth. Both hospitals and payers project bundled payment will top 17% of medical payments.
While there is progression and growth, there's a realistic view of the challenges to the alternative models, Gonzales notes. Just half of payers and only 40% of providers say they’re ready to implement bundles, and only a quarter have the tools in place to automate these complex models.
Network management at a glance
Network management, a key component of VBR, is also changing dramatically. According to McKesson's study, over 60% of payers have changed network strategy since 2014, with 53% using tiered and 42% using narrow networks now. Over 80% say they’re more selective about who’s in their networks, with care quality the top criteria at 75% of payers. But hospitals say these network strategies are driving up patient confusion, denials, directory inaccuracies, referral management problems, and network leakage.
While some of the pros of VBR are inherent – providers performing better on a number of measures – Gonzales acknowledges some downsides to VBR models can arise with access to healthcare services if a provider is dropped from a network. If a patient establishes a relationship with a provider, it can be disappointing if the provider is dropped from their network due to underperforming among its peers or a problem with costs.
Coordination challenges, IT solutions?
VBR’s rise is also intensifying system complexity, as evidenced by the finding that the majority of providers are not meeting their goals, according to the study. Of the metrics in place for measuring VBR success, 22% of hospitals are meeting their goal to reduce administrative cost of care, 26% are meeting goals to lower healthcare costs, 30% are meeting care coordination goals, and 40% are meeting goals for improving patient outcomes.
While hard to put a number on it, VBRs largely involve health IT efforts. Gonzales stated in the early stages of health reform (the last 4-5 years), many of the efforts had been manual or small scale pilots. Now, health IT is seen as a way of automating processes which work.
Gonzales points to how ACOs got their fair share of negative press as organizations dropped out of the ACO Pioneer Program. “What’s happening is the programs that worked well are now propagating and growing as programs that didn’t work are being sidelined and shut down,” Gonzales said, adding health IT can become a tool in automating those programs that have proven themselves to work. Last March, CMS announced it would launch a new Next Generation ACO Model to build on the experiences of leading Pioneer ACOs.
“What you want to do is [experiment] and figure out which models work. Then, if you start to scale that's where you need health IT,” Gonzales said. “And that's the phase we're in right now.”
In the study, both payers and providers noted automating VB payment reconciliation is the highest priority for tools they'll implement in the next 2-3 years. Other IT related capacities they’re looking towards are automation of shared risk and quality, VB payment modeling, and automation of retrospective and prospective bundled payments.
“Health IT is critical for scaling but another area where it's really important is insights,” Gonzales said. This includes the ability to pull together claims, quality data necessary to analyze performance and look for improvement opportunities. Gonzales notes insight is critical for successful health systems.
To help scaling VBR, Gonzales notes there needs to be more collaboration between payers and providers via a continuation of what’s already occurring with data-sharing. In addition, he adds organizations should put the tools in place to automate the programs that are clearly growing to scale.