Dive Brief:

• Rural, critical access and safety net hospitals have not expanded initiatives to address social determinants of health in vulnerable patient populations, and some are implementing fewer such strategies, according to an analysis of survey data collected during the first year of the COVID-19 pandemic. Efforts to develop community partnerships especially have lagged.
• Insufficient financial and community resources, workforce constraints, limited institutional partnerships and a lack of incentives were among the possible explanations for the stalled momentum offered by researchers from the Harvard T.H. Chan School of Public Health and Brigham and Women’s Hospital.
• For state and federal policymakers looking to alleviate health inequities by implementing programs focused on social needs, addressing resource barriers that hospitals serving vulnerable populations face should be a priority, the researchers said in a report published in JAMA Health Forum.

Dive Insight:

The findings from Harvard and Brigham and Women’s follow years of increased attention to the importance of social determinants such as housing, employment, education and food security to patient health.

Previous research has found that social factors account for more variation in health outcomes than medical care does. The Affordable Care Act in 2010 mandated that tax-exempt hospitals conduct community needs assessments every three years and participate in community-level planning to improve health outcomes.

The new study tracks with research conducted at New York University that suggested a hesitancy to invest in social determinants programs, possibly due to limited evidence of their effectiveness. That report found U.S. health systems invested at least $2.5 billion in such programs from 2017 to 2019, but spending on community-based activities had not increased as of 2014 despite the ACA requirements.

Programs focused on social determinants for Medicaid patients may help reduce unnecessary healthcare use but can be expensive to operate, another study, published this summer in the Annals of Internal Medicine, showed.

In the latest research, the investigators looked specifically at how facilities that serve vulnerable populations are addressing social determinants of health, using data from more than 2,700 hospitals in a 2020 American Hospital Association survey. The results showed rural hospitals screened for a similar number of social determinants as urban hospitals but implemented fewer programs, interventions or community partnerships.

The level of screening at critical access hospitals was similar to non-critical access hospitals, but the former addressed fewer social needs and reported fewer community partnerships. Safety net hospitals also reported fewer community partnerships compared to non-safety net hospitals.

After several years of virtual JPMorgan Healthcare Conferences, the 41st annual event was back in person and in full swing. Thousands of attendees came together in San Francisco to close deals, find partners, announce big wins, and give us a preview of what’s to come in 2023 and beyond.  

Seventeen major health systems from across the country presented at the conference: large, national faith-based organizations like Common Spirit and AdventHealth; major regional players such as Baylor Scott & White and Intermountain; smaller regional health systems, such as INOVA; AMC-centric organizations like Indiana University Health and highly specialized providers, including musculoskeletal powerhouse, Hospital for Special Surgery.  

Aggressive Cost Cutting and Risk Readiness Are the Roadmap for 2023

Among the stories of resilience through COVID-19 and impressive transformations to expand access through digital health, a line was drawn in the sand. With only one exception, the health systems reporting the strongest and most consistent financial performance from 2020 to 2022 — with operating margins between 6% to 12% — either have sizable health plans or a significant number of covered lives in value-based or shared savings plans. 

Health systems that have not taken risk find themselves with more typical margins of 1% to 4% or, in striking contrast to those that have taken risk, reporting substantial operating losses. 

The health systems with the largest losses are launching or are in the early stages of major margin improvement initiatives. One national health system reported a $2 billion cost reduction target and are planning to use a “command and control” approach to the cost take-out effort they perfected during COVID-19 surges.

Among the largest health systems, leveraging scale to centralize core functions and provide a consistently high level of service was a key strategy, with the idea that being large only adds complexity and cost if health systems aren’t leveraging their scale. 

Every system, regardless of size, current risk profile or margin, is looking to round out their continuum of care, increase access and enable a frictionless patient experience to provide patients with the care they need in the right setting — in their homes, their neighborhoods, an ambulatory surgery center or the hospital. They are becoming “risk-ready,” in the words of a CEO who had not yet entered into risk contracts.  Many leaders referred to an “asset-light” digital strategy as a way to enter desirable markets with largely healthy populations. The health system leaders acknowledged the importance of partnerships with vendors, outsourcers, and post-acute providers to accomplish their goals, especially given the labor shortage.  

Have we reached the tipping point for broad adoption of value-based care? 

A skeptic would say that this is what you’d expect to see. Health plans and capitated revenue provided a great financial hedge as patients sought less care throughout the pandemic. High-margin elective cases were paused. Hospitals provided more low-margin but high-intensity care to millions of people, including many who lost insurance coverage. All the while, wage rates and supply costs were skyrocketing.

In principle, that’s true, but the attitude feels different now. With 48% of the eligible Medicare population enrolled in Medicare Advantage plans and, the CMS committed to having 100% of enrollees in a value-based care program by 2023, the tailwinds are pushing at-risk arrangements forward in a big way. 

Health system leaders are also pushing it forward. At least five presenting CEOs at the JPMorgan conference said that taking on full risk gives them the freedom to do what is right for the patient.  Not only does this encompass healthcare services as we typically think of them, but it also addresses housing insecurity, nutrition, and other social determinants of health. One CEO said that “taking risk for the health of underserved populations is the best way to provide the services that are needed.” 

With payer rates lagging behind the cost of care, many health systems are negotiating with payers off-cycle just to cover costs. Most health systems are asking for a couple of points of increase but are expecting to see escalating denials and underpayments that effectively offset the gains. Many health systems are asking for full risk. Most are also looking to grow, partner, or start health plans so that they can be paid the “full healthcare dollar” and can better manage their patients’ health.  

For-profit companies are also seeing the advantage of taking on risk

On the other side of the coin are for-profit companies. There are at least 10 companies that are enabling providers — typically primary care practices — to have data and a slick, automated workflow to successfully manage the care of enrolled patients so that they have fewer acute episodes, hospital visits and readmissions. Then there are companies that are taking full risk for typically challenging patient populations to manage, such as dual eligible Medicare/Medicaid patients, rural Medicare patients, veterans and even oncology and end of life care patients. Medicare Advantage and Managed Medicaid patients are the sweet spot for many of these companies, largely because there is so much opportunity to better manage their health conditions and social determinants of health issues.

Interestingly, payers are typically the buyers for these new products. These startups are taking full risk which most traditional healthcare providers have emphatically said no to — and are providing the patients with the care they need to stay healthy and out of the hospital.

The results are stunning. They show considerable savings for the covered populations and boosted patient satisfaction ratings. In most models, savings are shared among the companies and the payer or practices.  

Several of these companies said they’d thought about selling to health systems, and a few had attempted to do so, but all said that health systems are too slow to move and their “incentives are not aligned to work with ours.” The incentives issue was often around fee-for-service and driving volumes, not total cost, of care and outcomes. 

Given the clear shift toward wanting to take more risk and an openness to partnerships, this trend may change in the coming year, especially as Medicaid and Medicare reimbursement covers increasingly less of the cost of care. Why wouldn’t health systems want to keep these patients in their network, improve their health and reduce unnecessary hospital visits? Keeping those patients out of the “most expensive hotel room in town,” except for when they really need to be in the hospital, would open more capacity for patients who need really it and whose care would likely be reimbursed at a higher level. 

What’s different this time? Will we get to the tipping point? 

Health systems want to take on risk because it can be more financially advantageous and better for patients, but they often struggle to fund and put together all the pieces to really provide patients with the services they need to lead healthier lives — proactive, coordinated primary care, housing, food, transportation, behavioral health coaching, post-discharge management and more. They know they need partnerships to accomplish this at scale. 

Startups have the technology, care models, roles and workflows to manage even the most difficult patient populations. Moreover, they have ROI, better health outcomes and highly satisfied patients. But there are simply too many of these companies right now, with each focusing only on a subset of the population.  The thought of managing multiple vendors and having varied user experiences creates too much complexity for health systems and physician practices that may have different platforms for patients enrolled with different health plans. 

However, once there is consolidation in this space, and there certainly will be in the next two to three years, the tipping point will come quickly. Health systems — or payers, if the health systems don’t take the opportunity — will have the tools, data, and workflows to confidently take on risk. They will be able to provide lower cost, higher quality care that is easily accessed and actually improves the lives of the people who are in the care of the health system or enrolled in these health plans.

Dive Brief:

• CVS is partnering with Rush University health system in Chicago to coordinate care for Medicare seniors in a new accountable care organization based off CMS’ direct contracting model.
• Under the new partnership, patients getting care at MinuteClinics participating in the ACO REACH model in the Chicago area can get follow-up primary and specialty care with Rush, along with other ACO REACH organizations, CVS said in a release Monday.
• Rush will be the only Chicago-area academic medical center participating in CVS’ first accountable care organization in REACH.

Dive Insight:

The goal of the initiative is to strengthen care coordination for patients in a convenient way, according to Rush CEO Omar Lateef. Medicare patients will be able to get customized support, including home-based care, transportation support for annual wellness visits and cost sharing to help with co-pays.

“This provides another option for patients at a time when access to high-quality health care is more important than ever,” Lateef said in a statement.

The partnership builds on Rush’s experience with the Medicare Shared Savings Program, the biggest accountable care program in the U.S., CVS said. According to Mohamed Diab, the CEO of CVS’ accountable care division, it has the potential to improve longitudinal care for Rush’s population of 35,000 Medicare beneficiaries.

CVS joined ACO REACH in 2022, when the model was still known as direct contracting, and was grandfathered in to participate in REACH for the 2023 plan year. The company, which owns health insurer Aetna, covers beneficiaries in REACH in the states of Florida, Georgia, Illinois, Indiana, Kansas, Missouri, North Carolina and New York.

CVS covers more than 80,000 aligned beneficiaries in ACO REACH across more than 4,000 providers, and more than 800 MinuteClinic locations, according to its website.

The company has said it’s looking to acquire a primary care provider as it looks to create a vertically integrated healthcare giant comprised of a health plan, pharmacy, medical clinics and more. Bloomberg reported earlier this month that CVS is exploring a $10 billion deal to purchase value-based medical group Oak Street Health, though speculation has eased amid reports that the deal wouldn’t make sense for CVS financially.

Dive Brief:

• The CMS has proposed revised rules and regulations for insurers operating on Affordable Care Act marketplaces, including attempting to boost provider availability through revising network adequacy and essential community provider standards, according to the 2024 HHS Notice of Benefit and Payment Parameters proposed rule released Monday. 
• The proposed rule requires that all marketplace plans must use providers that comply with network adequacy and essential provider standards, removing an exception that those regulations don’t apply to insurers who don’t use a provider network. It also requires insurers to include at least 35% of providers in any given market into their networks.
• The proposed regulations come as ACA exchanges, spurred by financial incentives during the COVID-19 pandemic, reached record enrollment numbers this year.

Dive Insight:

The CMS has increasingly been aligning itself with health equity initiatives as the Biden administration heightens its healthcare oversight into social issues. Its proposed standards released Tuesday are an attempt to further the administration’s “goals of advancing health equity by addressing the health disparities that underlie our health system,” according to the agency.

Mental health facilities and substance use disorder treatment are also addressed in the rule, with the CMS proposing new insurer categories for mental health facilities and substance use disorder treatment centers.

The agency’s focus on mental health comes as other agencies like the HHS have released plans to better integrate mental health and substance use disorder treatment into the healthcare ecosystem. The COVID-19 pandemic has compounded the country’s mental health crisis, with President Joe Biden stating in his State of the Union address this year that nearly 53 million Americans in 2020 were affected by mental illness.

In addition to boosting provider availability, the CMS is proposing to limit the number of non-standardized plan options that issuers can provide on exchanges and increase the availability of standardized plans. Standardized plans are required to standardize their deductibles, out-of-pocket maximum and cost-sharing for plans with the same coverage metals.

The standardized plans are an attempt to help consumers make plan choices, according to the CMS, given that the average number of plans available on the ACA marketplace has increased from 26 in plan year 2019 to 114 in plan year 2023, resulting in “plan choice overload.”

In the proposed rule, insurers would only be able to offer two non-standardized plans at each network type per metal level on federal marketplaces.

For example, a plan would be limited to offering two gold health maintenance organization and two gold preferred provider organization non-standardized plan options in any service area in 2024 and beyond, according to the CMS.

The rule also proposes additional flexibilities for those losing Medicaid or Children’s Health Insurance Program coverage due to the end of the COVID-19 public health emergency. A recent analysis from the Robert Johnson Wood Foundation found that 18 million people and 3.2 million children would lose Medicaid coverage at the end of the public health emergency.

Enrollees who lose Medicaid or Children’s Health Insurance Program coverage beginning Jan. 1, 2024, will have 60 days before or 90 days after coverage ends to enroll in another Marketplace plan due to a special enrollment period. The proposed rule also allows marketplace plans to have the option of providing earlier coverage start dates for those anticipating a loss of health coverage who would otherwise experience a gap in coverage.

Dive Brief:

• Medicare Advantage's quality bonus program has had no observable difference in plan quality despite costly federal investments, a new study suggests, bolstering calls from some stakeholders to substantially revise or even eliminate the program altogether.
• The study published in Health Affairs Monday analyzed nine claims-based measures of quality for MA beneficiaries versus a control group of commercial enrollees. Program participation was associated with significant quality improvements among MA beneficiaries on four measures, significant declines on four other measures and no significant change in overall quality.
• The findings jibe with past research suggesting the quality bonus program has had little-to-no effect on quality, despite the government awarding MA plans about $30 billion in quality bonus payments through the program over its first seven years — hinting the American people may not be getting enough bang for their buck.

Dive Insight:

The government has publicly reported MA plan quality in the form of a star ratings system since 2007. Ratings range from one to a high of five stars based on plans' calculated performance across dozens of measures relating to preventative care, chronic disease management, patient experience and more.

Medicare introduced the quality bonus program in 2012. The program links financial bonuses to commercial insurers' quality performance in the increasingly popular MA program, which covers roughly 42% of all Medicare beneficiaries, as measured by star ratings.

Unlike other value-based initiatives in traditional Medicare, which are designed to be budget-neutral or lower spending, the quality bonus program actually sets aside additional funding for payers. The incentives are pricey, totaling $6 billion in 2019 alone and making up 2.3% of aggregate payments to private insurers in MA, according to the Medicare Payment Advisory Commission.

But despite the major investments in the program (and some overhauls to its incentive structure and performance measures), its efficacy has largely been unclear.

The new study analyzed insurance claims from 2009 to 2018, comparing changes in performance between millions of MA beneficiaries and a control group of commercial enrollees. It's the first evaluating the quality bonus program using a broad swath of performance measures and a control group, researchers said, and they found disappointing results.

The findings were consistent with other studies, including one from two years ago, finding the quality bonus program was associated with minor or no changes in quality.

"Given the massive incentives in the quality bonus program and plans' focus on star ratings, it is perhaps surprising the program was not associated with improvements in quality," the University of Michigan researchers said.

There are myriad possible reasons. Plans may be more focused on the nonclinical administrative measures that contribute to star ratings, such as customer service, that they have more control over and still contribute 25% of the weight for star ratings calculation. Or, it may be difficult for plans to pass down incentives to physicians, who may have a more direct impact on quality of care.

The study backs arguments from some Medicare watchdogs, including MedPAC, that the quality bonus program could use a substantial facelift to address key deficits in the current rewards model and move it toward budget neutrality.

That recommendation is further supported by other recent studies finding that doubling bonuses in certain counties didn't increase enrollment or quality, but did result in payment disparities to plans.

Winnowing unnecessary spending in the Medicare program is looking increasingly important as the trust fund that finances Medicare's hospital benefit is expected to run dry in just five years, absent legislative action. Currently, program spending is expected to balloon from 4% of the country's gross domestic product to 6.2% by 2045.

According to Congressional Budget Office estimates, eliminating benchmark bonuses would reduce Medicare spending by $94 billion between 2021 and 2028.

Dive Brief:

• Most physicians in group practices owned by health systems are paid based on the volume of care they provide rather than value, despite payer efforts to move toward more value-based care, according to a study published Friday by the nonprofit Rand Corporation and published in JAMA Health Forum.
• Volume-based compensation was the most common type of base pay for more than 80% of primary-care doctors and more than 90% of specialists at medical practices owned by health systems, according to a survey conducted between November 2017 and July 2019.
• Systems still used financial incentives for quality and cost performance measures, but the percentage of total physician compensation based on quality and cost was just 9% for primary-care providers and 5% for specialists, according to Rand.

Dive Insight:

Public and private payers in recent years have pushed for payment reforms encouraging providers to improve care quality and slow spending growth by making care more value based. Still, physicians overall still are paid primarily based on volume rather than the quality and value of healthcare services provided, according to the Rand study.

"The payment systems that are most-often in place are designed to maximize health system revenue by incentivizing providers within the system to deliver more services," Rachel Reid, the study's lead author and a physician policy researcher at Rand, said in a statement.

Researchers examined physician payment structures used in 31 physician organizations affiliated with 22 health systems located in four states. They also interviewed physician organization leaders and surveyed practices to characterize compensation arrangements for both primary care and specialty physicians.

Physicians most commonly reported increasing the volume of services performed as a way to increase their compensation, with about 70% of practices following those plans, and in those cases, incentives based on volume accounted for more than two-thirds of their compensation.

While incentives based on clinical quality, cost, patient experience and access to care also were commonly included in physician pay, those payments represented a small fraction of doctors' total compensation and are "likely to only marginally affect physician behavior," the study said.

"For the U.S. healthcare system to truly realize the potential of value-based payment reform and deliver better value for patients, health systems and provider organizations will likely need to evolve the way that frontline physicians are paid to better align with value," Reid said.