Value-based payment update: Where we are and who is most successful

Healthcare expenditures are already at nearly $10,000 per person annually, accounting for 17.8% of the Gross Domestic Product, according to CMS. Costs are projected to grow another 1.2 percentage points each year, ballooning to 19.9% of the GDP by 2025.

It’s now clearer than ever that something’s got to give. The solution, however is less clear. Many in the industry point to value-based reimbursement models, which tie payment to quality of care. These include payer programs that reward hospitals for decreased readmissions and reduce payments for hospital-acquired infections or injuries. Other more formal arrangements include bundled payments and accountable care organizations (ACOs).

While these types of programs have been in place for several years, it can be difficult to gauge who is using them and how, and whether they are achieving their intended goal. Our experts weigh in.

Who is using value-based pay?

Andréa E. Caballero, program director at Catalyst for Payment Reform (CPR), an independent nonprofit working to improve payment models, says national results collected by the agency on payment reform for 2014 show that about 40% of commercial payments to physicians and hospitals included a quality component, compared to 11% in 2013 and just 1% to 3% back in 2010 when the organization conducted a more informal study.

“The increase from 2013 to 2014 suggests rapid growth in implementing payment reform. In 2016, the Health Care Payment Learning and Action Network (LAN) released a study announcing that 25% of payments to doctors and hospitals are in alternative payment models (APMs), which are more advanced, population-based methods,” Caballero says. “On its face, this seems lower than CPR’s national results, but it’s important to note that the methodology is different.  Most notably, the LAN results do not include pay-for-performance. We are seeing a move toward methods that hold providers accountable for their population’s care and a transition away from traditional fee-for-service; however, it is important to note that many APMs are still built on a fee-for-service architecture or chassis.”

Caballero notes that LAN is expected to release updated results later this year, and says CPR expects national results to be upwards of 40% based on the growth rate in 2013 and 2014.

These figures are in line with data collected from physicians. According to the “2016 Survey of America’s Physicians: Practice Patterns and Perspectives” from The Physicians Foundation, 42% of the more than 17,000 physicians polled reported having their compensation tied to quality or value-but 12% weren’t even sure if they participate in a value-based model.

“The fact that over 12% of all respondents are unsure whether they receive value-based payments underscores the continued novelty of these payment models in the eyes of many physicians,” the report notes.

In terms of alternate payment models, 55% of the physicians polled participate in the Physician Quality Reporting System (PQRS), 36% participate in an ACO, and 75% participate in patient satisfaction surveys.

The survey found that physicians employed within a hospital system were more likely than independent physicians or practice owners to be involved with a value-based payment model, and primary care physicians were also more likely than specialists to receive value-based payments. Of those physicians who do participate in value-based programs, most have 20% or less of their income tied to these models, according to the report.

In 2016, the Health Care Transformation Task Force released similar results from its own study, reporting that 41% of its member providers and payers were involved in value-based contracts, up from 20% in 2014.

Physicians are also facing the Medicare Access and CHIP Reauthorization Act (MACRA), which replaces the beleaguered Sustainable Growth Rate (SGR) formula for determining physician reimbursement through Medicare. MACRA requires physicians billing Medicare to participate in either a Merit-Based Incentive Payment System (MIPS) or an Alternative Payment Model (APM). Both contain value-based components, and will likely be emulated by private payers. Still, The Physicians Foundation report found that physicians are largely unaware and unprepared for these changes-more than half of those polled were unfamiliar with MACRA.

The Physicians Foundation report also indicated that physicians have little confidence in or knowledge about many of the value-based programs and don’t believe ACOs will benefit the system in terms of quality or cost.

“The survey strongly indicates that considerably more physician support and participation will be required to achieve the goals of healthcare reform and to transform the healthcare system from one based on volume to one based on value,” the report notes.

Still, CMS champions the move to value-based payments, and celebrates the fact that the agency met its goal to tie 30% of reimbursements to alternative payment models by the end of 2016 nearly one year ahead of schedule-up from 20% in 2014. The agency hopes to increase this percentage to 50% by the close of 2018.

Medicare ACOs saved $411 for CMS in 2014 alone, hospital-acquired conditions dropped by 17% from 2010 to 2014 to the tune of $20 billion in savings, more than half a million readmissions were prevented between 2010 and 2015, and Medicare spending is starting to slow down, according to CMS.

Next: Which models work best

Which models work best

As far as which models are most successful, Caballero says that’s more difficult to discern. “While we have a solid idea of where the nation is in its adoption of payment reform models, we do not have great insight into the models that are most successful,” she says. “It has been challenging to learn what payment reforms are working because there is a lack of independent, consistent, evaluation on the programs. We hope to build the demand for evaluations of payment reform programs so we can learn what works, what doesn’t, and why.”

Overall, she says most models still rely on a fee schedule where providers are paid a certain amount for every test, procedure, or service. These models, however, also incorporate quality measures that assess the providers’ performance in a variety of areas, and performance on those measures is then translated into some type of bonus or incentive payment.

New grant funding will allow CPR to begin tracking the impact of payment report in its research. “Our goal is to examine how the increasing prevalence of payment reform correlates with cost and quality outcomes,” Caballero says. The pilot study will investigate data from three states initially, with results expected in summer or fall of 2018.

In terms of value-based payment’s impact on quality of care, The Physicians Foundation report revealed concerns about the patient satisfaction element of value-based scoring.

“Many physicians who added written comments to the survey express the belief that patient satisfaction is not a valid method for assessing physician competence, and that such a rating method encourages doctors to tell patients what they want to hear rather than what they need to hear,” the report notes.

When it comes to cost, while results are preliminary in most areas, it seems that a focus on value-based payments are at the very least encouraging the industry to take a closer look at reimagining its processes.

Cheryl L. Damberg, PhD, MPH, principal policy researcher at the RAND Corporation, RAND distinguished chair in healthcare payment policy, and professor at the Pardee RAND Graduate School says there has been major progress on bundled payments. There is now monitoring of both hospital and physician performance in this scope, so that the result isn’t just lower cost, but also better care coordination.

“I think bundled payments potentially can work and try to improve the coordination between different providers,” Damberg says, noting there has traditionally been some operational challenges when it comes to implementing bundled payment programs. “I think that there’s great opportunity in the area of bundled payments once people work through some of these operational issues, and there is a lot of promise for improved coordination.”

Next: Central question to answer

The central question to answer

Francois de Brantes, MS, MBA, vice president and director of Center for Value in Health Care at Altarum Institute, says the impact of value-based programs depends on a host of factors, but mostly how risk is managed.

“Value-based payment models at the core are really an attempt to transfer a certain amount of financial risk to the physician, hospital or health system from the payer,” de Brantes says. “How those programs end up being designed and what they accomplish through those designs may or may not be consistent with the objective, which is to transfer a reasonable amount of manageable risk.”

To successfully use value-based reimbursement, providers and payers must first define how risk will be managed. Is the provider going to assume all or just some of the total cost of a patient? Who’s going to take on the most risk? What other conditions will be included?

For the most part, he says, commercial health plans have a variety of primary care-focused, value-based contracts in place and they are typically upside only, meaning that providers can earn incentives for meeting benchmarks but won’t be penalized if they don’t. The focus of these agreements is to beat some defined total cost of care trend rate with the assumption that the primary care provider can control the cost over a population of patients. Because these agreements are upside only, de Brantes says most physicians are not hesitant to sign up.

“There’s no financial risk to going above the target,” says de Brantes. “If you beat the target, you get to share in the savings. If you don’t beat the target, you don’t lose.”

The problem with these types of agreement, he says, is that it’s not clear how they are improving quality or cost of care or helping costs on a larger scale.

“Payers recognize that if all you do are upside only deals, you just end up spending more money. “It’s a little like a casino, where the casino pays out all the winners and never collects on the losers,” he says. “Upside-only deals are great for providers, not so great for those who pay the bills.”

De Brantes estimates that perhaps 90% of pay-for-performance contracts are upside only, and cautions that the money to pay for these incentives must come from somewhere. If it’s a wash when viewed against any cost of care savings, then there is little benefit other than perhaps better care or outcomes for the patient.

MACRA could change all that, de Brantes says, because it will push providers to accept contracts with some downside risk. “They have to accept downside risk or they have to stay in the mix portion of MACRA designed to keep [fee] schedules at the level they are at, potentially penalizing some physicians.”

Within a few years, he says, penalties will be levied against providers who don’t have a little skin in the game, and de Brantes says more physician practices are seeking out contracts “with teeth” that include downside so that they can tailor the agreement to their own terms, not CMS’ or other payers’.

“You wait around then it’s going to be like the old saying that you’re either the master of your destiny or someone will control it. And the someone else in this case is the federal government,” de Brantes says.

Upside only arrangements have failed to engage clinicians effectively, he says, because there is nothing to lose.  “If I spend a whole bunch of time in my practice getting a [Patient-Centered Medical Home] certification, I spend some time getting that done but at no point are my contracts putting me at some kind of financial risk,” de Brantes says. “Once that changes, your attention to the program and what you need to do to transform your practice and improve the way you deliver care just changes dramatically.”

Because many of the current value-based arrangements are upside only, de Brantes says it’s also been difficult to measure their effect on outcomes since there is little impetus for change. Providers and payers must work together to define their relationships and roles. Payers need to provide practices with data and support so that caregivers can target improvements.

“All those things that very few have paid attention to in this upside-only world, need to be part of the conversation, and I think one of my observations is that because these negotiable parameters have not been part of the discussions there is such hesitation among providers to take on financial risk,” de Brantes says. “It’s kind of silly, these are just common sense and plans need to engage their network in these discussions, bring them data, show them financial scenarios, and show them ‘what if’ scenarios. This is kind of simple math, but until such time as the payers bring those financial modeling tools to the physician offices with whom they’re negotiating, there is going to be a certain degree of hesitance.”

Rachael Zimlich, RN, is a writer in Columbia Station, Ohio.