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Developing Value-Based Payment Models

By Christopher Cheney  
   October 14, 2015


Embracing bundled payments

CHI has a shorter historical experience delivering value-based care than Dartmouth-Hitchcock, but the multistate health system is operating with a similarly broad set of value-based payment models.

Stanley says about 30% of CHI's healthcare service revenue is linked to some form of value-based payment, with more than 400,000 patients receiving care through value-based payment models such as Medicare Advantage, bundled payments, the managed care program for CHI employees, and direct managed care contracting in the employer-sponsored group insurance market.

He says bundled payments tied to episodes of care have been among the most rapidly adopted value-based payment models at CHI. "They really resonate well with our clinical staff and our administrative staff. We've been able to gain more traction in our organization in this area."

Bundled payments are relatively easy for all of the key clinical and administrative players to comprehend and operationalize, Stanley says. "A trigger event provides the starting point. There's a clear start and clear finish to when that episode occurs. Specialists can understand their sliver of care: procedure preparation, procedure, then procedure follow-up through a 90-day recovery period."

A robust healthcare IT capability is needed for large health systems to provide services through value-based payment models such as bundled payments, he says.

"There are multiple data elements. There's clinical data: status of patients, experience of care, and aggregate data as a program, not just data by patient. There's creating a real-time data capability alongside monthly and aggregate data collection," Stanley says, adding that the ability to track data digitally is indispensable to keep providers within their bundled payment bounds. "You have to not only have the data but also the analytics to drill down into it."

He says CHI monitors several classes of metrics in the health system's bundled payment programs.

"We track multiple metrics including clinical (complication rates, readmissions, and clinical risk), utilization (discharge locations such as rehab, skilled nursing facilities or home, and average length of stay in all settings), financial (total cost of care and supply cost during acute stay), and service and clinical quality metrics as determined by CMS. In our longest operating bundled payment program—St. Vincent Infirmary in Little Rock—our 90-day readmission rate has dropped by about 50%, average length of stay is now less than two days, and total cost of care has dropped significantly, with total reduction in costs of about $2 million in the first 12 months under the program for knee and hip replacements."  

Options for smaller organizations

Large health systems possess big advantages over other providers in the shift from volume to value. But independent hospitals and physician practices have several strategies at their disposal to survive the rigors of the transition to value-based payment models.

In some markets, commercial payers—a healthcare industry stakeholder that providers have often viewed as a business nemesis—can be the best value-based care comrade.

For the past decade, Detroit-based Blue Cross Blue Shield of Michigan has helped lead a statewide value-based initiative that features physician organizations and patient-centered medical homes. In 2005, BCBSM launched the Value Partnerships program with a set of provider partners featuring 10 physician organizations and 3,000 doctors, says David Share, MD, MPH, senior vice president of value partnerships at BCBSM.

"We started out 10 years ago with a recognition that the healthcare system was fragmented and had no meaningful accountability," he says. Value Partnerships has grown to 46 physician organizations, with 19,000 primary care physicians and specialists across the state.

"We wanted physician organizations to be responsible for cost and quality of care more and more over time. The physician organizations were held responsible for results on a population level," Share says.

In 2009, the Value Partnerships program launched a PCMH designation program that included variable reimbursement for physician practices based on cost and quality performance, he says. "If you had a good cost and quality experience, you got a bounce up in your fee. Providers can generate up to a 30% increase in value-based payments from success in the program."

As of July, the Value Partnerships program had designated 1,551 physician practices as PCMH sites eligible for value-based payments, Share says. "It's the largest such program in the country. The PCMH practices that are most involved achieve a 5% improvement in HEDIS [Healthcare Effectiveness Data and Information Set] scores and a 4% to 5% reduction in costs from effective preventive measures. For the past four years within the preferred provider organization, the trend for increases in cost has been 2% or lower, one of the lowest cost trends among comparison plans nationally."

Coping with costly investments

While costly investment in healthcare IT systems is essential for most health systems to deliver value-based care, providers of all sizes can adopt elements of value-based care without huge expenditures on digital technology, according to Miller, of the Center for Healthcare Quality and Payment Reform.

"The myth that has developed is that you need to spend a lot of money on information technology. It's a top-down approach. ... You're spending a ton of money on IT to be able to watch the doctors, instead of trying to involve the doctors themselves," he says.

But specialty practice leaders have proven they can redesign care based on value, as long as they can find a way to pay for it. Miller cites, for example, the New Mexico oncology practice of Barbara McEneny, MD, who also serves on the American Medical Association Board of Trustees. With grant funding, the New Mexico Cancer Center hired oncology triage nurses to track and coordinate patient care, which led to a significant reduction in treatment costs.

"There's a little bit of IT in there, but it wasn't a massive investment," Miller says. "The key investment there was not the IT. It was the triage nurses. They can figure out what to do as soon as patients get into trouble, like bringing someone in for IV rehydration as an intervention at the practice, which is far less costly than at the ER. But at most oncology practices, a chair at the practice for an IV gets paid relatively little, whereas that chair is far more profitable for the practice if someone is in it receiving chemotherapy drugs."

Dartmouth-Hitchcock's Greene says providers seeking to adopt value-based payment models can and should leverage capabilities beyond healthcare IT. "There are some very big bites you have to swallow, and healthcare IT is one of them. But people and processes are probably the biggest bite of them all."

David Lansky, PhD, president and CEO of San Francisco-based Pacific Business Group on Health, says providers seeking to improve managed care contracts directly with employers need to keep the motivations of these potential customers in mind. PBGH is a purchaser-only coalition, representing 60 public and private organizations across the United States that collectively spend $40 billion a year purchasing healthcare services for 10 million Americans.

"Whether it's direct relationships with [the] provider or health plan managed care products, the employers are still looking for the same kind of features," Lansky says. "For ACOs with shared savings and other value-based contracting, the employers want to see that contracting tied to a quality threshold. They feel a responsibility for the care of their employees. They need to feel especially confident about quality."

As a way to cater to that concern over quality, PBGH has established a centers-of-excellence program that features a handful of providers that its employer members may use—for example, Baltimore-based Johns Hopkins Health System. PBGH selects providers for the program based on a large set of factors, including patient experience scores such as complication rates and the collection of patent-reported outcomes.

"There's a long list of quality-based criteria, at a reasonable price," Lansky says. "It sends a lot of really powerful signals. For employees, they know they are getting top-notch care. And there's a strong message for providers: 'We're not going to take the community norm, and we'll put an employee on a plane to Baltimore if we have to.' "

Although value-based payment models are more demanding on providers than fee-for-service, and are likely to be less rewarding financially, there is a value-based promised land on the horizon, Weinstein insists.

"As doctors, we take the Hippocratic Oath to 'do no harm.' The wrong incentives—as in the fee-for-service system that we're in now—can lead to the wrong solutions. And there is a pot of gold at the end of the rainbow: It's the creation of a health system where patients, when well-informed, receive only the care they want and need—care that's delivered safely and at the lowest possible cost."

Christopher Cheney is the senior clinical care​ editor at HealthLeaders.

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