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Are Your Value-Based Investments a Waste?

Analysis  |  By Philip Betbeze  
   January 04, 2018

It could be tempting to think that your investment efforts in value-based contracting are wasted. But not so, says a former population health executive.

The future of value-based care has gotten a bit murkier in recent months. After hospitals and health systems have made substantial investments in technology, staff, physician practices, and spent considerable time and effort changing workflows and even the basics of their business model to adapt to value-based principles, they're left to wonder whether it all was wasted in the face of the proposed cancellation of mandatory Medicare bundled payment programs and growing MACRA participation exemptions.

But despite the chaos, it's worth recalibrating the changes you've made as an organization to adapt to the new reality, rather than returning to the practices and patterns of a volume-based business, says Chris Stanley, MD, the former system vice president of population health at Inglewood, Colorado-based Catholic Health Initiatives.

"No, those investments haven't been wasted," says Stanley, now a director in Navigant's healthcare practice, "but we are getting that question from a lot of our clients."

One thing to remember, he says, is that many organizations have made investments around episodes of care or in setting up ACOs to provide value beyond an individual program, such as hip and knee or cardio bundles. Those investments still have value beyond the isolated programs that are no longer mandatory, especially in the sense that they have helped align physicians, pull disparate IT systems closer together, and reengineer how care is delivered beyond an inpatient hospital stay.

Following are four tactics that Dr. Stanley suggests your organization can try that work well regardless of the reimbursement scheme, and which don't necessarily rely on specific value-based reimbursement programs to have, well, value.

1. Transition value-based investments toward the Medicaid population. Reducing unnecessary ER use and hospitalizations for Medicaid patients and the uninsured should pay off because these are populations for which providers are not adequately paid, if they're paid at all. Major elements of this strategy are squarely rooted in population health pillars, says Stanley, such as using primary care for risk profiling and other preventive care tactics. Developing community-based partnerships can help reduce uncompensated care costs with this population as well.  

2. Leverage value-based experience as a stepping stone to Medicare Advantage. Stanley says Medicare Advantage plans are appealing to baby boomers, payers, and providers. For the latter, MA is important because benefit design favors in-network utilization where the ROI from provider spending on value-based tactics is clearer than it is with traditional Medicare or many commercial plans.

MA is also growing. Only 17% of Medicare beneficiaries in 2004 chose Medicare Advantage, but 33% did in 2017, which means 19 million people are enrolled in such programs now. And Medicare Advantage spending doubled between 2006 and 2016, while Medicare benefit inpatient spending fell by one-third over the same period.

3. Stop trying to boil the ocean. When it comes to value-based investments, many organizations have made this mistake, Stanley says.

"They've tried to solve for everything, but one tactic is to be very focused on your efforts," he says. "You should focus on the outcome or result and the two or three specific items that will drive those results."

For example, if an ACO that is focused on achieving targets that would provide a bonus through CMS hasn't yet bent the cost curve, Stanley suggests focusing on postacute care. In the Medicare environment, such tactics as managing length of the inpatient stay and developing a preferred postacute network can represent low-hanging fruit for health systems.

"Sometimes this will free up ACOs that may have 20 different initiatives going on and by setting them up with two or three, you can focus on a few areas and drive broad results," he says.

4. Move up the premium chain. Most organizations that dip their toe into shared savings programs quickly realize that in a largely fee-for-service model, when inpatient utilization drops, so does revenue. To change that narrative, and because commercial plans are still ramping up value-based initiatives in many geographic areas, healthcare organizations should try to move up the premium chain, says Stanley.

That can mean employing several tactics, such as taking downside risk with a payer or joint venturing with a payer to tap into a percentage share of the premium or even a capitated rate. Many markets have an insurer, or even state Medicaid, for example, that are willing to enter into a contractual relationship that will share savings or allow the payer to grow its market share, so each side benefits, says Stanley. Maybe your partner won't be the largest payer, but it could be one that wants to offer a more reasonably priced premium in order to grow.

"The feeling two to three years ago was that to do this effectively, you had to have your own provider-sponsored health plan," says Stanley. "Otherwise, you don't have enough leverage. But in 2018, there are other ways to do it beyond owning your own insurance plan."

Philip Betbeze is the senior leadership editor at HealthLeaders.

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