Emergency CMS rule provides optimism for alternative payment models

Hospitals and providers face unprecedented financial pressure amid the COVID-19 pandemic.

Providers are losing $1.4 billion daily as they experience significant declines in patient volume, according to consulting firm Crowe. Healthcare executives are responding to the financial declines with workforce reductions, pay cuts and other cost-cutting measures. 

Debbie Zimmerman, MD, Corporate CMO at Lumeris, a value-based managed services company, and Essence Healthcare, a Medicare Advantage health plan with 64,000 members, stated that COVID-19 has shed light on the limitations of fee-for-service reimbursement when unmitigated risk is involved.

"If a primary care physician's revenue is based on seeing patients face-to-face and that ability is taken out of the equation, it reflects a problem in the business model," Dr. Zimmerman said. 

To prevent future losses, healthcare executives are also reevaluating their participation in risk-bearing alternative payment models. In an April survey from the National Association of Accountable Care Organizations, which represents 180 ACOs, the majority — 80% of respondents — said they were very concerned about their ACO performance because of COVID-19. It is important to note, the survey was taken prior to CMS announcing an emergency rule that delivers relief to ACOs. 

CMS relieves ACOs of burden of uncontrollable risk

Under the Medicare Shared Savings Program model, the risk adjustment methodology used to determine payment is prospective, meaning diagnoses submitted this year determine revenue for next year. The National Association of ACOs estimated COVID-19-related costs for MSSP beneficiaries could range from $7.7 billion to $23.1 billion and wipe out any financial rewards providers expected.

To offset payment implications outside of providers' control, in late April, CMS said it would adjust the financial methodology to remove spending associated with COVID-19 patients from Medicare ACO performance calculations. Quality measurement and performance benchmarks are also being addressed. 

Ray Herschman, vice president and general manager of accountable care strategy and risk solutions at Cerner, said CMS' efforts to reduce the burden of taking on unmitigable risk combined with the ability to receive payments for virtual visits helps provide a cushion to support those in shared savings and value-based contracts. 

"ACOs and delivery systems are well into recovery efforts that prioritize and re-engage with patients, using telemedicine, virtual care, predictive analytics and a host of innovative initiatives for patient engagement," said Mr. Herschman. "Improvements in operating models and accelerated adoption of technology and service models offer significant promise for managing population health and risks in a post-COVID world," he said.    

An opportunity for value-based business 

COVID-19 may be an unexpected opportunity for the healthcare industry to reevaluate how value-based contracts can account for risk beyond care management and become more viable and advantageous for providers. 

Dr. Zimmerman said providers who are in value-based contracts and receive a global payment, regardless of whether they see patients or not, are managing this crisis better. They're not focused on how to get patients in the door but rather on how to keep them healthy and stay connected through other means like telehealth and home care services.

In the future, contracts should consider how payers pool risk among their provider partners to help balance uncontrollable risk across a broader population. Payers should also incentivize different modes of care delivery that aren't as interlaced with elective procedures, like telemedicine and home health services. Providers have told Dr. Zimmerman that while COVID-19 has disrupted normal care delivery, they now have a much clearer view of the home environment of their patients.

"Care delivery will change after COVID-19. There's no going back," Dr. Zimmerman said. "We have to start looking at the appropriate level of care and keeping people out of the hospital. Aggressively managing conditions will be a continued focus," and future ACO and alternative payment model contracts must adequately reimburse for these services, she said.

The new value-based business model

More than ever, providers are realizing fee-for-service models that provide reimbursement based on volume are unsustainable — especially during a pandemic, when resources designated for elective services must be redistributed. 

"COVID-19 makes a compelling learning platform for value-based models," Mr. Herschman said. "There will be a rethink on how people move through the delivery system. We won’t default back to the way we've always been doing it."

Cerner and Lumeris are working together to make the move from volume to value easier for provider organizations. In tandem, the companies offer data management, analytic resources, and strategic managed services and operational support for providers seeking sustainable success in value-based arrangements. Their EHR-agnostic solutions are designed to help health systems manage provider and patient relationships across Medicare, Medicaid and commercial population segments to help maximize the outcomes for patients they serve while also succeeding from an economic perspective.

As an example, Cerner has collaborated with Lumeris to incorporate an open-source COVID-19 Hospitalization Index model into Cerner EHR-agnostic technology. Use of the COVID-19 Hospitalization Index will help provide organizations the ability to prioritize outreach to people in the community, identify and address emerging medical or psychological issues and schedule follow-up telehealth appointments, to ultimately help mitigate risk, reduce admissions and free hospital beds.

"People have been advocating for more accessible healthcare for a long time, whether that comes from virtual healthcare, video visits, home visits or other channels. It took a crisis for some of this to breakthrough," said Mr. Herschman. "With the right technology and financial incentives in place, people are finding it's not only good, it's better. Patients no longer have to come in, they don't have to be exposed unnecessarily to others in the waiting room and the quality of interactions between providers and their patients via virtual care are high," he said.

CMS has offered ACOs the opportunity to reduce the economic penalties from the current pandemic, but these recent challenges have also placed a spotlight on the need to put proper value-based payment approaches in place to address future uncontrollable risk. An opportunity lies in retooling ACO and APM contracts, as well as utilizing technology resources to realign focus on value-based initiatives and coordinate the best care for populations.

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