Hospitals and health systems move forward with value-based payment models amid uncertainty over healthcare reform

Unpredictability in the healthcare industry unnerves hospital leaders, as no one knows the future of the ACA or if the new administration will further alter existing payment reform programs. The unknown future of healthcare reform has hospitals and health systems searching for the best path forward regarding value-based care.

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Although efforts to repeal the ACA have failed thus far, Republican lawmakers are still exploring ways to dismantle the health reform law. In addition, the Trump administration has moved forward with significant changes to Medicare payment programs, including canceling and scaling back major bundled payment initiatives, and could modify these or other payment programs more in the future.

Despite uncertainty in the industry, many hospitals and health systems are continuing to migrate toward value-based care models, including entering into agreements with government and commercial payers that involve downside risk. However, achieving success with value-based arrangements in the unpredictable healthcare environment can be challenging.

Becker’s Hospital Review caught up with three health system executives to discuss key lessons learned from their experience with value-based payment models, how their systems plan for growth amid uncertainty in the industry and how to determine if a healthcare organization is ready to take on downside risk.

Participants include:

  • J. Mark Maddox, MD, physician executive of care coordination and utilization management at MultiCare Health System (Tacoma, Wash.).
  • Joel Shu, MD, vice president of clinical transformation and population health at Catholic Health Services of Long Island (Rockville Centre, N.Y.).
  • Tangerine Brigham, chief administrative officer of population health at Alameda  Health System (Oakland, Calif.).

Question: How does your organization plan for growth while there are so many uncertainties regarding payment and policy?

Tangerine Brigham: Alameda Health System (AHS) is an integrated network with five hospitals and four ambulatory care community clinics/wellness centers. Planning in uncertainty has become the norm in the healthcare industry. As a result, while AHS has a strategic plan to guide its major initiatives; it also regularly examines market data for strategic planning and business purposes. Given that it serves a significant number of publicly insured (Medicaid) individuals, a component of the growth in this area is dependent upon ensuring full retention of Medicaid benefit[s] and the eligible population.

Dr. Joel Shu: Growth comes from three different avenues: the organic, traditional word of mouth, marketing and branding; the acquisition method; and the covered lives capture method. This third method is achieved primarily by demonstrating to health plans and managed services organizations that our network offers higher value and cost-controlled care. That makes us more attractive for the health plans to preferentially utilize our network of providers and facilities.

Dr. J. Mark Maddox: We need to be [more] capable of managing risk-based arrangements, including value-based agreements. We are working to move from managing people to managing populations within the communities we serve.

Q: What are some of the key lessons your organization has learned from your experience in value-based payment models?

TB: Alameda Health System’s experience with value-based payment models comes from its participation in California’s current 1115 Medicaid Waiver, specifically its Public Hospital Redesign and Incentives in MediCal (PRIME) program, which has offered AHS the ability to institutionalize quality improvement strategies, promote population health and create an environment for AHS to move toward value-based purchasing. In fiscal year 2016-17, AHS began receiving payment based on its performance in meeting certain clinical measures. In those cases, payment [is] not based on utilization. In preparation, AHS increased focus on improving EHR infrastructure and data reporting systems through the creation of a data warehouse that contains available clinical and administrative data; developing, strengthening and standardizing our approach to team-based care; strengthening the ambulatory, population health and behavioral health infrastructure to support the increasing focus on population health and preventive care; and establishing an Ambulatory Quality Council meeting to review performance and develop and monitor action plans to drive improvement work. These improvements will be sustained after the waiver ends and will help the organization as it moves into alternative payment models with other health plans.

JM: Initially, you don’t know what you don’t know. So, looking back over the last three years in value-based payment, we have learned many valuable lessons. Attribution methods and designated populations can be more difficult to manage across the continuum of care compared to assigned populations. Timeliness and formatting of information is also critical in our ability to manage a population. Additionally, management of nondomestic utilization across a community of care can be complex and limited based on the type of data supplied. The configuration of data systems to accept claims information and integrate clinical data to develop case management triggers takes time [for providers] to establish and develop, all while they are asked to manage a population.

JS: Physician engagement is a buzzword that many people use, but it really is the key to a sustainable, thriving network. That network is the basis of succeeding in value-based care. If the physicians are not aligned in that model, the patient may not have enough knowledge to navigate high-value care nor the incentive to do so.

Physician engagement doesn’t come from just having meetings or token representation on a board. It is a relationship.

Q: If you are taking downside risk, what capabilities are critical to your success? If you are not taking downside risk, what would you need to engage in these models?

TB: Alameda Health System does not have any financial arrangements with health plans in which it is taking downside risk. However, it anticipates moving in that direction in the future. As AHS prepares its healthcare delivery system to participate in alternative payment models, for example, capitation, it will need to ensure its care delivery model, clinical informatics and business intelligence, organizational readiness, clinical capacity and provider network are robust. Operational and clinical infrastructure is vital to assuming the delegated responsibilities that come along with taking on downside risk. In addition, having a solid understanding of the utilization patterns within the population (in-network, out-of-network, etc.) will be critical to assessing whether taking downside risk is appropriate for a given population or set of services. Finally, AHS will be transitioning to a universal, integrated EHR within the next three years and having this in place will be an important component of its infrastructure.

JM: MultiCare Health System participates in some value-based arrangements that include upside only or both up- and downside risk. Critical capabilities include allocation of staff to manage patients through transitions of care, such as at times of discharge to home or skilled nursing facilities. Success is also dependent on engaging in new ways with other healthcare providers, such as skilled nursing facilities, rehabilitation facilities and community-based resources, as well as working with the providers in new ways to reduce readmissions, reduce ED visits and reduce the length of stay both in the acute and post-acute settings.

Timely data and early identification of patients that meet clinical indicators for escalating risk are also important in the ability to manage a population. The integration of claims, clinical data, including medical and pharmacy, along with data related to social determinants is needed to fully gauge areas of opportunity and intervention.

Also critical is the ability to keep providers informed of their patient population’s clinical behavior, especially related to utilization patterns or gaps in care. Development of provider dashboards and portals for providers is needed to better care for a population at risk. Integration of medical services and behavioral health, when possible, can also improve clinical care outcomes.

JS: A strong relationship with the engaged physician network as I mentioned above is a basic prerequisite. From there, an organization needs solid actuarial ability to accurately price risk/reward, interconnected care management to help patients find the services they need and strong medical documentation and coding processes to ensure risk is adequately captured.

Q: How do you determine if your organization is ready to contract for downside risk? How do you access market receptivity to the payment model?

JS: If the conditions in the previous question are satisfied, the next checkbox is the commitment and vision of the system and its leadership to drive value-based care. It’s more difficult to succeed in downside risk and value-based care if the contracts are conceptualized as a carve-out to traditional fee-for-service. It takes full commitment toward providing a single standard of care, but also the prudence to move it forward stepwise while payment models catch up.

Market receptivity should be highly correlated to what the patient thinks he/she will receive for their premium dollar.

TB: AHS will undertake an internal readiness assessment. This will include working closely with and educating providers and staff about alternative payment models, downside risk, value-based purchasing, etc. The State of California has made alternative payment models for Medi-Cal managed care a key component in its drive to transform healthcare delivery and financing. AHS’ health plan partners for Medi-Cal managed care have signaled their interest in this approach.

JM: Implementation of alternative payments is not equal across all health plans. The variations in risk models and quality indications pose a challenge to implementation strategies. Self-insured populations may be more receptive to alternative models and direct-to-consumer pricing in attempts to decrease medical inflation.

An organization can never truly approximate the process and change management required in risk-based contracts until you have downside contracts that force the conversation and internal change. I don’t think an organization is truly ready until they have the ability to experience a risk-based contract. To remain market competitive and relevant, an organization needs to be willing to embrace risk and adapt in moving from volume to value in healthcare.

More articles on healthcare finance: 

7 hospitals with strong finances
California hospital faces 'imminent risk of closure,' says board
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