Americans are living longer, and the cost of healthcare is continuing to rise. In a 2012 article published in JAMA, founder of the Institute for Healthcare Improvement and former CMS Administrator Donald Berwick, MD, suggested one third of spending on U.S. healthcare is wasted.
Value-based care and population health are ways to address the rising costs and waste in healthcare. But new approaches to healthcare delivery require new methods of managing the healthcare revenue cycle. Shifting to value-based care is mission critical for many organizations. However, making this transition isn't easy.
At Becker's 5th Annual Health IT + Revenue Cycle Conference in Chicago, nThrive sponsored an executive roundtable to explore how population health programs are reducing the cost of hospital services. Carl Couch, MD, nThrive's CMO and former vice president of innovation at Dallas-based Baylor Scott & White Health, shared insights about value-based care based on his years leading a large accountable care organization. Jennifer Nicholson, HP2 program manager at Northeast Georgia Health System in Gainesville, discussed how analytics and bundled payments have generated better patient outcomes and cost savings for the health system.
Delivering value-based care through an ACO
In 2012, Baylor Scott & White Health formed an ACO called Baylor Scott & White Quality Alliance. The results have been impressive.
One of the populations the ACO has served since its inception is legacy Baylor employees. This patient cohort comprises 34,000 employees and dependents. The actual cost of healthcare for this group started at $482 per person, per month. That number remained unchanged for several years until it increased slightly last year to $500 per person, per month.
Annually, an independent actuary sets a target spending amount for the Baylor employee population. Historically, this target has been higher than their actual healthcare costs. The difference between the target and the actual spending is the savings. To date, the total savings associated with the Baylor employees' cohort has been over $150 million.
Dr. Couch explained, "In the Dallas-Fort Worth area, the commercial cost of healthcare continues to increase about 6 percent per year. This has generated significant concern among employers. For some, it has jeopardized their ability to stay in business. Many companies have looked to the ACO to reduce their healthcare costs."
Since 2014, Baylor Scott & White Quality Alliance has served a combined commercial population that is now around 650,000 patients. This group represents many different contracts. The ACO's ability to tailor strategies to meet the needs of the various contract populations has been critical. Over time, the actual healthcare spend for patients across contracts has been fairly flat. The cumulative savings for the combined commercial population is approaching $500M and it is continuing to increase.
Building an ACO: Best practices from the field
Based on his experience at Baylor Scott & White Quality Alliance, Dr. Couch feels there are four key areas organizations must give special consideration when creating an ACO: organizational, data and analytics, clinical and contractual.
1. Organizational issues. Key organizational considerations include aligning physicians and hiring disease management nurses. According to Dr. Couch, "Without physician alignment, it's hard to get started with population health. Alignment requires trust and an understanding among doctors that they need to play a role in changing the healthcare system."
Disease management nurses were among the first and most important team members hired by Baylor Scott & White Quality Alliance. In the United States, 5 percent of patients drive half the cost of healthcare. These patients have unique needs, major illnesses and multiple comorbidities. While these patients would benefit greatly from clinically integrated care, their care is usually isolated in specialty silos throughout the healthcare system.
Disease management nurses proactively engage the costliest 5 percent of patients and establish relationships. They also cultivate relationships with patients' primary care physicians and become an extension of the physician's office. "These nurses changed the trajectory of preventable admissions and preventable ED visits — two items with the highest costs to the healthcare system," Dr. Couch said.
2. Interoperability and EMR usablity. A common EMR is essential for clinical integration. Implementing an EMR platform and promoting adoption, however, may be easier said than done. Even today at Baylor Scott & White Quality Alliance, 2,500 independent physicians aren't on the same EMR as the employed physicians. To improve healthcare delivery, the ACO must find ways to seamlessly share critical data and patient information with independent physicians. In addition, EMRs are perhaps the top source of physician dissatisfaction. Healthcare systems must address this problem.
3. Clinical integration. Specialists need to keep the whole patient journey in mind during care interactions and transitions. Communication between providers can be insufficient and patients may get redundant pharmacologic therapies. Clinical integration can help. One solution is matching patients with a primary care physician. Data strongly suggests that people with a primary care physician have lower lifetime health expenditures and live longer. Today, only a portion of people have a primary care physician and that provider may not be involved in the clinical integration of their care.
4. Contractual packages. Organizations need to consider how to structure contracts so they can decrease waste and attain additional value. Shared savings and bundled payments are common value-based strategies. Shared savings is typically used for populations, while bundled payments are used for a subset of clinical problems. To get significant shared savings, defining the specific patient target is important. This must be set realistically and will move every year.
Using analytics, bundled payments and gainsharing to reduce waste
Northeast Georgia Health System is a four-hospital system with one affiliate hospital and a physician group. In 2016, the organization implemented a comprehensive care joint replacement program. Ms. Nicholson said program made a little under $8,000 in the first year, but in its second year the program made $600,000. In the third year, the organization unfortunately deprioritized this initiative and the program made around $300,000. Had the change in priorities not occurred, however, CJR had the potential to make close to $1 million in the third year.
Northeast Georgia created a set of key performance indicators to track CJR program performance in areas like readmission rates and costs, the number of patients discharged to skilled nursing facilities, SNF episode costs, the number of patients discharged to home health and home health episode costs.
"We saw hundreds of thousands of dollars of SNF charges that could be avoided if patients were educated in advance about home healthcare and knew what to expect when they went home. Our goal was to shift people to home and home health after CJR procedures," Ms. Nicholson said. The nThrive tool enables the organization to look at episodes as a whole and identify waste. It's easy to see how much surgeries and SNFs costs, as well as where there are outliers.
To generate internal cost savings, Northeast Georgia negotiated with implant vendors for joint replacement bundles. This required physician support. According to Ms. Nicholson, "If you are going to take away a doctor's implants, you need their buy-in. In exchange, we proposed cost sharing with them. Fortunately, all the implant vendors agreed to our price."
The bundles in the CJR program alone have saved $1 million, and across the entire health system, savings from renegotiated contracts have resulted in around $2 million in savings. During the most recent gainshare, physicians were paid $673,000 out of a potential $820,000. If physicians don't meet quality metrics related to surgical site infections, Methicillin-resistant Staphylococcus aureus infections, deep vein thrombosis and pulmonary embolisms, they do not get 100 percent of their gainshare amount.
Developing a value-based healthcare strategy
In a June 2018 survey of executives, clinical leaders and clinicians conducted by the NEJM Catalyst about value-based reimbursement models:
- 42 percent of respondents think these will become the primary revenue model for U.S. healthcare.
- 36 percent of participants were uncertain about the future of value-based reimbursement models.
- 22 percent thought value-based reimbursement would not take hold.
While some people can't yet see past the current transactional fee-for-service healthcare environment, attitudes are likely to change. Taking the pulse of the market is very important. Healthcare systems must decide when to invest in the competencies needed to manage populations of patients, while still operating in a fee-for-service world.
Analytics that show the relationship between the quality of care and costs are also essential. Without them, healthcare organizations can't operate in a value-based world. Dr. Couch observed, "If you don't have the core competencies in place, you won't be able to provide value-based care. It's a matter of developing those competencies over time and honing the systems."
Conclusion
In light of rising healthcare costs and waste, systemic changes are needed in payment and reimbursement models. Interest in value-based care and population health models as potential solutions is growing. When successfully implemented, these models show promising results and can generate significant savings. Keys to success include physician buy-in and alignment of incentives through gainsharing, focus on the costliest patients, resources like disease management nurses and continuous program measurement.