Paying for Population Health: Why Rewarding Value is Key

As healthcare providers zero in on population health management, industry experts say the payment systems that support them will need to transform.

Facing increasing pressure to improve outcomes while reducing costs, hospitals and health systems around the nation have begun to focus on population health management, which involves preventive care, wellness programs and public health initiatives.

The Cleveland Clinic has been working for a while to improve population health, says Michael Rothberg, MD, vice chair for research at the Cleveland Clinic Medicine Institute. The clinic's initiatives include improving continuity of care between hospitals and skilled nursing facilities and the creation of patient-centered medical homes with care managers on staff.

However, Dr. Rothberg says there's a problem with these population health management efforts: The clinic can't get reimbursed for them under the current payment system.

"We're not making a profit on it at this point," he says. "This is an investment in the future."

The issue is that primary care physicians at the clinic currently get reimbursed for patient visits and not much else, he says. They don't get paid for services such as email or phone consultations, which can help with monitoring a patient's health, cutting costs and making care more efficient.

"Typical insurance plans incentivize physicians to bring patients in as often as possible and have as many visits as they can," Dr. Rothberg says. "But that's not necessarily what the patients need."

There's already recognition in the healthcare industry that paying for volume through a fee-for-service system rather than for value of care isn't the best approach in terms of cost or quality outcomes. Accountable care organizations, patient-centered medical homes and value-based payment arrangements that reward practitioners for quality care are on the rise.

As healthcare providers zero in on population health management, industry experts say the payment systems that support them will need to continue to transform. But the specific shape healthcare provider reimbursements need to take to best support population health improvement efforts remains unclear, says Ashley Thompson, the American Hospital Association's vice president and deputy director of policy.

"I'm not sure we know exactly what that payment system will look like," she says. "The first step of moving from paying for volume to paying for value is good…but we haven't determined what the most effective payment system is to result in a paradigm shift."

The current payment system: What needs to change
Dr. Rothberg says primary care drives all other elements in the healthcare system essential to managing the health of patient populations, including preventive action and better patient decision-making. However, per visit payments based on volume rather than value don't reward providers for taking care of patients over the phone or through email, or for providing other services that can help people better manage their health.

"There are additional things that I might be able to do to better manage your health, by having a nutritionist or having a health coach or having a pharmacist see you," he says. "All of those things would be less expensive than your coming to see me. But for me to have a pharmacist in my practice who goes over your medications and the side effects and interactions, there's no way for me to bill for that."

Terry Fouts, MD, CMO of MedeAnalytics, agrees the payment system needs to change to accommodate a care delivery model that's more integrated and complex than just a primary care physician seeing a patient in his or her office once every month or so.

"When I graduated, I was a solo practitioner," he says. "I saw my patients every month or every two months. That wasn't right. We were, in those days, blissfully unaware of what was happening between those encounters."

He says the right way involves engaging the patient by giving them access to the right practitioner to deal with their specific health issue, whether that's an internist, a cardiologist, nurse practitioner, pharmacist, respiratory technician or another specialist.

"It's a team approach," he says. "You need to compensate all of those different disciplines that are part of the patient-centered medical home or whatever you want to call it."

The Patient Protection and Affordable Care Act has expanded coverage for preventive services, but it's still not enough to adequately support population health management, says George Isham, MD, senior adviser for the nonprofit HMO HealthPartners in Michigan City, Ind.

"A lot of the things that are preventive in nature are now paid for under the ACA, but there's a very definite definition of them," he says. "We've got payments for vaccinations, cancer screening…other things such as the social factors that affect health are not in those definitions and are not paid for. Those are factors like getting the transportation you need to get to the doctor and getting the help you need at home."

Ms. Thompson says AHA members are striving to improve population health as part of the triple aim of better health and better health care at lower costs. However, volume-based payments are holding them back.

"While hospitals are putting the systems and processes in place to move toward population health, they're not there yet," she says. "They have one foot on the dock and one foot on the boat in terms of the payment incentive, which is paying still for volume rather than value."

The ideal population health payment system
There has been progress in terms of transitioning from fee-for-service to a payment system that will give hospitals, health systems and other providers the incentive to get on that boat. Providers involved in ACOs are striving to move toward pay-for-performance, reimbursing physicians based on a range of metrics that can include care quality, patient safety and outcomes, and cost of care.

Additionally, the PPACA has established the Hospital Value-Based Purchasing program. In fiscal year 2014, this meant CMS held back 1.25 percent of Medicare reimbursements at hospitals paid under Medicare's inpatient prospective payment system. The resulting $1.1 billion would then be dispersed to hospitals based on how well they performed on healthcare quality measures, like treatment of heart attack and congestive heart failure, as well as patient satisfaction.

Health insurers are joining the push for performance-based payments as well. For instance, UnitedHealthcare plans to double its value-based contracts with providers by 2017.

Still, Dr. Rothberg says value-based payments won't make population health management easier unless they're structured in the right way.

"If you're going to do it based on a bunch of metrics that have to do with a bunch of specific things, you won't get the chronic disease management and health coaching that you want," he says.

Dr. Rothberg envisions the ideal population health management pay system as being structured in one of two possible ways. The first involves the health system receiving a single payment for all of a particular patient's healthcare during a given time period. The health system would then determine how best to apportion that payment.

"There aren't a lot of systems that are doing that," he says. "That's sort of the idea behind the ACO, where the ACO gets paid a certain amount of money per member per month based on the complexity of that patient. There are a few problems with that method. One is figuring out how to apportion the money within the system. Hospitals don't necessarily understand primary care. There are politics within the care that are going to drive who's going to get reimbursed what."

The second reimbursement model would entail enhanced payments for primary care physicians and potentially some kind of shared savings arrangement related to a patient's overall costs, he says. A flat fee for chronic disease management could cover services such as email consults that providers don't get paid for currently.

"If that includes all their chronic medical care, I no longer have any incentive to bring in the patient when it's not necessary," he says.

Dr. Fouts of MedeAnalytics says he views the right payment structure to support population health management as "an experiment that hasn't been finished yet." However, he says he thinks the reimbursement structure will ultimately have to take into account the volume as well as the value of care.

"There has to be some recognition of the amount of work people do but also some recognition of the outcomes they get as a result of that work," he says.

How hospitals and health systems can move toward a better payment model
Even if the ideal payment model to support their efforts isn't yet in place, that doesn't mean hospitals and health systems can't move forward with population health initiatives, Dr. Isham of HealthPartners says.

"What providers need to do is prepare by thinking about what kinds of systems they need to have in place and what kind of skills they need to have — data and information, know how — in order to perform against these kinds of incentives, which have them working with patients to keep them healthy," he says.

They can also forge ahead in search of better payment models. He says providers can "roll up their sleeves" and actively seek to work with payers that are open to value-based contracts.

"Be very candid about what you can and can't do," he says. "Inquire about technical assistance or other assistance that might be available to you. Then, if you're comfortable with it, sign onto a relationship where you give that a try."

Tom Cassels, executive director for research and insights at The Advisory Board Company, says there are two main ways health systems can proactively move toward being rewarded for value rather than volume. The first involves engaging and collaborating with payers to reorient payment systems. The second approach is to go straight to health insurance sponsors such as employers and explain how the payment system needs to change to help healthcare providers be successful while also benefiting the sponsor.

"Our guidance for those who really want to be rewarded for improving the health of a population is to design and actively seek out the right payment system for yourself, because it is unlikely that payers are going to proactively offer it to you," he says.

Still, Dr. Rothberg of the Cleveland Clinic says moving to an entirely value-based pay structure through negotiations with payers isn't an easy task.

"The big problem that we've had in the U.S. in general is we have so many different insurers," he says. "If I have a primary care practice, even if I were going to negotiate this kind of a plan with one insurer, I can't necessarily do it for all insurers. Because most physicians are serving multiple insurers, they can't negotiate this kind of bundled payment across all the insurers, and unless you do it across the entire group, it's difficult to build the practice."

He says the Cleveland Clinic is forging ahead with population health management efforts on faith that the right payment model will follow. There's a long "ramp-up period" to getting population health right, and he says the clinic can't wait until the payment infrastructure is in place and then suddenly change the way it provides care. He acknowledges there's some risk in assuming the reimbursement system will eventually sync up with the care delivery model.

"We're ahead of the curve," he says. "But if that payment system doesn't catch up, it's going to be a problem."

More Articles on Healthcare Payment Reform:
CMS: Chronic Care Management, SGR Main Issues for Physician Pay in 2014  
5 Predictions for Value-Based Care in 2014
Is Healthcare Spending Finally Under Control? 

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