CMS' new value-based approach presents physician and disruptor opportunity, health system risk

Considering the mixed results of CMS' value-based contracting programs to date, the recent announcement of its newest model, Primary Care First (PCF), may leave many with a feeling of déjà vu all over again.

But PCF represents a different value-based ballgame that levels the playing field for physician practices, allows a series of new players to get in the game, and puts choice back in the hands of consumers. It's also a clear indication that CMS is doubling-down on the move to value, and providers who stay on the sideline will be at increased risk of volume and market share losses.

According to CMS, PCF offers a series of new, innovative direct-contracting payment model options to support delivery of advanced primary care and reward providers for delivering higher value care, all with a reduced administrative burden. CMS anticipates releasing a Request for Application in spring 2019, with implementation of the new models beginning in January 2020 for the first cohort of participants. A later round of applications will be accepted during 2020 with participation beginning in January 2021.  

A Different Road to Value

With a focus on physician flexibility, new market entry opportunities, and consumer empowerment, PCF signals a turning point in CMS' and healthcare's shift to value that's based on lessons learned from other value-based programs.

Flexibility for physician practices  

Instead of proposing a single avenue for risk adoption, PCF offers physicians customizable pathways to value with varying levels of risk assumption, requirements and opt-in provisions. For example, practices in PCF will only need a patient population of 125 to qualify, allowing them to retain an entrepreneurial approach that doesn't rely on a larger system partnership.

PCF also promotes physician interaction with individual patients as the central driver of success while supporting practices through reduced administrative burdens related to tracking an abundance of metrics and revenue cycle requirements. Finally, the model will better reward practices with greater upside payments for the care they're providing their patients, presenting a more dependable revenue stream.

Opportunity for new market entrants, consumers

Through PCF, new market entrants such as healthcare technology and retail companies can enter the model with no requirements to go through a physician practice, hospital or health system. Thus, the Apples, Walgreens, and CVSs of the world that have invested in primary care models, consumer engagement and technologies now have a pathway to quickly grow market share while providing an attractive partnering option for dissatisfied physicians.

From a consumer standpoint, other programs assign patients to an accountable care organization based on who provided their care in the past. In contrast, PCF allows consumers to decide who will provide their care based on where they believe they'll get the highest-value experience.

Implications for hospitals and health systems

Margin compression has left hospitals and health systems looking for short-term margin impact, but most population health investments have yet to demonstrate a meaningful return. This, combined with the renewed chorus of repeal and replace rhetoric, has caused some providers to slow down their value-based pursuits.

That PCF is opening the contracting door to technology companies and retailers signals that the same disruption that came to the taxi, big-box retail and home video markets may be soon come to healthcare. Hospitals and health systems should look at this chain of events as an indicator that the market is no longer going to wait for traditional providers to transform it.

While risk assumption should never be taken lightly, hospitals and health systems need to strongly contemplate the following considerations as the landscape continues to shift.

1. Evaluate existing value-based contracts to determine if they present the best monetization vehicles. Getting closer to the premium dollar and growth in new lives are requirements for a sustainable value-based payment model. But recent Navigant analysis has shown that even the highest-performing Track 1 and 2 Medicare Shared Savings Program ACOs are losing money for health system sponsors. PCF and direct contracting models can represent a better chassis to achieve these requirements by offering providers the flexibility to choose the model that best fits their situations. Providers should strongly consider at least completing the LOI application to evaluate if any of these models make sense.

2. Further solidify physician relationships. With the marked uptick in physician burnout, now is not the time for systems to take physician relationships for granted. As the direct contracting option will undoubtedly bring new suitors of physician practices to the table, systems must better evaluate their physician alignment and meaningfully engage primary care physicians as the foundation of value-based strategies.

3. Continue to thoughtfully build population health capabilities and effective partnerships. The fact that CMS will be working to ease the administrative burden by aligning these new models with health plans is a clear indication that enhanced risk-based models are coming to a theater near you. Even if systems choose not to advance one of these models, they must take inventory of their readiness and current gaps. Non-traditional partners specializing in competency areas like urgent care, virtual care, direct-to-consumer engagement and actuarial science should be engaged to meet the ever-evolving expectations of consumers.

4. Define your complete Medicare strategy. Growth in Medicare Advantage remains another priority for CMS and health plans. Converting existing fee-for-service and newly eligible beneficiaries to MA will help avoid the risks of disruption from PCF by mimicking their benefits, but with increased flexibility. Addressing the levers of success in MA, such as HCC scores and STAR ratings, directly translate to CMS' new program.

5. Pursue no-regret strategies to support growth. Even under these new models, providers will inevitably continue to operate in a market primarily driven by fee-for-service payments. However, the path forward does not have to be an either-or scenario. Systems can drive success in both FFS and value-based worlds through strategies focused on clinical standardization, network fidelity (e.g. patient keepage), targeted cost of care reductions in areas such as post-acute care, and effective care coordination.

Introduction of CMS' new value-based model emphasizes the fact that healthcare's move to value is inevitable, and that waning provider interest won't stop this movement. In changing the rules of the game, CMS is signaling that providers are no longer the single chassis to launch contracting vehicles.

In other words, the value-based movement will happen regardless of health system participation, and if traditional providers don't take the steps needed to transform healthcare, others will.

Dennis Butts and Dr. Julia Clark are managing directors at Navigant Consulting, Inc.

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