The future of value-based healthcare: 5 questions for Change Healthcare's Carolyn Wukitch

Change Healthcare released a white paper titled "Value-Based Reimbursement: State-by-State," which summarizes the landscape of value-based care in each state and what to expect for the future.

Here, Change Healthcare's Senior Vice President of Network and Financial Management Carolyn Wukitch discusses overall trends in value-based healthcare and how ACOs, bundled payments and value initiatives will affect healthcare delivery models in the future.

Question: States are redesigning their healthcare systems to provide more value-based care. What types of programs do you expect to see states rolling out over the next three to five years, and how should hospitals prepare?

Carolyn Wukitch: As you can imagine, the approach varies significantly across states, but the most common state-led approaches to value-based payment include ACOs and bundled payments.

Our recent study revealed that 17 states are moving forward with plans to contract with ACOs, and about 12 are pursuing bundled payment programs.

Typically, these VBP agreements begin as shared-savings arrangements and then ramp up to shared savings and risk over time.

We would recommend hospitals do four things:

1. Analyze and understand the variations in care provided by your facilities and providers
2. Evaluate your capacity to support the ongoing analytics and transformation necessary to identify savings opportunities and eliminate care variation, as this work is critical to being successful in any value-based approach
3. Engage with states actively as a stakeholder in the process of developing their VBP programs
4. Advocate across payers in your states to coordinate on approaches

Q: When considering the most advanced states in value-based payments, what are the early outcomes for their efforts? How do you expect other states to respond?

CW: It’s important to keep in mind that a lot of these programs are still in their infancy, in that they have only been in implementation for two to three years.

As a result, there are few published reports on outcomes, but we are beginning to see some results from the early adopters who have been doing this work for five or more years.

For example, a study published in Health Affairs this year demonstrated that Oregon’s move to Coordinated Care Organizations, which established global budgets for 90 percent of patients in the Medicaid program, demonstrated a 7 percent drop in expenditures and a reduction in avoidable ED visits.

Similarly, we did a webinar with the state of Tennessee, which adopted a multipayer bundled payment program. Reports from that state show savings of $14.5 million in 2016. Again, these are programs that are still in development, but there are some promising early results.

It really depends on the states and how they respond to others’ reported success.

VBP takes upfront investment, a willingness to commit to the process of reforming the healthcare system and some level of expertise, either from inside or outside of state government. Not all state-level leaders are interested in making that investment.

Q: What are the major factors driving states' initiatives toward value-based care? Which factors dictate whether states implement value-based programs and the direction those programs go?

CW: Factors motivating states are multifaceted.

In most cases, there was significant support offered from the federal government via the State Innovation Model grants (about $1 billion over five years to over 30 states).

In addition, states are feeling pressure to "do more with less" and make their healthcare programs more efficient. Health spending is behind only education as a percentage of spending in the state budget, so states are looking for opportunities to save on healthcare spending.

The one thing that’s clear is that VBP is not a red state-blue state issue — we see adoption of robust value-based payment programs in states that are controlled by Republican and Democratic governors and legislatures.

Q: How do you think the ability of states to require Medicaid MCOs to implement value-based payments will affect Medicaid programs in the future? How do you think states will respond to having authority over these programs?

CW: We are already seeing a lot of states adopt value-based payment targets in their contracts with their Medicaid MCOs.

There are at least 17 states that have already incorporated VBP targets or are looking to do so in the next year.

The pros of this approach are that it holds health plans accountable for making the transition to value and offers flexibility to providers and plans to negotiate the terms of the transition.

The downside is that there is less likely to be a unified approach, which may require hospitals to track and report multiple different quality measures, undertake different improvement initiatives depending on payment arrangements, and accept different levels of risk by payer.

We think that states see this as low-hanging fruit in their efforts to transition to value, as it requires very little expertise on the part of the states; it doesn’t require them to change the way they do business (in any significant way) and allows them to track progress via contract reporting.

Q: What will the continued shift to value-based payments mean for hospitals and health systems? Do you see the gap between the most advanced states and states without value-based programs shrinking or growing in the future?

CW: We think it will mean that hospitals will have to continue to do more with less and focus on providing high-value services to patients. This will require hospitals to develop and maintain a deeper understanding of the drivers of cost variations in their systems. Hospitals who understand their costs to support value based programs will be better prepared for this transition

Hospitals will also need to better understand the total cost of care episodes, including costs for care delivered outside their facilities. Change Healthcare is expanding our solution set, adding capabilities that help providers analyze all the costs associated with care episodes they engage in and helping them better evaluate episode costs across their community

It will also require a focus on the social determinants of health, since these have such a profound impact on a patient’s individual health.

In ACO states, health systems will need to be able to provide better integrated behavioral healthcare in addition to primary and specialty care.

We think the answer to the second question depends on whether the federal government continues to push states in the direction of investing in VBP. It’s clear with the current administration that they are interested in seeing states take the lead on innovation.

The question is whether there will be any funding/TA to support these innovations or if states will be left on their own. With little investment, we will probably continue to see the gap between highly evolved states and those that have done very little. However, if the federal government does provide support, it’s likely that some of the laggard states will be able to catch up.

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