Navigating Value-Based Reimbursement

Even though the pursuit of value-based care is one of the most high-profile initiatives healthcare organizations face, hospitals and health systems are at different points along the journey, addressing various roadblocks that are slowing progress. In this roundtable, sponsored by Optum, several senior healthcare finance leaders discuss the challenges and opportunities related to value-based mechanisms, and what it takes to increase quality while controlling cost.

In your experience, what is the right formula for implementing successful value-based contracts?

Thomas Felch: The first step is finding mutual goals between the participants and then aligning incentives to support strong relationships. Before FullWell and Centura consider an opportunity, we make sure that everybody is on the same page in terms of how we are going to provide and measure care. If you are not aligned from day one, then you are going to have trouble implementing any of the necessary solutions to effect change.

The main thing we want to be certain of is whether we are going to have access to the data that we need to manage the population. If we don’t, that’s a nonstarter. Data sits at the base of all value-based programs—you need it to know where you are and where you can move the needle on realizing quality while managing costs.

During our early work in value-based reimbursement, we had a number of conversations with payers that wanted to partner with us to create accountable care organizations [ACOs]. We spent time on the front end validating whether the arrangements were something we wanted to consider. There were a couple in which we didn’t engage because the membership was going to be too small, the efforts were going to be too substantial, or the upside opportunity wasn’t sufficient. These criteria have helped us determine whether a potential program is viable.

Once we vet different options, we bring the ones we think are worth pursuing to our physician leadership and ask for feedback. We want to check that the clinical requirements and quality measures are achievable and the benefits are worth the effort. Getting everyone onboard and invested takes time, but it’s an essential process to ensure the appropriate structure.

Chris Elfner: Data validation is also key. At Bellin Health, we want to make sure we can corroborate the numbers that the payers produce. If we can generate those numbers internally and they vastly differ, then there isn’t going to be a lot of trust on either end. We all must agree to the metrics and be able to consistently produce the same data because that will allow us to be more comfortable entering into arrangements and choosing metrics for which to be accountable.

Dan Rieber: I agree with both my colleagues. Before you sign a contract, you should define the population that will be at risk and understand who exactly falls within that population. Then you need to have data on that population to appreciate not just the high-level costs and quality numbers, but the details behind them. Once you have the data, you can then think through the various aspects of the contract, including metrics and payment provisions. At UCHealth, we try to make all our value-based work as consistent as we can across payers; however, that’s not always possible, and it’s frustrating.

Mark Carley: It’s true. The payers aren’t especially flexible in how they administer the programs, so each one has its own nuances. To overcome this challenge, Centura has had to come to a common denominator within our organization even though different payers have different criteria. It makes things more complicated.

Felch: FullWell works with Centura to define what success in quality and patient care look like, and then we map those criteria to the various contracts. Although we can review the payer-generated data to get a sense of how we are doing, our numbers will never fully match theirs, but at least it is directionally correct and gives us an idea of where we’re headed.

How progressive have you been in taking on value-based reimbursement?

Carley: Centura joined the Centers for Medicare & Medicaid Services [CMS] Pioneer Accountable Care Organization Model in 2012, and we have achieved a level of comfort with this kind of arrangement. We currently have three additional dual-sided risk contracts with Medicare Advantage.

Along the way, we have also been involved in and promoting commercial ACO shared savings programs. Looking at our primary care population, I would say about 40 percent has some type of value incentive, whether that is shared upside or shared upside/downside risk. One of the main reasons we chose to work toward these models is the support that the revenue provides our clinically integrated network. There is some revenue loss for the hospitals, but it is relatively minimal. However, the gain from the network’s perspective is significant.

Elfner: Bellin Health has fully embraced downside risk, which is unusual in the marketplace. That said, there is more reward with downside risk if you are successful. We are currently working to redesign the way we deliver care, so we can pay for that care using the value-based dollars—basically funding the next wave of care delivery. If the industry decides to go back to fee for service, Bellin is in big trouble because we are moving forward with redesign. We are particularly focused on ways to reduce costs while maintaining the quality that we historically have achieved. One thing we do is work closely with employers in the commercial space. We have on-site services that come to the employer’s business to streamline access. For instance, we have found that providing physical therapy at the business location can help us get ahead of workers comp issues, especially for manufacturing companies. This small step has had a big effect on the overall costs of care.

Rieber: Over the past several years, UCHealth established a strong foundation with clinical integration, a single electronic health record for all our locations and providers, and a system-level team that focuses on data collection and quality improvements. This has led to significant reductions in infections, readmissions, and other adverse events while improving our overall outcomes. Based on this quality foundation, we have become far more aggressive in pursuing value-based contracts with both payers and major employers.

How are payers approaching value- based payment arrangements? Are they pushing them?

Elfner: We are seeing pressure from payers to at least expand existing arrangements and add on more value-based initiatives. There is a wide spectrum of how we partner with payers, and some are more committed to establishing a value-based relationship than others, but all of them are pushing us to evaluate our contracts and put additional money at risk.

At this point, Medicare Advantage programs are fairly well-developed. The payers in that space want ACO contracts, and they know what the formula is. However, the minute you need something beyond that formula, it becomes significantly harder to reach agreements. Everyone tends to fall back to the old mindset of not collaborating and sharing information. That’s changing and becoming better, but we have a way to go.

Care management is especially thorny because in some cases payers and providers are doing the same things, and there is conflict. Take the annual wellness visit, for example. When payers conduct home visits, patients think they have had their annual wellness visit and won’t come to see their healthcare provider for the service. We don’t know anything about what happened during the payer visit. If we take on more risk, then payers should let us do the care management, so we can have more control. If we go full risk, maybe we can avoid pre-authorizations. If payers and providers have stronger relationships and partnerships, then they can sort out some of these hurdles together.

Carley: Different payers are emphasizing different populations, and we’ve seen some that are more aggressive in outlining risk terms than others. Here in Colorado, there’s going to be more activity in the Medicare Advantage space than there is in the commercial arena. In my opinion, the driving factor for commercial payers is that they want to develop and deploy varying products for employer clients—things like narrow networks.

Felch: Commercial payers are responding to employers who are becoming much more informed, inquisitive, and savvy around cost and quality—understanding what their employees and their employees’ families need. Employers have realized that they require a vehicle to combat rising costs and are viewing value-based models as opportunities to not only keep expenses in check, but potentially share in savings.

Have you seen quantifiable quality improvements and cost reductions as part of your value-based portfolio?

Felch: There are definite benefits to these programs. We have greater insight into the data and what the risks are, and we are closer to understanding the total costs of care. Through predictive analytics, we have a glimpse into the future and actively anticipate and deliver care for at-risk populations. Being able to see the whole picture is key in terms of bringing down the total cost of care and increasing overall quality.

Elfner: As I mentioned before, we are redesigning our primary care to follow more of a team-based model, which we are rolling out throughout the health system. As part of this effort, we have been able to quantify the fact that patients in the team-based care model have lower costs of care than their counterparts who are not in the team-based model. For instance, we have a 14 percent contribution margin improvement on team-based care through primary care, which takes us from a negative to a positive. However, in other services like cardiology, margin shifts in a different direction. Overall, the price per member has gone down and stayed down. We are also seeing quality improvements, as well as a huge bump in provider satisfaction and patient engagement, with an increased likelihood that a patient will recommend the organization to others.

Rieber: Absolutely. Many of our quality metrics rank in the top decile or quartile when compared to our regional and national competitors. Innovative primary care redesign initiatives have reduced member visits to emergency rooms and lowered price-per-member averages.

Does your primary analytics platform support care coordination, patient engagement, and the patient experience? Or is it aimed more at cost measurement?

Felch: At FullWell and Centura, we gather information through claims, clinical, and other data sources in an attempt to understand more about the patients we manage. We also use a proprietary data analytics tool to understand cost-of-care and quality, and to perform additional analyses around risk. Our tools help us know where to intervene. We are also going through an initiative to examine social determinants of care to gather a more complete view of a patient’s health. Another of our initiatives relates to quantifying a patient’s Net Promoter Score— whether they are likely to recommend us to family or friends. Although having access to all this data is wonderful, it’s tough bringing it together, aggregating it, normalizing it, and putting it into a format where it is not merely a bunch of data, but actionable information that our teams can use to identify who is at high-risk and who needs a phone call or other intervention today versus a month from now.

Chris White: The crux of the conversation is around where the data resides, and how you can bring disparate data sources together to provide a holistic view of a patient. That’s going to influence what type of analytics platform you need. Although your core electronic health record [EHR] can take you so far, it may not be enough. Moreover, if the entire organization is using the same EHR, that’s one conversation. However, if there are 10 or more EHRs sitting inside of a network, that’s a completely different conversation. And if you add in claims data, it becomes even more complicated. How do you get to a level of data uniformity and sophistication that gives you confidence that the insights are real and trustworthy? Trust in the data is the number one thing you need as you’re building these kinds of programs.

Elfner: Another challenge is accounting for the income. You receive value-based revenue 18 to 24 months after services are complete, and it isn’t directly related to those services. So how do you account for it? Who gets it? How do you apply it so that certain areas don’t look like the margin is going upside down?

That’s what makes it difficult to figure out the return on these investments. You think you’re going to get a specific amount of value-based revenue for a particular episode. However, when you add it up, the effort involved can substantially surpass the value-based revenue you bring in.

The accounting piece is built on analytics that help you understand where things are changing. On average, if the fee-for-service revenue is going down a little bit and your value-based revenue is going up, that’s good. But now you’ve got to break things down even further, and that’s the next frontier for this work. Right now, it’s kind of a mess.

What has been your experience with consumerism and price transparency demands in your market from your patient populations? Do you feel that you’ve made some strides in this area?

Carley: In Colorado, much of the energy behind transparency is coming from the state congressional body. It’s not necessarily coming from the individual or from groups of consumers. There is always that group of individuals who know they are going to have an episode at some point in the near future and start shopping ahead of time. For them, transparency is important. For everyone else, it’s not so critical.

The health delivery systems here have been proactive at working with the state and our hospital association at getting transparency information out there. The flaw with this to date is it’s all about price. We aren’t as clear about quality, patient satisfaction, outcomes, and so forth. Plus, the transparency requirements are directed to self-pay patients, which comprise about 4 to 5 percent of the total population. So even though we’re seeing more transparency around costs, it’s not providing valuable information for 95 percent of the population.

James Dietsche: Bellin Health is also running into the problem where patients are upset because they come in for their physicals and get a much bigger bill because we address the issues that we find. We have to charge more because we are doing more. This approach may train patients to not be fully up front about their problems when they come in for a wellness visit, because if they are, they might get a higher bill. That’s not the culture we want to establish. Right now, we are charging people more who are reducing the overall costs. Then, others come in, have a catastrophic event, and we write it off. The cost conversation isn’t the right one because it’s just about the price of the service. We need to make sure that it goes beyond that.

Rieber: Many of the transparency requirements and initiatives we are seeing will ultimately be of little value for patients because they are not specific and accurate for an individual patient’s circumstances. To be useful, price estimates must be provided on an individual basis, taking into account the patient’s insurance plan details, deductible, out-of-pocket maximum, how much of those amounts the patient has met in their current plan year, and so on. This is the only way we can provide useful information for our patients, and UCHealth is moving to provide these kinds of accurate estimates for individuals..

White: It’s tough to apply the consumer mindset to health care. It’s not like when individuals go to an online retailer to buy something. They see the price, quality, and reviews, and then they make a decision based on the information that they are given. They don’t have that ability to shop in health care for the most part.

Elfner: But they are thinking about healthcare insurers based on the premium that they pay every month. If care delivery had a model that was more like the premium concept, then patients could come in and get what they needed. There would be flow issues to address because you don’t want patients to super use, but if we move away from a service-based pricing to value-based pricing, it could be more consumer friendly.

White: Benefit design plays a huge part in this because if you offer virtual care, telephonic visits, or e-visits, there is a convenience factor that is critical to the patient experience. Plus, a lot of times these programs can reduce costs. There are things that the insurance companies, health systems, and employers can do together to deliver services and meet patient expectations. We work with our partners to remove access barriers in their care delivery models and integrate all areas into a single data source, so all providers have a comprehensive view of each patient.

In the end, consumerism—and really everything we’ve talked about today—requires organizations to apply meaningful data to strong payer-provider partnerships in which they put the patient at the center and work to provide services that are convenient and cost-effective, and that help avoid unanticipated acute stays.

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HFMA Roundtable Participants

Mark Carley is vice president, managed care and risk products, at Centura Health in Denver

James Dietsche is executive vice president and CFO for Bellin Health in Green Bay, Wisc.

Chris Elfner is director of accountable care strategy for Bellin Health

Thomas Felch is COO at FullWell, Centura’s population health services organization

Dan Rieber is vice president and CFO of UCHealth in Aurora, Colo.

Chris White is vice president of growth for Optum Analytics

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About Optum

Optum is a leading information and technology-enabled health services business dedicated to helping make the health system work better for everyone. With more than 124,000 people worldwide, Optum delivers intelligent, integrated solutions that help to modernize the health system and improve overall population health. Optum is part of UnitedHealth Group (NYSE:UNH).