Hospitals See Improvement in Value Contracting with Commercial Plans

March 29—Hospitals continue to have more difficulty establishing value-based contracts with commercial health plans than with government payers, but that may be changing.

“Unfortunately, it is a challenge to find payer partners who are willing to work in a deeply collaborative fashion with providers on payment for taking risk and moving to value,” said Elliot Joseph, CEO of Hartford Healthcare in Connecticut.

Like many health systems, Christiana Care Health System in Newark, Del., is committed to moving from volume to value and has been looking to partner in such models with government payers and commercial plans, said Janice Nevin, MD, president and CEO.

“We’ve taken full advantage of anything that Medicare has offered,” Nevin said in an interview. The Centers for Medicare & Medicaid Services (CMS) “has been a leader in that space.”

However, the health system has “had some challenges” finding value-based payment arrangements with commercial plans.

“But one of the changes I’ve seen in the last few months is that commercial payers are coming to the table differently. Where we haven’t had the opportunity, I’m now optimistic that we will,” Nevin said.

Hartford Healthcare also found a VBP arrangement with a commercial plan, Tufts Health Plan in Massachusetts, “but we had to go out of state to find somebody.”

Tufts, a provider of Medicare Advantage (MA) plans, supplies Hartford’s clinician network, which also offers advanced care management.

“We just haven’t found with one of our Connecticut payers the moment of opportunity to bring it to the marketplace,” Joseph said in an interview. “We’re still hopeful about it and we’re constantly in conversations with them.”

Broader Optimism Seen

Such optimism is broadly reflected among health system executives, according to a recent Lumeris survey of executives from 22 health systems.

Although 73 percent of executives rated the transition to risk-based delivery models as a “high” or “very high” priority, the pace of change remains slow in most cases due to market forces, unwillingness of payers, lack of organizational readiness, and hesitation to take on risk.

“However, executives agree that both the public and commercial markets are gradually moving toward value-based care and health systems need to prepare,” the report stated.

Among specific VBP initiatives of the health systems in the survey:

• 86 percent were participating in some type of downside-risk contract with payers
• 50 percent of those in downside models were in Medicare accountable care organization (ACO) contracts
• 45 percent of those with downside risk were in commercial ACO contracts
• 41 percent of risk-based contracts were MA, Medicare Part D, or state Medicaid contracts, among others

Nevin said her health system traditionally has had a lot of conversation around upside-only models.

“What has changed is the conversation about the downside part,” Nevin said. “And we want that. We believe that will help drive more change and frankly there will be more opportunity for everyone in that kind of payment environment.”

Health Systems’ VBP Challenges

Common challenges for VBP programs include aligning physician incentives with quality and cost goals; transforming care delivery; developing capabilities and expertise that are traditionally associated with payers; and collecting, aggregating, and disseminating actionable data to drive clinical and financial performance, according to the executive survey.

Placing a team of C-suite executives, including CFOs and medical group leaders, in decision-making positions in VBP programs is key to successfully transforming operations, respondents said.

Surveyed health systems also preferred to build their VBP programs and capabilities in-house rather than partnering with an outside vendor. When they do partner, common areas are information technology and data analytics.

Meeting Expectations?

A majority (64 percent) of executives reported that Medicare ACO contracts met all or most health system objectives, while just over a third (36 percent) said the contracts met only some objectives

In contrast, no respondent said commercial ACO contracts met all health system objectives, while 30 percent said they met most objectives and 50 percent some objectives.

Over a third (39 percent) of health systems in the survey did not offer health plans. However, 75 percent plan to offer MA (50 percent), Medicaid plans (25 percent), or commercial or employer plans (25 percent) within 15 months.

Although provider-sponsored health plans were generally meeting health systems’ objectives, especially in the case of MA plans (63 percent), one health system executive noted that MA and commercial or employee plans were generating significant operating losses.

Areas that health systems viewed as strengths when offering a health plan included:

• Payer contracting strategy (71 percent)
• Physician alignment and engagement (62 percent)
• Clinically integrated networks (57 percent)

Self-identified challenging areas included:

• Developing effective care management (62 percent)
• Data and analytics capabilities (52 percent)