Plotting the Roadmap to Value-based Reimbursements in 2017 & Beyond

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Value-Based Health Care is Antithetic to Patient-Centered Care

Editor’s Note: Mark R. Anderson, FHIMSS, CPHIMS is the CEO of AC Group and a member of Innovaccer’s Board of Advisor, a Silicon Valley-based healthcare analytics company. Previously, he is a former CIO for 5 IDNs, an interim CFO, and CEO of Rural Hospitals. 

Policymakers and private industries have been pushing for a change in healthcare reimbursement policy. Back in January of 2015, several of the nation’s largest health care systems and payers, joined by the purchaser and patient stakeholders, announced a powerful new private-sector alliance dedicated to accelerating the transformation of the U.S. healthcare system to value-based business and clinical models aligned with improving outcomes and lowering costs.

Payers and providers have been challenged by the Health Care Transformation Task Force (which comprises of six of the nation’s top fifteen health systems and four of the top twenty-five health insurers) to join its commitment. They aim to put 75 percent of their business into value-based arrangements that focus on the achieving a Triple Aim of

●      Better health

●      Better care and

●      Lower costs by 2020. 

After the Secretary of HHS, Sylvia Mathews Burwell, made an announcement that 50% of the Medicare payments would be shifted to alternative payment arrangements such as ACOs or bundled payments by 2018, together, these two decisions are sending a clear message that focus of both the private and public sectors is to transition from fee-for-service model to alternative payment arrangement known as value-based reimbursement.

What is Value-based reimbursement?

To meet the increasing demands of aging population healthcare as a whole is making an effort to move from traditional fee-for-service (FFS) reimbursement to Value-based reimbursement. The Value-based Reimbursement process has been designed to improve the clinical outcomes and performance by shifting the reimbursement from “volume to value” by incorporating financial incentives.

But that might not be sufficient to achieve the targeted transformation; it requires a holistic approach to Value-based reimbursement that includes a new emphasis on population health, care coordination, new alliances between various healthcare organizations, physician offices/clinics, and investments in new tools and services promoting such activities. The provider organizations’ VBR transformations requires interoperable EHRs which are capable of capturing patient data from any clinical practice, normalize that data, and makes it easily accessible and usable for physicians.

Secondly, providers must create comprehensive care coordination and patient engagement programs designed to create real-time clinical for providers of care. For Health plans, the foundation is the development of strong next-generation clinical business intelligent tools to go along with the current claims adjudication systems plus the need to create real-time care coordination programs designed to engage their members and the treating physicians.

One of the major challenges in the VBR financing system is a lack of knowledge on what technologies are required and at what phase. The problem for most decision makers is that when you look at the offerings, you get about 60 different offerings and very few are designed around needs of today and the future. The problem today is in products or services that are needed in the industry without first defining the real needs of the specific organization. For example, it’s like selling “transportation” – do you need new shoes to walk, a skateboard, a two-passenger auto, a truck, a boat to go across water, or an airplane to move people and supplies across regions.  We must first determine our needs and then match those needs to the multiple suppliers.

Why implement VBR?

Clinical Decision Makers need the right information, provided at the right time, about the right patients, with the right clinical rules and guidelines, on the right devices (The 5 Rights of VBR). To assist both Payers and Providers, we came up with 15 different functionalities required to thrive in a VBR financial world, and “Population Health” is only one of the 15 categories. Starting from the bottom and working up, healthcare organizations interested in VBR financing models must have the ability to connect multiple EHR products together from multiple vendors in order to create a single-view of the patient’s condition over time.   

Of course, since providers use different patient naming conventions and do not always collect the right information, the healthcare organization needs the ability to match patient (Master Patient Index) and the ability to cleanse the data so that garbage is removed from the patient single 360 view of the patient’s record. Once you have the single view of the patient’s clinical and financial records, you can create patient registries, and you can start analyzing your population based on clinical rules and guidelines (Population Health). This is where 40% of the so-called “population health” vendors in the market stop. The vendors highlight patient populations, costs, outliners, and help determine which physicians follow protocols. However, most so-called “population health” vendors do not provide actionable items directed to care providers on what necessary steps are required to improve clinical outcomes.

Care Coordination

As far back as June of 2007,  the Agency for Healthcare Research and Quality (AHRQ)[1] identified over forty different definitions of ‘Care Coordination’ and related terminologies and developed a working definition drawing together common elements. Overall, AHRQ defined Care Coordination as:

“The deliberate organization of patient care activities between two or more participants (including the patient) involved in a patient’s care to facilitate the appropriate delivery of health care services. Organizing care involves the marshaling of personnel and other resources needed to carry out all required patient care activities, and is often managed by the exchange of information among participants responsible for different aspects of care.”

This definition is adequate, but how does an organization implement Care Coordination without the right technologies. The simple answer is, “It Can’t.”  

Advanced Care Coordination requires a single source of patient data, risk stratification, clinic alerts and guidelines based on best practices and all of this information needs to be presented in a simple manner that notifies the Care Coordinators about gaps in care and high-risk patients that need action “today.” Care Coordinators do not need a list of 500 patients that meet certain criteria; they need daily worklist of high-risk patients that need intervention today based on selected criteria and a list of patients that need intervention tomorrow. A care Coordinator cannot interact with 500 patients in one given day, so the advance software most priorities the patients based on criteria established by the various paying sources – usually Medicare or Health plans.

 Once the Care Coordinators are provided a short list of patients to interact with on a daily basis, the Care Coordinators need instructions on what additional information is needed from either the patient or their family (Patient Engagement).  This could be in the form of online questionnaires and remote monitoring of patients via home monitoring devices or even new inventions like Fit-Bit. Once the additional patient related data is collected, the next generation VBR software should recalculate the patient’s risk score and should create an updated patient-specific care Coordination plan for the patient. Depending on the results, clinical alerts should be automatically electronically transmitted to the appropriate physician’s EHR software application in the form of a clinical message or alert.  For effective Transition of Care, the physician should not have to log into a separate software application.  The physician works within their EHR and should not have to leave their EHR to get clinical updates on their patients.

The current scenario

Now all of this might sound great, but do Care Coordination and VBR technology increase the chance of success?  First, let’s look at August 25, 2016, CMS announcement regarding the 2015 financial and quality performance results for 392 ACOs. The results showed:

●       There were 83 ACOs out of the one that had health care costs lower than their benchmark but still did not qualify for the annual shared savings because they couldn’t meet the minimum savings

●       An increasing proportion of ACOs has generated savings above their minimum savings rate each year. For the Performance Year ‘15, 120 out of 392 total ACOs (31%) generated savings above their Minimum Savings Rate compared to 92 out of total 333 ACOs (28%) in Performance Year14 and 58 out of total 220 ACOs (26%) in Performance Year 13.

●       Accountable Care Organizations like some in Pioneer Model who have more experience in the program were more likely to generate savings above their MSR. For the PY 2015, 42 percent of Accountable Care Organizations that started in 2012 generated savings above their MSR as compared to the 37 percent of 2013 starters, 22 percent of 2014 starters, and 21 percent of 2015 starters.

●       45 percent of Accountable Care Organizations participating in the Advance Payment model or ACO Investment Model tested by the CMS Innovation Center, which offers select Shared Savings Program ACOs pre-paid savings, generated more savings above their Minimum Savings Rate compared to 29 percent of all other ACOs.

The one factor that was missing from the discussion related to “how does advanced technologies drive financial and clinical improvements.” Our research indicates that the ACOs with the best results had advanced VBR software technologies that performed almost all of the 15 aspects of our VBR functionality table provided earlier.  We have been involved in numerous projects where Advanced VBR technologies were used to improve clinical quality outcomes while reducing overall costs. 

Success Stories

A Health Plan with 500,000 covered lives in Southern California decided that they wanted to create a pay-for-performance program for local providers based on reducing costs while improving quality outcomes for their higher risk patients with chronic diseases.   Before implementing and advanced VBR software application, the health plan relied on 90-day old adjudicated claims for their risk-adjusted evaluations.

They realized they need more data.  The operational plan called for the consolidation of real-time patient-specific clinical data from their active 2,300 providers including lab results, active medications, problem lists, allergies, vital signs, ER visits and Hospitalization, immunizations, and other data that could be collected from the National C-CDA interoperability standard.

The Health Plan applied technology that could provide:

●      One common view of risk stratified consolidated cleansed patient data from over 25 different EHRs with a Master Index to insure data integrity

●      Advance data analytics so that the healthcare plan could create disease registries so that they could identify gaps in care based on best practice clinical guidelines

●      Comprehensive Care Coordination program for identifying recently discharged patients from local Emergency Rooms and Hospitals and best practice guidelines for patients with COPD and Diabetes,

●      An interactive patient and family engagement program to encourage patient compliance with clinical protocols,

●      Last, the ability to passed clinical results back to individual physician’s EHR applications to gain trust within the physician population and to encourage physician interaction with the health plans Care Coordination program.

Within 12 months the health plan had integration of multiple structured and unstructured data streams to create one intelligent real-time view of the patient’s clinical data and current treatment plans and assignment to clinical care coordinators based on risk factors. It could better predict disease frequencies by mapping external factors at the city and county level using search trends, demographic patterns, and physical factors like obesity, smoking, etc. while identifying key factors over time that enabled data-driven intervention plans.

The results of all these in one year were:

1.     Reduced ER re-admission rates within 48 hours by 42%

2.     Reduced Hospital Readmission rates within 96 hours by 67%.

3.     Improved quality scores for COPD and Diabetes by implementing advanced clinical Care Coordination guidelines and working with local care providers.   Results included in a reduction of diabetes patients with uncontrolled H1C values > 9.0 by 38%, improved compliance with annual eye and foot exams by 78%, and through education and patient engagement, reduced BMI scores by 12.5% for patients with Diabetes.

4.     Health plan’s calculated return on Investment of increased by 300% within 12 months of implementation.

Another Health Plan with 325,000 lives covered in the Mid-West that wanted to reduce the costs of Emergency Rooms and Hospital readmission through the development of a predictive modeling program designed to foresee readmission based on patient conditions and home conditions through an advanced patient engagement care coordination program.  Prior to implementing and advanced VBR software application, the health plan relied on 90-day old adjudicated claims for their risk-adjusted evaluations. 

Like the prior case study, they realized they needed more data.  The operational plan called for the consolidation of real-time patient-specific clinical data from the 12 hospitals in their geographic area including the reason for admission, discharge plans, order results, discharged medications, and other clinical and operational data.  The Health Plan had Health IT that could provide solutions similar to the previous health plan.

Within 3 months the health plan had Integrated patient information from all six hospitals and created an intelligent real-time view of patient information and was able to assigned risk stratified patients to specific care coordinators based on their clinical expertise. The results were:

1.     Reduced ER re-admission rates within 48 hours by 23% within 6 months and by 37% within 12 months.

2.     Reduced Hospital Readmission rates within 96 hours by 18% within 6 months and 42% within 12 months.

3.     Reduced Medical Loss Ratio (MLR) by 34% for patients with risk of readmission.

4.     These improvements in financial performance created a 6x return on investment on their advanced VBR software costs within 12 months.

The Road Ahead

Advanced VBR software is not only necessary but required for both Payers and Providers in order to thrive under a VBR financial model. To thrive in this new market, payers and providers must start with data integration from multiple sources, implement advanced analytics and Care Coordination programs based on best practices and national care guidelines, and should implement patient and family engagement programs.

To accomplish these fundamental requirements and to thrive in the new VBR financial models, Payers and Providers should search for software vendors that meet all of the 15 components of VBR. Additionally, since you will need a minimum of 12 months of prior patient data for true risk stratification, the time implement advanced VBR software is today. Medicare VBR contracts will begin on October 1, 2017, followed closely by commercial insurance plans in early to late 2018. So the time to start evaluations is now and improve on quality metrics at a lower cost of care.


  • Erdem Asma

    Mark, I read your article with pleasure and as a HITS implementations professional I believe you captured great pain points very successfully.

    The change occurs due to the shift from focus on optimizing healthcare delivery to more on the health of communities in order to identify and overcome today’s challenges. We can only succeed during this transition to drive value by making meaningful changes in people, processes, and technology all in combination. Vendors proactively impacting the health of the communities they serve through leading-edge technology solutions still with limited product data exchange specification boundaries. As solution partners that help providers to optimize the health outcomes of individuals, the performance of a network of providers and their financial performance urge to build vision and strategies for solid Population Health platforms. 

    Managing growth requires to adopt and grow technology solutions, service portfolio, leadership, structured methodologies, and processes ahead of demand. Scorecards are getting widely deployed by leading vendors delivering a new level of personalized classification, prediction, and population surveillance through automation which naturally require the continuation of scaling to massive population sizes. 2017 seems to be a modification period. The business models and health information technology strategies are going to be shifting fast. As you stated we are just entering the transition period with the largest shift from fee-for-service to an at-risk model occurring between next 2-3 years across the health system, health plans, Medicare, Medicaid, self-insured providers and more. This shift not only brings significant change to the business model of providing care, but also impacts how to manage health and to the necessary information technology support in various fragments such as: reactive care to proactive management of health; fragmented care to connected continuums; reward for volume to reward for quality, safety, and efficiency; group plans to personalized plans; transaction oriented to intelligence/data driven; provider enablement to consumer enablement, etc.
    Therefore as the market continues to tilt towards value-based reimbursement arrangements, providers need to navigate the complexities of an evolving healthcare demographics ecosystem.  More specifically market needs experienced HITS partners to actually engage and manage their populations while mining necessary analytics for effective quality assurance. The care provider priority must be on how to rethink business model, processes, and how to structure their IT solutions while vendors make the technology integrated more openly. Vendors must ensure they are prepared to deliver value for those to ensure they successfully make the transition and thrive in the emerging models where managed system shared platforms exchange realtime patient data for common good.

    From a technologist’s point of view, our contribution nests in streamlining the technology implementations to reduce the time to value, while scaling to higher in volume to expand product portfolio to manage high-performance shared networks, provide tighter provider workflow integration, actively engage consumers, support enterprise-wide analytics, mine the data to create nfew intelligence, and create an open ecosystem to empower the innovators.