Just before the COVID-19 pandemic emerged, 48% of healthcare providers surveyed said three-quarters of their organization’s payments were grounded in fee-for-service models of care. Fast forward a year and the financial aftershocks of the pandemic have highlighted some of the benefits of value-based models for providers as well as health plans and consumers.
Despite the benefits of incentive-based payment models in healthcare, including indications that it may reduce readmissions and healthcare costs, providers and payers alike have taken a while to warm up to value-based care. Data from 2018 found the industry was only one-third of the way through the journey to value-based care. The same data indicated that approximately 5% of healthcare payments were through alternative models, with most payers anticipating minimal future growth in this area. Meanwhile, a 2018 survey showed physicians were cautious about value-based reimbursement—with nearly half believing value-based models could have a detrimental effect on the quality of patient care.
But during the pandemic, when elective procedures were postponed in the first months and volumes were slow to return to pre-COVID levels, many providers who relied on fee-for-service payment for most of their revenue found themselves negatively impacted financially by the lower utilization of services. Meanwhile, value-based models gave some providers a financial lifeline, with payers like Blue Cross and Blue Shield of North Carolina providing financial and other support to primary care providers and others speeding up value-based payments to help physician practices. These are moves that strengthened these practices’ financial stability while protecting members’ access to care. Experiences such as these prompted increased inquiries around how to make the move toward value.
Value-based payment doesn’t have to be a zero-sum game: Providers can achieve healthy margins while payers decrease risk and associated costs. The key to realizing value is to partner closely with payers to develop models that support data sharing, high-quality care, and reduced waste, which is critical given that $600 billion in healthcare spending could be considered waste. To get there, consider the following approaches.
1. Set the right goals. To succeed under value-based models, providers must intensify their focus on delivering the right care to the right individual at the right time. This means zeroing in on the populations most at risk of adverse outcomes and readmissions. Success also requires providers to reexamine practice patterns that do not provide value, such as the use of higher-cost settings of care for laboratory orders or imaging tests, or variations from evidence-based practices of care. In the move toward a value-based environment, providers who are willing to adjust higher-cost behaviors will be more likely to succeed under new payment models. One analysis estimated that a health plan could have saved 6.5% of the total spent on lab orders in one year by encouraging physicians to move 40% of eligible lab tests to higher-value, lower-cost locations, even after allocating 15% of the savings accrued to physicians in the form of incentive payments.
The key to setting the right goals is to rely on publicly available data sources to create benchmarks that payers and providers can agree upon, taking into account performance among providers of similar type, size, and geography. Three sources that can prove vital in this effort include government health data, such as Medicare Advantage bids and health insurance exchange enrollments by ZIP code; academic health data, including the Dartmouth Atlas; and socioeconomic, behavioral health, and demographic data, from U.S. Census data to Behavioral Risk Factor Surveillance System datasets.
2. Promote an environment of transparency. One of the biggest roadblocks to the adoption of value-based payment from a physician’s perspective is a perceived lack of transparency around how much they can expect to receive under these models. Too often, physicians and healthcare organizations are not given real-time reinforcement for positive behavior. When providers lack timely insight into the changes in behavior that make the biggest impact on performance, maintaining momentum around these behaviors becomes difficult. This is especially true given the numerous factors that are evaluated under value-based models, some of which providers view as out of their control, such as when members seek specialty care outside the network.
Transparency accelerates physician buy-in. To move the needle on value, providers must share data as close to real-time as possible, with dashboards that highlight the greatest opportunities for improvement—from reduced emergency department use to improved medication adherence—on a weekly, monthly and annual basis. Physicians and providers also must have insight into performance on quality measures and patient satisfaction. Leading health plans use specialty-specific metrics to measure clinical quality and medical economic outcomes. These plans risk-adjust measures based on traditional Medicare hierarchical condition category (HCC) risk-adjustment methodologies. They then score providers on each measure based on their relative performance within peer cohorts.
One alternative quality contract provided significant incentives for providers to strengthen care management for chronic illnesses such as diabetes and high blood pressure. Over time, the health plan reduced annual medical spending for these members by up to 12%.
3. Ensure that physicians have access to longitudinal data—and the technology to leverage actionable insight. Access to longitudinal data gives providers a basis for identifying prospective risks and gaps in care that may have existed before the value-based contract went into effect. When combined with advanced analytics, these data provide a more complete view into the health of a population, pinpointing opportunities to reduce risk by providing the right support.
For example, during the first months of the pandemic, as the Centers for Disease Control & Prevention began to track the impacts by cohort—from asymptomatic and symptomatic patients to those who were hospitalized with severe complications—researchers used artificial intelligence to predict where COVID-19 hotspots would emerge and predict the severity of disease and mortality risk by population. They also used the data to create a signature care profile for COVID-19 that went beyond the known clinical symptoms to include signs such as a rash, sudden onset of diabetes, heart arrhythmias and more. With this information in hand, providers could better assess the scope of indicators that can lead to hospitalization or even death in those who contract the virus—and respond with potentially life-saving interventions.
In Chicago, for example, early data revealed significant racial health inequities, with Black residents diagnosed with COVID-19 at over twice the rate of other ethnicities. Black residents were also far more likely to die of COVID-19 than other residents, with 72% of deaths occurring among Black Chicagoans even though they comprise just 30% of the city’s population. A deeper dive into the data revealed that higher rates of chronic illness—which make individuals more likely to become seriously ill from COVID-19—were one factor. Chicagoans who are Black not only have higher rates of chronic illness, such as heart disease, diabetes, and lung disease, but they also are more likely to die from these conditions. With this information, public health officials, healthcare organizations, and health plans worked together to create greater equity in access to health services and engage vulnerable populations in reducing their level of risk. Today, similar efforts are underway to increase access to the vaccine in specific neighborhoods.
Game On for Value
Providers and payers are equally committed to members’ health and satisfaction. Together, they are powerful allies, trading ideas that strengthen the member experience—and when members are happy, everyone is happy. But often, providers need direction on how to succeed under value-based payment contracts. By collaborating with health plans to gain actionable data that is geographic- and practice-specific, providers can ensure that value-based payment isn’t a zero-sum game. The result: a win-win not just for themselves and their health plan partners, but also for patients.
Emad Rizk, M.D. and Rachael Jones Bio
Emad Rizk, M.D., is President, CEO, and Chairman of the Board of Cotiviti. A seasoned and renowned healthcare industry senior executive, Dr. Rizk brings to this role more than 25 years of experience working closely with payers, providers, and government entities. Most recently, he served as CEO of Accretive Health and was also a member of its Board of Directors. Prior to Accretive Health, Dr. Rizk was President of McKesson Health Solutions, a business that provides clinical and financial solutions to healthcare payers.
Rachael Jones is the Senior Vice President, Performance Analytics & Quality at Cotiviti. In her role, she has accountability for business unit strategy, product vision, team, and market impact for one of the company’s high-growth verticals, Performance Analytics & Quality, which allows health plans to move from simply reporting quality measures to driving the purchase, delivery, and utilization of higher value healthcare. Prior to her current role, she was Vice President, Growth & Account Management for Anthem’s Diversified Business Group (DBG) division which is focused on delivering whole-person care to radically transform the healthcare industry.