By David O. Ault and Steve Lokensgard
Value-based care is a term used frequently in healthcare to refer to care that is of equal or higher quality for the same or lower cost. In a value-based model, payers provide financial incentives to physicians and hospitals to figure out how to replace a knee for the same or lower cost without sacrificing quality. For Medicare, it’s a way of controlling spending by paying for value instead of volume. But what is value? And how do we measure it? The Centers for Medicare & Medicaid Services (CMS) is taking this on with a vast array of payment initiatives aimed at reducing the nearly 20% of the U.S. gross domestic product spent on healthcare.
Under authority provided by the Affordable Care Act (ACA), CMS’ Center for Medicare and Medicaid Innovation (Innovation Center) tests and evaluates payment models that – by law – must maintain or improve quality and not increase costs. Some of the previous models have been designed for large, integrated health care systems that are able to function essentially as their own HMO, but the Innovation Center recently released a new slate of model options through its Primary Cares Initiative that signal a shift in its approach to value-based care. The new models more strongly emphasize:
This shift in focus is significant as it plays into a widely used definition of value: outcomes divided by costs.
The Primary Cares Initiative builds upon the care relationships and coordination strategies developed in prior alternative payment models (APMs) by making the models more accessible to smaller groups of primary care providers and by engaging beneficiaries in new ways.
Earlier models all aimed to reduce Medicare spending by charging an entity (either an Accountable Care Organization [ACO] or a physician practice) with the task of coordinating care for group of assigned beneficiaries receiving care from participating providers. While primary care providers were necessary participants, most did not have the resources to serve as the entity coordinating care. And, in these models, patients’ participation was passive, with many patients not even knowing they were part of the model or even having heard of an ACO.
This structure was intentional, as policymakers feared that beneficiaries would be upset about a change to the structure of their Medicare, especially a change that added another “layer of bureaucracy.” With the ACA a passionately debated and divisive political issue, the Obama administration would have wanted to avoid the potentially negative press surrounding an ACA program. And since beneficiaries retained the freedom of choice to visit any Medicare provider, there wasn’t an inherent need for beneficiaries to understand the behind-the-scenes payment mechanisms at work.
APMs are no longer new and unfamiliar, and providers and patients have become more comfortable with them through both commercial insurance and government payers. When you add that to an environment where an increasing number of beneficiaries are better able and increasingly willing to be an active participant in their care, the timing was right to usher in this new era of models.
First, the models aim to reduce participation barriers faced by primary care physicians. For example, the models provide monthly upfront capitated payments equal to the per-member, per-month equivalent for either all services (100% capitation) or for enhanced primary care services (about 7% capitation). CMS hopes that the capitated payments will provide the upfront funding stream necessary for even small provider groups to participate.
The focus on primary care in these APMs is a critical component to achieving savings in the models. Studies demonstrate a reduction in overall spending for patients receiving routine primary care. Preventive and acute care provided by primary care doctors drives reductions in expenditures for emergency department visits and other outpatient services.
Second, the models seek to strengthen the connection between the model participants and beneficiaries. For example, ACOs and practices participating in the Primary Care First model, will be able to market themselves to beneficiaries (with certain limitations) in an effort to have the beneficiaries “voluntarily align” to the model. The marketing materials may include descriptions of the enhanced benefits the ACOs and practices can offer, such as waiver of the three-day hospital stay requirement for skilled nursing facility (SNF) coverage, increased access to home care, and waiver of cost-sharing responsibility. Arming patients with information and choices can drive a more effective and competitive system.
While the new models offer novel opportunities to reduce costs, the financial methodology devised by CMS is by far the biggest factor in whether participants can achieve sustained savings over time. Specifically, CMS sets a benchmark against which it compares a participant’s expenditures, which has traditionally been determined by a blend of historical and regional costs. By using historical costs, CMS disadvantages providers that have been efficient in the past, since they have trouble showing continued success. The new models will continue to use this troubling methodology as well as a coding adjustment methodology that is unpredictable and that incentivizes poor coding practices.
The Primary Cares Initiative also takes aim at the outcomes part of the value equation as CMS balances its statutory requirement to measure quality with administrative burden of quality reporting.
Existing models require participants to report on a wide array of measures, which are reported through claims, patients (for patient-reported outcomes measures), and through CMS web portals. Needless to say, this places a heavy administrative burden on participants. Accordingly, over the past several years, CMS has made multiple attempts to reduce quality reporting to a core set of measures but has struggled to identify measures that actually measure quality and are applicable across initiatives. For the new models, CMS appears to be landing on a set of five to six measures, including at least one outcome measure. Participants’ financial performance will be tied to their performance on the quality measures.
Between the new strategies to reduce cost and a more thoughtful set of quality measures, Medicare is poised to take the next step towards value-based healthcare.
Healthcare is routinely criticized for a lack of price transparency. This criticism seems to imply that price transparency would make healthcare better: better outcomes, lower prices, and overall better value. Is that true?
In the second of a two-part series, “Leading the Conversation: Does Price Transparency Matter?” will challenge this criticism and engage health leaders in uncovering the challenges to improving outcomes, lowering costs, and delivering value in a price-conscience world.