You’ll recall that we ran a long piece (pt 1, pt 2) about Medicare Advantage from former Kaiser Permanente CEO George Halvorson earlier this year. Here’s a somewhat related piece from the current head of The Permanente Medical Group about what actually happened there and elsewhere during the pandemic–Matthew Holt
The COVID-19 pandemic has provided important lessons regarding the structure and delivery of health care in the United States, and one of the most significant takeaways has been the need to shift to value-based models of care.
The urgency for this transformation was clear from the pandemic’s earliest days, as shelter-in-place orders caused patient visits to brick-and-mortar facilities to plummet. That decline dealt a financial blow to many fee-for-service health care providers, who are paid per patient visit, treatment or test performed — regardless of the patient’s health outcome.
Prepaid, value-based health care systems, on the other hand, have demonstrated that they are better equipped to respond to a continually evolving health care landscape. Because they are integrated, with a focus on seamless care coordination, and they are accountable for both the quality of care and cost, these systems can leverage technologies in different ways to rapidly adapt to major disruptions and other market dynamics. Priorities are in the right place: the patient’s best interests. Value is generated by delivering the right level of care, in the right setting, at the right time.
Because value-based care focuses on avoiding chronic disease and helping patients recover from illnesses and injuries more quickly, it has the promise to significantly reduce overall costs in the United States, where nearly 18% of gross domestic product was spent on health care before the pandemic — significantly more than comparable countries. That figure rose to nearly 20% in 2020 during the pandemic.
While providers may need to spend more time on implementing new, prevention-based services and technologies, they will spend less time on managing chronic diseases. And thanks to the preventive approach of value-based health care organizations, society benefits because less money is spent managing chronic diseases, costly hospitalizations and medical emergencies.
Value-based organizations drive additional societal benefits. They understand that building trust with patients requires cultural competency — tailoring services to an individual’s cultural and language preferences. During the pandemic, building trust was especially important with underserved communities, where mistrust of health care systems is prevalent.
Today on THCB Spotlights, Matthew Holt talks with Maya Said, the CEO of Outcomes4Me, which works in the cancer patient empowerment space. Outcomes4Me is a patient empowerment platform that helps patients diagnosed or in active treatment for breast cancer understand their situation and treatment options, as well as connect better with providers to enable meaningful shared decision making. Maya tells us about the goals of Outcomes4Me, the current needs for enabling value-based care, and what the future directions are for Outcomes4Me, which recently closed a $12 million Series A round led by Northpond.
Signify Health (NYSE: SGFY) has called their approach “Value-Based Care 2.0” and, today, they’ve received an important designation from CMS that could set an exciting precedent for scaling up episodes-of-care, value-based models for the under 65 commercial health insurance market. The plan to receive this important approval as an Advanced Alternative Payment Model (AAPM) is the State of Connecticut’s health plan – a massive plan that covers the State’s 220,000 employees and retirees. To talk about what this first-of-its-kind approval signals for the future of value-based payment models are the State of Connecticut’s Comptroller Kevin Lembo and Signify Health’s CEO Kyle Armbrester.
What’s so important here is the combination of episodes-of-care (which is like value-based care-lite) and the under-65 market (which is not as rich with value-based care case studies as the over-65 Medicare market). That a State government with a massive population of covered lives AND a vested interest in helping keep local hospitals and health systems vibrant economic engines in the community is leading the way on this novel payment model design is significant. And, Comptroller Lembo gives us the details about how he’s viewing it as a win-win – after quite a few battles along the way. To win in health innovation, you’ve got to follow the dollar! Tune into this chat to see where it’s headed as episodes-of-care models get a huge boost from CMS.
Humana has 4m Medicare advantage members with ~2/3rds of those in value-based care arrangements. The report has lots of data about how Humana makes everything better for those Medicare Advantage members and how VBC shows slightly better outcomes at a lower cost. But that wasn’t really what caught my eye. What did was their chart about how they pay their physicians/medical group
What it says on the surface is that of their Medicare Advantage members, 67% are in VBC arrangements. But that covers a wide range of different payment schemes. The 67% VBC schemes include:
Global capitation for everything 19%
Global cap for everything but not drugs 5%
FFS + care coordination payment + some shared savings 7%
FFS + some share savings 36%
FFS + some bonus 19%
FFS only 14%
What Humana doesn’t say is how much risk the middle group is at. Those are the 7% of PCP groups being paid “FFS + care coordination payment + some shared savings” and the 36% getting “FFS + some share savings.” My guess is not much. So they could have been put in the non-VBC group. But the interesting thing is the results.
(This is the seventh in a series of excerpts from Terry’s new book, Physician-Led Healthcare Reform: a New Approach to Medicare for All, published by the American Association for Physician Leadership.)
Even in a healthcare system dedicated to value-based care, there would be a few major barriers to the kinds of waste reduction described in this book. First, there’s the ethical challenge: Physicians might be tempted to skimp on care when they have financial incentives to cut costs. Second, there’s a practical obstacle: Clinical guidelines are not infallible, and large parts of medicine have never been subjected to rigorous trials. Third, because of the many gaps in clinical knowledge, it can be difficult for physicians to distinguish between beneficial and non-beneficial care before they provide it.
Regarding the ethical dimension, insurance companies often are criticized when they deny coverage for what doctors and patients view as financial reasons. Physicians encounter this every day when they request prior authorization for a test, a drug, or a procedure that they believe could benefit their patient. But in groups that take financial risk, physicians themselves have incentives to limit the amount and types of care to what they think is necessary. In other words, they must balance their duty to the patient against their role as stewards of scarce healthcare resources.
On the other hand, fee-for-service payment motivates physicians to do more for patients, regardless of whether it’s necessary or not. In some cases, doctors may order tests or do procedures of questionable value to protect themselves against malpractice suits; but studies of defensive medicine have shown that it actually raises health costs by a fairly small percentage. More often, physicians overtreat patients because of individual practice patterns or because they practice in areas where that’s the standard of care. As long as doctors believe there’s a chance that the patient will benefit from low-value care, they can justify their decision to provide that care.
U.S. physicians report that more than 20 percent of overall medical
care is not needed.
The Congressional Budget Office recently estimated that up to
30 percent of the costs of medical care delivered in the U.S. pay for tests,
procedures, doctor visits, hospital stays, and other services that may not
actually improve patient health.
Unnecessary medical treatment impacts the healthcare industry through
decreased physician productivity, increased cost of medical care, and
additional work for front office staff and other healthcare professionals.
Most of today’s
primary care is, in retail terms, a loss leader — a well-oiled doorway to the
wildly expensive sick care system. For decades, practitioners have been forced
into production factories, seeing as many patients, ordering as many tests, and
sending as many referrals as possible to specialists. Patients, likewise, have
avoided going in for regular visits for fear of the price tag attached, often
waiting until they’re in such bad shape that urgent (and much more expensive)
care is necessary.
The system as it
stands isn’t delivering primary care in a way that serves patients, providers,
employers, or insurers as well as it could. To improve health at individual and
population levels, the system needs to be disrupted. Primary care needs to play a much larger role in healthcare, and it
needs to be delivered in a way that doesn’t make patients feel isolated,
neglected, or dismissed.
care is making a comeback — the kind that doesn’t just treat symptoms, but sees
trust, engagement, and behavior change as a path to health.
Todd Park is known for being excited, but THIS TIME the co-Founder and Executive Chairman of Devoted Health is excited that it’s the 10th Anniversary of Health Datapalooza, a gathering and initiative he had a hand in creating when he served Barack Obama as the Chief Technology Officer of the United States. What else is energizing Todd? How about value-based payment finally taking hold and the opportunities that’s opening up for payment model innovation and that will allow the disruption of healthcare to achieve ‘escape velocity.’
Filmed at Health Datapalooza in Washington DC, March 2019.
Jessica DaMassa is the host of the WTF Health show & stars in Health in 2 Point 00 with Matthew Holt.
Get a glimpse of the future of healthcare by meeting the people who are going to change it. Find more WTF Health interviews here or check out www.wtf.health.
Back in 2015, 20 major health systems and payers pledged to
convert 75% of their business to value-based arrangements by 2020. Today, more than
two-thirds of payments from U.S. commercial health insurers are tied to some
kind of value-based model. By 2021, the health plans expect three-quarters of their
payments will be value-based.
However, a recent analysis of Change Healthcare data by Modern
Healthcare found that the percentage of value-based revenue tied up in
upside/downside risk contracts was in the single digits. Among the types of two-sided
risk contracts that provider organizations had were capitation or global
payment (7.3%), pay for performance (6.5%), prospective bundled payment (5%),
population-based payment (5.8%), and retrospective bundled payment (4.1%).
An AMGA survey picked up signs of a recession in risk contracting
in 2016. A year earlier, survey respondents—mostly large groups–had predicted
their organizations would get 9 percent of revenue from capitated products. In
2016, the actual figure was 5 percent, according to a Health Affairs
post by the AMGA’s Chet Speed and the late Donald Fisher.
cited a number of obstacles to the spread of risk contracting, including
“limited commercial value-based or risk-based products in their local markets; the
inability to access administrative claims data from all payers; the massive
administrative burden of submitting data in different formats to different
payers; lack of access to investment capital; and inadequate infrastructure.”
How will the drive to health care value affect health care’s structure? We tend to assume that the health care structure we’re become accustomed to is the one we’ll always have, but that’s probably far from the truth. If we pull levers that incentivize the right care at the right time, it’s likely that many of the problems we think we’re stuck with, like overtreatment and a lack of accountability, will disappear.
A large part of getting the right results is making sure that health care vendors have the right incentives. All forms of reimbursement carry incentives, so it’s important to align them, to choose payment structures that work for patients and purchasers as well as providers. Fee-for-service sends exactly the wrong message, because it encourages unnecessary utilization, paying for each component service independent of whether its necessary and independent of the outcomes. Compare US treatment patterns to those in other industrialized nations and you’ll find ours are generally bloated with procedures that have become part of practice not because they’re clinically necessary but simply because they’re billable.
By contrast, value-based arrangements are really about purchasers demanding that health care vendors deliver better health outcomes and/or lower cost than what they’ve experienced under fee-for-service reimbursement, and the payment structure often asks the vendor to put his money where his mouth is, at least where performance claims are concerned. In a market that’s still overwhelmingly dominated by fee-for-service arrangements, one way for a vendor to get noticed is to financially guarantee performance. Integrated Musculoskeletal Care, a musculoskeletal management firm based in Florida, guarantees a 25% reduction in musculoskeletal spend on the patients they touch. This typically translates to a 4%-5% reduction in total health plan spend, just by contracting with this vendor, a compelling offer in an environment that makes it hard for upstarts to get market traction.
We do a lot of things in our head in this business. Once a patient reports a symptom, we mentally run down lists of related followup questions, possible diagnoses, similar cases we have seen. All this happens faster than we could ever describe in words (let alone type).
And, just like in math class, we are constantly reminded that it doesn’t matter if we have the right answer if we can’t describe how we got there.
So the ninth doctor who observes a little girl with deteriorating neurologic functioning and after less than ten minutes says “your child has Rett Syndrome” could theoretically get paid less than the previous eight doctors whose explorations meandered for over an hour before they admitted they didn’t know what was going on.
Does anybody care how Mozart or Beethoven created their music? Or do we mostly care about how it makes us feel when we listen to it?