Pioneer Melanie Matthews of PSW Takes the Long View on Risk-Based Contracting

March 7, 2023
Melanie Matthews, president and CEO of PSW, a population health company that administrators risk-based contracts, shares her perspectives on the long-term prospects for risk-based contracting

As we noted in our January/February issue feature on risk-based and value-based contracting, “A lot has happened in healthcare over the past three years; in January 2020, the COVID-19 virus was first officially documented as having arrived in the U.S., and by March, a full public health emergency had been declared, shutting down the vast majority of non-emergency surgical procedures and throwing the U.S. healthcare system into crisis, with COVID cases overwhelming the system and leading to tremendous challenges, some of which are lingering even now. Indeed, the clinician and other staffing shortages, the increase in staffing and supply costs, and the burnout and subsequent departure of large numbers of nurses in particular, have all been devastating for the healthcare system, with revenue margins of many hospital-based health systems sliding into the red nationwide.”

One of the leaders whom we spoke to, who is at the absolute forefront of risk-based contracting innovation, and who understands the issues at a very granular level, is Melanie Matthews, president and CEO of PSW, a Population Health Company based in Olympia, Washington, and which administers what was the Direct Contract ACO but on Jan. 1, 2023, became the REACH ACO, and the MSSP contract, for MultiCare, the Tacoma-based health system, and which helps manage risk-based contracts for health systems in several states. We spoke with Melanie Matthews for that report at the end of last year; below are excerpts from that interview.

How do you describe your organization to outsiders?

PSW is a population health company, and we maintain a network that takes risk with government and commercial payers and provide the administrative support for CIN MultiCare Connected Care. Altogether, we have risk contracts for over 350,000 lives, of which 80,000 are in CMS [Centers for Medicare and Medicaid Services] and CMMI [Center for Medicare and Medicaid Innovation] ACO [accountable care organization] payment models like Direct Contracting/REACH ACO and MSSP [the Medicare Shared Savings Program]. We work with and contract on behalf of, urban, suburban, and rural communities; hospital-based physicians, independent physicians, and critical-access hospital communities.

How have things evolved over this past year [2022]?

I think that the healthcare system in general has been incredibly taxed by COVID-19, including by inflation, labor costs, provider burnout, and the impacts of delayed care during COVID on our system. In general, the healthcare system is stressed. From a policy perspective, there continues to be interest in policy direction to continue down the value-based care path, to reward performance based on quality and cost… and engaging in models with predictability and that are economically viable.

What would you say to those who hesitated to pioneer before the pandemic?

There are disruptors being funded private equity and venture capital, who are supporting new models to support taking risk; so for organizations who haven’t jumped on, how do you partner with organizations and/or build administrative infrastructure? CMS is creating opportunities for those that haven’t yet invested; and there are a lot of convener-type organizations that have already built the infrastructure that are helping others now. So if you haven’t built this yet, you need to think where to build infrastructure; because the skills and attributes are different from the FFS [fee-for-service] model. You can build it yourself with upside opportunity; CMS has models to encourage investment; and you can partner with those who have built infrastructure.

What have your and your colleagues’ biggest learnings been over the past couple of years?

Because we’re responsible for a total population attributed to us, we’ve had the opportunity to engage in and address preventative health and the social determinants of health, made sure our patients made their appointments, sought care, where there wouldn’t have been the incentives for the prospective outreach we’ve done. That shows to me how important this is, because you’re not just engaging the patient when they have to use the health system; that’s the whole point of this. And per health equity, there’s good research to suggest that Medicare ACOs are doing preventive care such as COVID and flu vaccines across all racial categories and are providing prevention better than fee-for-service-based models.” Moving forward with value-based contracting is simply the right thing to do for patients and for the healthcare system, she emphasizes.

With the equity lens, are you encouraged that CMS and CMMI are making it more appealing to providers?

Yes, and the discussion on the policy side is, how much should be carrot, how much stick? It’s been proven that organizations that take downside risk act more proactively. I think the administration is trying to provide more glidepaths for organizations to get onto the path. And you can’t pass the increased cost onto payers in the same way you can pass costs along to consumers at the gas station or the grocery store. So the financial challenges just erode margins. In theory, you’re able to perform in VB contracts, even when the fee-for-service providers are struggling; so there’s economic interest in the model.

And providers are exhausted and depleted, and access is a huge issue now. Providers are interested in a different model, and in value-based care delivery, when you can invest in complex care and in models, it is a potential way to address caregivers burnout.

Organizations like yours are learning and sharing their learnings. What have some of the biggest learnings been?

There certainly are more resources, tools, and best practices, with information on outcomes in value-based care delivery. And we’re serving as advocates for patients and providers; we can do the negotiating with the payers, and pay the claims. So certainly, those capabilities are proving useful in ACO models, as modeled by early adopters. It’s really important that we have predictability in the benchmarks; because a lot of the skepticism is around the fact that the rates can change. You need to make sure that government payers aren’t arbitrarily punishing early adopters.

Is one of the concerns that the algorithms in the MSSP effectively punished early adopters, by forcing them to compete against their good early performance?

Yes. There’s concern that early adopters aren’t disadvantaged by having performed well in previous years. And we need to look at the sharp reduction in care provided during the depth of the COVID years. So you had some wonky data during that time, and then you might have patients whose cancer advanced during that time because they didn’t get tested, for example. So we need to get those benchmarks correct so that providers can feel comfortable joining the ACO well. Predictability is important. There’s chaos in the COVID years, and we need to help incentivize people, and they’re scared about lack of predictability; so CMS has to balance that out with careful consideration of COVID-based issues.

Data is king, correct?

Yes. Data for action is great; data for displaying performance is great; monitoring trends in wonderful. We’re still working with payers, working with EHRs, to make the data more usable. There might be data in the systems all the time, but bringing that data closer to the bedside—but the data is still fragmented, because of a lack of reliance on standards. And these investments in the technology are extremely expensive. And it’s not just the cost of the development, but also the labor, and creating the priorities. Unless you’re really committed to the value-based movement… Having investments in value-based care becomes cyclable, because you look to make investments in primary care management, and behavioral-based motivating of patients, and care management. In an ACO model you can get care anywhere, but systems don’t see everywhere that patients seek care.

What about using data to impact the physician culture?

Yes, per Banner Aetna, comparison data is effective. There’s a culture of skepticism. Doctors will all initially say, ‘My patients are sicker.’ And in VBC you’re only seeing dashboards around the attributed patients. So physicians can believe you’re using data as a compensation-related weapon. But you can use it effectively as an incentive.

You have to have people sitting down with the physicians to convince them to trust the data, correct?

And if you’re only doing 5 percent of VBC in 5 percent of populations, that might translate into so much interest. You have to have a meaningful number of lives in VBC to really strike interest in providers. In a volume model, in RVUs, that’s different from value models. So there’s a natural struggle to align incentives. So you’ve got to build more and more lives into the model; you have to build it.

What would your advice be for CIOs and CMIOs in health systems?

I would say to advocate for adoption of standards, and to engage with EHRs and other tech providers around adopting those standards. Many systems have relied on their tech vendors to advocate for tech standards. But provider organizations moving into risk really need that data; and there needs to be advocacy around adopting standards. There needs to be more advocacy and pressure on vendors to build information systems that are less expensive and move data closer to the bedside.

Do you have any closing thoughts?

This is a journey. It requires a lot of champions and folks who can create enthusiasm around the concept of care becoming more preventive and holistic, and it’s tricky when not all your patients are in such a model, and it’s hard to operationalize; but we need to create change. And the entire models of disruptors are based on value-based contracts. But the rest of the HC delivery system have to care for all people. We have to care for the Medicaid and uninsured and underinsured patients as well. We need to be careful that we’re not creating an incentive that causes our uninsured to lose.

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