Q&A With Consultant Terri Welter: Is Value-Based Care Stalling?

As a partner at ECG Management Consultants, Terri Welter has spent more than 20 years helping providers develop innovative payment strategies and negotiate contracts with payers. She also helps health systems develop and implement accountable care organizations and clinically integrated networks. In a recent interview, she gave her opinions on some of the reasons that the shift to value-based care has been slow on the commercial insurance front, and some things that might accelerate change. 

Healthcare Innovation: An e-mail I received from ECG Management Consultants had a provocative headline — something about why value-based care is stalling and what can be done about it. What are some signs that it's stalling?

Welter: I see the signs literally every day. At ECG we do dozens of negotiations between providers and payers across the country, and in those negotiations, we are seeing an immaterial percentage of payments tied to value. It's somewhere between 1% and 3%. My belief is that coming out of the pandemic, we’ve had a lot of inflation, a lot of labor issues in the industry. So many of our clients are just financially strained. They're focused on getting a correction to catch up with that high-water mark that they hit on expenses and in doing so we're slowing down progress on value, because we're focused on that correction on inflation. 

A lot of the rural health systems and providers have been even more financially strained. So some of the bigger health systems are having to invest in keeping them open, because those patients are not having anywhere else to go.

HCI: Are there particular challenges rural health systems face in shifting to value? 

Welter: Yes, I think a big part of it is access to primary care, and being able to invest in the infrastructure that you need around data. A lot of those rural organizations have plugged into clinically integrated networks (CINs) or ACOs from the bigger regional systems. I think one of the problems has been whether there is enough size and scope in those arrangements to make sense. Or do you have one foot in fee for service and one foot in value? I think that has been an impediment.

HCI: So how does that description you gave of only 1% to 3% in value match up with what we hear from CMS about how they want to have a huge percentage of patients in a value-based care arrangement by 2030?

Welter: I'm doing negotiations with commercial payers, Medicare Advantage and Medicaid managed care. You've got CMS programs, and I think that those programs have moved the needle, but then you've got commercial and Medicare Advantage and Medicaid, who are really just dabbling in it. If we’re going to advance it, I think we've got to have larger-scale adoption across those payers.

HCI: So even when you have Medicaid managed care organizations in a state, that doesn't mean that the providers are in value-based arrangements, correct?

Welter: That's correct. It's usually still fee for service. Now we are seeing some advancements on the Medicaid side. For example, there are some states that are paying a per member/per month to practices to help them build some infrastructure. They'll give them a shared savings arrangement. So we're starting to see it. I think the way to advance it is for CMS to support some state-based initiatives. Medicaid is a really big opportunity for value. On the commercial side, I think they are probably going to be the last to do it.

HCI: In your day-to-day work, you work with the provider side and help negotiate the contracts with the payers. Is that how it works? 

Welter: That’s correct. We do a lot of the analytical work in preparation for negotiations. We’ll look at all the transparency data, for example, to say, how do we compare to the market? And then we'll sit at the table and negotiate arrangements or just be behind the scenes as an advisor.

HCI: We have been seeing a lot of those negotiations breaking down, particularly between Medicare Advantage plans and provider organizations, and all of a sudden a huge number of patients are thrown out of network for a health system and it leads to a lot of disruption.

Welter: Yes, and I think that the two big drivers of that disruption are the administrative burden that hospitals and providers are seeing related to Medicare Advantage participation, in particular, coupled with the fact that they end up getting paid below Medicare because of the denials and the pre-authorization requirements. So that is actually causing them to re-look at those arrangements and say traditional Medicare may be better — or can we find a strategic MA partner. Instead of participating with five, we could have two to three that might be better partners.

HCI: What are some of the challenges you see that the physician groups have in the transition to value-based care, even if they have better data infrastructure now? 

Welter: Their compensation arrangements, even in some of the  larger groups, may not be aligned with value. I think that gap between having these CMS programs but not having the commercial programs involved actually is an impediment, because it doesn't give them the size and scope they need to be all in on value. Also, they often don’t have the pocketbooks to invest like they need to. So they need help with those investments.

HCI: If we saw more multi-payer alignment between CMS and the commercial providers, especially on things like quality measures, would that make life easier?

Welter: Yes, absolutely — and not just which measures, but the definitions for those. There's a lot of disparity. If you're an academic health system, you have a higher acuity patient population. You might have different definitions for measures around those patients. The other thing is the availability of total cost of care data. If you're a large enough health system, you might have the full continuum of providers so that you can access that data. But many of our medical groups don't have access to what happens to the patient when they go to the hospital.

HCI: It seems like in the Medicare Shared Savings Program, the physician-led ACOs do better than hospital system ACOs. Is that because the the incentives for the hospitals are skewed? 

Welter: In part, but I also think that just the fragmentation of the system has something to do with it. If you look at the physician groups that have done well under risk, whether it's CMS programs or even Medicare Advantage risk programs, they have been able to control where the patients go, getting them into the right setting of care. 

The hospitals actually have done a much better job in the last five years or so at re-examining their ambulatory strategies, doing things around developing ambulatory surgery centers and urgent care, and I think lowering prices on shoppable services — imaging and things like that. But the inpatient setting is for the really sick patients who are higher acuity. If you have them in a value-based arrangement, it becomes a math problem. The hospitals end up being the high-cost component of the value-based arrangement.

HCI: I read that you've worked with the development of several statewide clinically integrated networks. What are some of the factors that lead to success there, and what are some things they have to work through to get there?

Welter: I think the biggest factor for success is the cultural adoption of that movement at the executive C-suite level. I think that the ones focusing on the prevention or advancement of chronic diseases, particularly in the Medicare Advantage population, have been the more successful ones, because there are opportunities to keep patients from going to the hospital.  It has to be physician-led at the governance level. And while primary care is central, another key is figuring out how to involve specialists. 

HCI: We write a lot about alternative payment models from the CMS Innovation Center. They have received criticism from some in Congress because few if any of their models have shown enough savings to scale up on a national level. Are there things they could do differently? 

Welter: As I referred to earlier, maybe they could roll those out at the state level. We're a huge country. I think trying to implement what works and give state-based programs the opportunity to adopt those is probably the way to go. I also think that we've improved the availability of data based on the CMMI work, but I still think we have a lot to accomplish in that regard. So if we can break down the barriers on that total cost of care and quality data and rolling out the models that work, it will probably lead to better adoption. If we could get Medicaid managed care involved at the state level, then from there we could get the commercials involved.

HCI: Are there some regulatory things that can drive progress?

Welter: We're in the early phases of the price transparency data being available. For the whole history of healthcare we didn't have that data. Now we have it, and I think that is going to unlock value eventually. Right now it's creating chaos because some organizations say I'm underpaid; other organizations look like they are overpaid. And it's creating this chaotic activity in the negotiations. I think ultimately we're going to have less variability because of it, and it's going to then cause us to look at how do we differentiate? We have to differentiate based on value, but it's going to take at least five more years. We’re in the early phases, but to me, that’s going to be a game changer. 

HCI: Is there anything else that we we haven't talked about yet that you want to mention?

Welter: I think investment in behavioral health is actually paramount. If you look at access to behavioral health, it's still a big problem, with the impact of behavioral health on medical issues. So I would say somewhere in this value equation, we've got to have more focus on investment in behavioral health.

What's happening right now is behavioral health is really underfunded. We’re asking our providers to invest in it, which they are, but sometimes they're not even covering their costs. So we end up having an access issue. If you don't have access to behavioral health, you're going to have bigger problems around overall health and population health. I think there's a lot more to research about the evolution of how we advance behavioral health.