The shift into risk-based contracting is both inevitable and highly desirable, and is being led by advanced physician groups, who are eager to prove their value in the emerging U.S. healthcare system, Don Crane told attendees Thursday morning, Sep. 19, at the California Healthcare Innovation Summit, being held at the Sofitel Hotel Los Angeles at Beverly Hills, and sponsored by Healthcare Innovation.
Crane is president and CEO of America’s Physician Groups (APG), a Los Angeles-based nationwide association of more than 300 physician groups that represents 195,000 physicians in practice across 44 states and Puerto Rico, and which care for more than 45 million patients. Describing his association’s member groups, Crane referenced the fact that “We represent the whole spectrum of groups, from the very sophisticated and risk-advanced, and to the newcomers. We’re dedicated to coordinated, integrated, risk-based care,” he added. “The ultimate goal is capitation; that’s the payment model. And delegation is the operating model.”
Crane gave the opening keynote presentation on Thursday at the Summit, under the headline, “The Policy and Payment Horizon: What Providers Need to Know.” Looking at the federal policy and payment landscape in the present moment, he noted that the biggest-picture frame around this is the shift from an acute care-dominated payment model to a chronic care-dominated one, connected to changes in society. During the nineteenth century, he noted, most patient care was connected to the treatment of epidemic disease; in that context, fee-for-service reimbursement made sense. “Now,” he noted, “90 percent of the spend in the Medicare program is on behalf of seniors with multiple chronic conditions. The disease burden has changed entirely, creating the need for a very different payment model and very different care delivery model.”
Looking more specifically, at some of the federal reimbursement changes of the past several years, Crane spent some time discussing MACRA—the Medicare Access and CHIP Reauthorization Act of 2015—he noted that “MACRA gave us APMs [alternative payment models] and MIPS [the Merit-based Incentive Payment System], and moved us [physician organizations] away from fee-for-service and into value-based payment.”
Speaking of the APG’s policy interests, Crane noted that “What was important from our standpoint under MACRA was the introduction of MIPS and APMs.” That introduction, he noted, can be seen as growing in importance over time, as the Medicare fee-for-service physician fee schedule is scheduled to provide extremely tiny (less than 1 percent) annual pay increases to physicians in the coming years, with such small percentage increases in effect becoming pay cuts, as practice costs continue to rise beyond those reimbursement increases, to levels of 4 to 5 percent a year. And in that regard, he noted, “Rather than MIPS, the choice of our members is APMs, because APMs give them the opportunity to reduce waste.”
Among the key policy innovations that APG members see as holding real potential, Crane said, are the five direct-contracting models that were introduced by the Center for Medicare & Medicaid Innovation (CMMI) in April. “CMS released five models, three of them direct-contracting models,” he noted, “which we had lobbied heavily for.” Those three, he noted, include “ a primary care capitated model, a globally capitated model, and a geographic model—to be delayed for a year—under which they [the federal healthcare authorities] may hand over responsibility for care management across a region,” including non-provider entities like IT firms.
The degree to which all of those models will appeal to APG’s member groups, Crane said, will inevitably depend on the specifics of the terms of the contract types. With regard to that, he added, “The rumor is that within a couple of weeks, the details will come out about such all-important elements as the benchmarks involved, attribution, etc.” Even so, he said, “I think these new direct contracting models are truly a watershed event for American healthcare. CMMI projects are that fully 25 percent of original Medicare will be in one of these models within five years.”
Crane went on to note that, while the Medicare Advantage program has been one of the more successful programs under the Medicare umbrella, “It remains a fee-for-service bastion. The health plans are keeping the risk” in Medicare Advantage, rather than allowing providers to directly share the financial risk. In that regard, he said, “Medicare Advantage needs to evolve as well. Let’s create two-sided risk inside Medicare Advantage. If we get risk-based contracting in one-third of Medicare, and we get these direct contracting models across another third, we’ve got two-thirds of the Medicare program” operating risk-based models.
Crane emphasized to his audience the inevitability of the need for the U.S. healthcare system to reform itself in order to bend the cost curve that is threatening its financial stability, with value-based care delivery and payment the only broad answer to how to bend that cost curve. Meanwhile, he noted that on the state level, an important development recently took place in California, where AB 1249, which would allow self-insured corporations to contract directly with providers, has recently passed both houses of the California State Legislature. The five-year pilot envisioned in the bill would include one pilot in northern California, and one in southern California. APG members could contract to provide services to School District employees at locations across the state.
