Federal health officials have not kept secret their desire to link healthcare payments to value-based care, with the Centers of Medicare & Medicaid Services (CMS) saying last year that they want to have 100 percent of providers taking on some downside financial risk by 2025. Currently, however, less than 20 percent of Medicare spending is value-based, meaning $1 trillion of healthcare risk will be shifting from the government to hospitals, health systems, and physician practices across the U.S., should CMS’ benchmarks be met, according to a new report released by Coverys, a Boston-based provider of medical professional liability insurance.
The government also wants half of Medicaid and commercial contracts to be in value-based reimbursement models by 2025. Going forward, the central challenge for providers is figuring out how to successfully transition from fee-for-service to shared risk and population-based payment models. Many are not sure what their downside exposure is or if they can afford it, and some are unsure how to even calculate that or if they can survive in value-based contracts, according to the researchers of the report.
The report, entitled, Red Signal Report: Value-Based Care, examines the healthcare industry’s shift from volume-based reimbursement to value-based care models as providers seek to improve care quality and reduce costs. “The combination of COVID-19 and an economic recession has only accelerated the transition to value-based care as employers and consumers look for ways to manage spending, driving the demand for value,” said Brian York, vice president, value based care, Coverys. “Additionally, during the first COVID-19 surge, many providers who transitioned to value-based fared better than those who leaned entirely on fee-for-service models. For these providers, revenue remained consistent during lockdowns while elective procedures were delayed and canceled, further underscoring its value to providers.”
Providing some background, the authors of the report noted that skeptics might wonder how the latest iteration of value-based care is any different from the capitation efforts of the past. To that question, they stated that providers in the 1990s weren’t using electronic medical records (EMRs), which are critical to participation in Advanced APMs (A-APMs). The Affordable Care Act has also opened doors to data sharing and gainsharing, which now makes it possible for providers to access significant amounts of data and share in financial gains. What’s more, quality measurement was not as much a part of the conversation in the 1990s, they added.
The report noted that in 2018, Medicare covered 59.9 million people—51.2 million people aged 65 plus and 8.8 million people with disabilities. While value-based care currently accounts for 10 to 15 percent of Medicare beneficiaries, voluntary adoption by providers of population-based models with significant downside risk is steadily increasing, researchers said. In 2012, when CMMI (the Center for Medicare & Medicaid Innovation) introduced the first population-based risk program, there were fewer than 1 million. The number hit 4 million in 2017, the first performance period under MACRA, and in 2018, hit 6 million. The growth continued in 2019 and is projected to reach more than 9 million by the end of 2020, they said.
Because fee-for-service models don’t connect cost and price, the report’s authors stated that physicians who treat patients are even further removed—and in many cases shielded entirely—from such cost and price conversations. New payment models are trying to fix that, however, and are forcing providers—sometimes for the first time—to think about what healthcare costs and examine how they are delivering care.
The researchers believe that since Medicare has far and away the highest number of attributed lives in the U.S. healthcare ecosystem and is easily the largest payer in the country, CMS is a very influential purchaser of services and is leading a lot of the innovation occurring within the system. As such, commercial payers are starting to follow suit, implementing these innovations where it makes sense. Of the 2,454 providers making up the current risk market in Medicare programs, 714, or 29 percent, are commercial ACOs, according to the report.
“The key takeaway of the report, from my perspective, is that CMS is really accelerating this push from a fee-for-service model to a value-based care one, and is developing more and more programs shifting the risk of the cost of care from Medicare to the providers themselves,” says Coverys’ York, who along with David Terry, CEO and founder of Archway Health, a Boston-based company that helps organizations manage risk-based programs, were recently interviewed by Healthcare Innovation following the release of the report. Referring to Medicare’s goal of tying 100 percent of providers to some form of a risk-based contract by 2025, York adds, “There will be a monumental shift of risk over the next four years from payers to providers.”
Indeed, over the years, CMMI has developed over a dozen new voluntary and mandatory value-based payment models. These new programs follow two basic models, the report’s authors noted: accountable care organizations (ACOs) and bundled payments. Both York and Terry agree that the push from CMS into risk is only going to speed up over the next few years, but contend that CMS is in “a tough spot” since it needs to create programs that generate savings for the Medicare Trust Fund, but also which drive participation among providers.
“Ultimately, whether it’s in two, five, or seven years, [CMS] will move away from the voluntary models to more mandatory ones,” Terry predicts. “We work with a lot of providers and some say that [value-based care] is moving too fast and that they aren’t ready. But the reality is that CMMI has been putting these programs out since 2012, and folks have had the opportunity to learn, get better, use data, and build systems and teams to do this [work], so at some point the ‘we’re not ready’ excuse won’t fly,” he asserts.
Terry also believes that a “significant disruption in the market” could be upon us, in which the market could bifurcate with on one side stakeholders who embrace value-based care becoming very good at it, seeing an opportunity to provide better care and make more money doing it. And then on the other end of the table there will be laggards who haven’t bought in or figured it out. “So the market could split in some ways,” he offers.
As far as the potential impact that the COVID-19 pandemic might have on the future of value-based care, Terry and York also concur that in their talks with providers, being in a value-based care program, such as CMMI’s Oncology Care Model (OCM), for example—or a model in which there’s a per-member-per-month payment—has resulted in a more steady flow of cash compared to operating in a fee-for-service payment structure during the crisis.
“We have heard providers who aren’t in these [value-based care] programs envious of their colleagues who are, so I think providers will look to diversify their revenue streams beyond fee-for-service coming out of this,” Terry confirms. “During the pandemic, we have seen some slowdown in the models as providers focus on making it through these crisis, but we believe in the medium- to long-term, this accelerates the movement toward value—not only because of cash flow issues, but [also because] budgets are down everywhere. Everyone is struggling. There will continue to be significant pressure on healthcare costs and finding ways to deliver quality at lower prices,” he adds.