On Tuesday, Nov. 17, leaders of the medical group association America’s Physician Groups (APG) discussed the future of the value movement in U.S. healthcare, during the afternoon of the first day of the APG Colloquium 2020, which was held virtually on Nov. 17 and 28.
Don Crane, president and CEO of APG, led a discussion entitled “Value Movement: Smooth Sailing? Or Clouds on the Horizon?” He was joined by Niyum Gandhi, executive vice president and chief population officer at the Mount Sinai Health System in New York City; David Joyner, CEO of the Hill Physicians Medical group, based in the San Francisco suburb of San Ramon; and Robert E. Matthews, president and CEO of MediSync, a Cincinnati-based consulting firm focused on medical group management.
APG’s Crane initiated the session by asking how panelists see the overall landscape for the value-based payment and care delivery movement overall. “I do see continued operation of capitated models, and getting from fee-for-service medicine,” Hill Physicians’ Joyner said. “You see it in Medicare Advantage; also in global payments with professional facilities; and you also see it in MediCal [Medicaid in California]. On the other hand, putting a shared-savings program on top of a fee-for-service system is a little bit like putting broccoli on top of a hamburger,” Joyner said, referring to the Medicare Shared Savings Program sponsored by the Centers for Medicare & Medicaid Services (CMS). “Outside of MA, we have a massive amount of fee-for-service reimbursement. So the marketplace is very mixed.”
Joyner went on to add that “The other thing is that value is linked to outcomes, quality, cost of care. And reimbursements are more linked to the leverage that a provider has, than the actual results; and until that changes, we won’t have true pay-for-value. Finally, I think that payment innovation will happen, and there are encouraging signs of a move to more-narrow networks. For example, in California, there’s Canopy Health Network, and Sutter Health Plus, with Sutter and Stanford Health. So I see some signs for optimism; but today, it’s a mixed bag.”
“It’s now ten-and-a-half years since Obamacare passed,” said MediSync’s Matthews, referring to the Affordable Care Act (ACA). “And Looking back, back then, I and a lot of others assumed we’d have a lot more value in our revenue packages, than we do today. Our organization doesn’t want to be in the fee-for-service business. The fee-for-service business in 2020, especially for primary care, is a bad business model. It’s underpaid, and the incentives are to not do what’s best for patients. We’re ten years in and would like to be further along.”
Matthews went on to say, “So why is this happening? Speaking very broadly, and throwing pharma out for a minute, there are two big inside players in healthcare, nationwide. One is the hospital-based integrated health systems: by and large, they are not interested in value. There are some exceptions, such as Sharp Rees-Stealy, which you had on earlier. And the other group is insurers; they’re making a ton of money in fee-for-service, and are quite happy with it. And if they were to go to fee-for-value, it would blow their brand, which is to claim that they are the progenitor of all that’s good in healthcare. So the inside players are slow-walking, with exceptions. By and large, there’s not a lot of hurry. So the people more interested in cost and quality are the outside players. The government, purchasers, and patients, simply cannot afford what’s going on in healthcare. We’re talking a family benefit of $38,500 a year in Connecticut. The point is, we’ve been saying since Hillary Clinton was newly in the White House, that we can’t afford this anymore, and we’re still affording it; but the impetus for change is going to come from outside. I don’t see health insurers and hospital systems saying en masse that they’re going to change over. And in some places, there is Medicare capitation. And we make very good money in Medicaid in our group, which is extremely hard to do. But on the commercial side, we render far more value than we get paid for. And insurers don’t want to turn the money over to us.”
Mount Sinai’s Gandhi said, “I’m optimistic because I only know how to be optimistic—and am planning to be in the industry for another 35 years. So I would say it will be smooth sailing, but with a really, really long way to go. We’ve been able in our organization to deliver a lot of value, as Bob noted for his organization, that others are reaping the benefit of. And in terms of the overlay of FFS, that’s the crux of the issue. And what we’re talking about is not incremental change; we need transformative change. You ultimately have to rip out the fee-for-service system and replace it. This system was set up for fee-for-service, churn-and-burn medicine. Everything in the system is designed for fee-for-service, mediocre, care. And so we have to rearchitect this $3 trillion system that employs 35 million people.”
In short, Gandhi said, “We want transformation, not incremental change; we want it at scale, not just in pockets; and we want it fast, not slow. But we can only get two of the three. So we can have at-scale change that’s slow, and you get that through the shared-savings programs. And that will take two decades. But to get this transformative change, we really need the time to get there. And health systems like Mount Sinai are embracing value by taking risk. And pressures will inevitably push us to a new model of high-value care, at scale, with real value; it will just take a while to get there.”
“So, a yes-or-no question: is the move from volume to value in the interest of health plans?” Crane asked the discussants.
“Not today,” Matthews said. When they own more and more delivery systems, which is their goal, then they will” want to shift to value-based payment.
“I think it depends on the price,” Joyner opined. “Health plans are rational economic actors. If a health plan can provide predictable amounts to providers, they’ll select fee-for-service-based or value-based payment, based on what’s in their best interest. Per COVID, we were very relieved to have capitation here at Hill, because we’ve been able to support some of our practices better during this crisis. But I can tell that some health plans looked at this situation and said, wow, if he’d had fee-for-service right now, we could have benefited in this crisis.”
Further, Joyner said, “One huge barrier [to the forward advance of value-based contracting] is that customers or consumers have preferred PPO models. Unfortunately, HMOs got a very big black eye over the perception that they created barriers to care. So consumers equate quality with choice of care. And increasingly, employers wish to be self-funded. When I was at Blue Shield, I’d laugh, because we’d meet with employers, and 80 percent of the time, employers would say, well, we know that our employers are healthier than average, and would claim that they were overpaying. Which is why so many have gone self-funded. And large employers want some level of balance, as they try to deploy a consistent benefits package. Finally, in more-rural areas and others, you can’t really provide capitation to individual practitioners; they have to be organized in some form of group or IPA. And in many parts of the country, those are still nonexistent or early-stage.”
“Yes, it’s in health plans’ interest [to move forward into value] on managed Medicaid, and if it hasn’t happened because some providers aren’t there,” Gandhi said. “On the commercial side, David is spot-on. On the self-funded side—sometimes we talk out of both sides of our mouths. We’re returning value to the employers, which is who wants that return. We just haven’t figured out the value proposition on the self-insured or PPO side. And the individual person wants an open-access PPO program where they can self-refer to any provider, even the highest-cost provider. And benefits managers are stuck in the middle. And because health plans use the same networks on the ASO and PPO sides, it boxes them in, in terms of what they can do [in terms of benefits design].
“Bob, why do most providers want to move into prospective payment?” Crane asked Matthews.
“Everyone wants choice,” Matthews responded. But I want to point out two things. When Elizabeth Mitchell presented earlier today [Elizabeth Mitchell, CEO of the powerful San Francisco-based purchaser alliance the Pacific Business Group on Health, had done a session with Crane earlier on Tuesday], she pointed out that the health plans weren’t helping on the primary care side, and she had to go around them; that’s an employer’s perspective. And we’re saying that they give us 20 cents out of every dollar we save. And it’s like Huck Finn, we’re out there painting their fence, and of course, they want to keep that going as long as possible; wo doesn’t like an 80/20 split.”
In other words, Matthews said, “I think there are lots of problems, and I don’t dispute some of the complexities of the PPO market. But in general, when you’re killing it financially, as some of the carriers are doing these days, nobody says, let’s change it all. On the provider side, there are 450 very large provider systems. And why don’t they want to do this With Mt. Sinai and several other systems as exceptions, on average, if you go to the large-system club, there aren’t a lot of people saying, let’s go into risk. So, first, they don’t know how. Seriously, they don’t know how. They went out and hired zillions of care and case managers 20 years ago, and that hasn’t changed things. And the second thing is that these hospital systems have gotten bigger and bigger. Now, I believe that primary care, done right, saves an absolute fortunate. But these hospital-based systems are using primary care as the wide end of the funnel, to fill up beds.”
Why Mount Sinai removed a major chunk of its capacity
“Niyum, why did you guys decide to go into value?” Crane asked Gandhi. “Our oldest institution just celebrated its 200th anniversary; and we want to serve the New York community for another 200 years,” Gandhi responded. “And the only way to be around that long is to provide value. We have to do it. And it came about after our chairman of the board emeritus worked with our CEO on this. And we knew that it would not provide a quick ROI; we had to cannibalize parts of the system to make this happen. And we’ve taken out underlying capacity. And we’re on a path to take out 1,000 beds from the system, and have taken out 700 beds and have 300 more to go.”
The reality, Gandhi said, is that “Unless you take out the underlying cost, no matter how hard you run towards risk, you end up losing money. You can try to jack up your rates. And I’m not saying the others are bad people; they’re just being shortsighted, because ultimately, the market share will be awarded to those who deliver higher value. Here in NYC, the second-largest labor union in the market, 200,000 members, went live with a tiered network, with a rich benefit and a $100 copay if you go to Mt. Sinai, and $1,000 if you go elsewhere. And that moved market, because we give them bundled pricing and our prices are 20-30 percent lower, because our cost structure is 20-30 percent lower and can do it. But we’ve spent 10 years and $100 million to get there. And most systems don’t want to try that if they don’t think it’ll work.”
The uneven shift across different regions
“Many providers in California are working on capitated contracts in California, but the same plans won’t give them capped contracts outside of California. Why?” Crane asked.
“We’re in such a fee-for-service market, and we don’t do our own claims management,” Gandhi responded. “All the MA plans here are absolutely willing, and this is a prototypical FFS market. Perhaps they won’t do it under the same terms as in California.”
“What we keep hearing is the word ‘readiness’—plans will say groups aren’t ready, groups will say plans aren’t ready,” Crane said. “But maybe something else is going on?”
“It depends on the price,” Joyner responded. “Plans are very interested in doing global capitation with groups in Northern California, because the benchmarks and margins are tight. In other places, the situation is different. So I think it’s very dependent on the benchmark. And another barrier to moving to a value-based market is the lack of transparency around pricing. In MA, the price you pay for the service is known, based on the Medicare allowable. In terms of commercial plans, we have multiple shared-savings arrangements, but we have no transparency whatsoever on the elements that drive our results, hospital stays, etc. So until there is that transparency, frankly, I don’t want to take a capitation rate unless I can understand whether a capitation rate is fair and reasonable. And plans will claim that they can’t share data because the providers have gag clauses in their contracts. But providers claim the same thing. So we’re fooling ourselves if we think that this can move forward in a major way until prices are known.”
Finally, Crane asked, “What lessons are we learning about technology?”
“We need to embrace telehealth, AI tools, remote monitoring,” Joyner said. “If we haven’t embraced those tools, rapidly, we’re going to have that volume picked off by new entrants. Second, there are going to be new products that are neither PPOs nor HMOs, but that involve new plan designs that will allow us to embrace something in between PPO and HMO, where there’s both margin and value.”
