On November 17, leaders of the medical group association America’s Physician Groups (APG) discussed the future of the value movement in U.S. healthcare at the APG Colloquium 2020, which was held virtually this year.
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 health 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. “I do see continued operation of capitated models, and getting away 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 narrower 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. And the other group is insurers; they’re making a ton of money in fee-for-service, and are quite happy with it. 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. 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. 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. 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 long way to go. We’ve been able in our organization to deliver a lot of value that others are reaping the benefit of. 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. 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. Joyner opined, “I think it depends on the price. 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 they had fee-for-service right now, we could have benefited in this crisis.’”
“Yes, it’s in health plans’ interest [to move forward into value] on managed Medicaid, and if it hasn’t happened that’s because some providers aren’t there,” Gandhi added. “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.”
“Why do most providers want to move into prospective payment?” Crane asked Matthews. “Everyone wants choice,” Matthews responded. “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 wants to change it all. On the provider side, there are 450 very large provider systems. On average, if you go to the large-system club, there aren’t a lot of people wanting to go into risk. But, first, 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. It came about after our chairman of the board emeritus worked with our CEO on this. We knew that it would not provide a quick ROI; we had to cannibalize parts of the system to make this happen. We have taken out underlying capacity and we’re on a path to take out 1,000 beds from the system.”
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 New York City, the second-largest labor union in the market with 200,000 members went live with a tiered network, with a rich benefit and a $100 copay if you go to Mount Sinai, and $1,000 if you go elsewhere. That moved market, because we give them bundled pricing, and our prices are 20 to 30 percent lower, because our cost structure is 20 to 30 percent lower. But we’ve spent 10 years and $100 million to get there. Most systems don’t want to try that if they don’t think it’ll work.”
Finally, Crane asked, “What lessons are we learning about technology?” Joyner said, “We need to embrace telehealth, AI tools, and remote monitoring. 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.”
