Can Value-Based Care Help Counter the Consolidation Trend?
During a Feb. 25 panel at the Value-Based Payment Summit, experts discussed challenges and some potential solutions to address consolidation in healthcare and allow more practices to remain independent. Among other things, panelists addressed some ways to leverage value-based care models to provide more stable and predictable payments for independent practices.
Erica Socker, Ph.D., vice president of healthcare and payor reform at evidence-based philanthropy organization Arnold Ventures, set the stage by noting that there's been a big decline in the number of small, independent practices, and at the same time, a lot of growth in consolidation in healthcare markets. She called out three relevant actors: the hospitals and large health systems; private equity, especially in specialty care; and the insurers. (There has been a big increase in insurer acquisitions of primary care practices, she noted.)
From the perspective of these organizations, Socker said, fundamentally it comes down to revenue strategies that they're pursuing in the commercial market. “The more market power that hospitals and health systems can amass, they can negotiate higher rates with insurers. It really affects their bargaining power, so that really matters,” she said.
There are areas where payment policy is encouraging consolidation to occur, Socker added. “One particular example of this is in the Medicare program, and also a lot of private insurers as well pay higher hospital prices when the same service is delivered in a hospital-based facility vs. an independent doctor's office. What this does is it creates incentives for the hospitals to buy up the physician practice, convert it to a hospital outpatient department, and now they can get higher reimbursement or the exact same service, sometimes even delivered by the same doctor.”
Socker highlighted three areas where policy changes could help. One is fixing the payment issues that are contributing to consolidation, and more directly limiting the ability of consolidated entities to extract higher payment rates when they amass more market power. “You could do things like fixing the payment disparity that I mentioned between the independent physician offices and hospital outpatient departments,” she said, adding that another area that deserves attention is strengthening antitrust oversight and banning anti-competitive practices that are allowing consolidated entities to further stifle competition and drive up prices in various ways.
She said there are also opportunities to reduce administrative burden on independent practices. “We could do more to streamline prior authorization. We could do more to streamline quality reporting. Also, I think we need to think about creating a more stable, sustainable payment system and Medicare program as well.”
Farzad Mostashari, M.D., CEO of Aledade Inc., which operates the nation's largest network of independent primary care practices, said that consolidation in healthcare is different than in manufacturing or other sectors. “It’s not like you're combining or rolling up and scaling auto manufacturers, so you're producing it cheaper and higher quality. In healthcare, when these private practices are bought up, the evidence overwhelmingly shows quality does not improve and cost do not go down. They in fact, go up. I think that is a really important piece of context here for why we care about private independent practice continuing.”
Mostashari said that Socker is totally right that there is a payment disparity, and not only in terms of site-neutral payments. "It’s shocking, looking at some of the price transparency data that has come out recently, a very substantial percent of independent primary care practices are paid commercial rates less than Medicare.” The conventional wisdom is always that commercial rates are subsidizing radically too low rates from Medicare, but it turns out that a lot of doctors would be perfectly happy with Medicare rates that are 100% of Medicare, without all the prior authorization and denials that come with the private payers, he added.
Mostashari noted that in fee-for-service price negotiations, independent practices are at a disadvantage, whereas in value-based care, the evidence overwhelmingly shows they are at an advantage. “And in the Medicare Shared Savings Program, they have twice as much shared savings as do all those fancy health systems. So I would say encouraging and making more feasible value-based payment as a component of primary care should also be on on the list.”
He said one of the big improvements CMS has made is to begin to treat the large Medicare Shared Savings Program (MSSP) as a chassis for testing new features. Mostashari said the Primary Care Flex model posed the question of whether switching to capitated and more predictable monthly payments up front would help improve savings rates. But rather than come up with an entirely new model, with new benchmarking, new trending, new risk adjustments, new attributions — factors that could create potential for arbitrage or for misestimation or complexity or confusion in the market — instead they just tested it within MSSP. “I think we have 250,000 of the 350,000 lives in PC Flex,” he said. “We’re in it in a big way, because we really do believe that bringing more of the funding forward can enable more investment on the part of independent primary care practices, and lead to increasing the savings rate. So I'm hopeful, that that is the approach that will be pursued even more broadly, in terms of the MSSP as a chassis.”
The panel spoke about the challenges of practices returning to being independent after being part of a larger health system. Mostashari said that Aledade has taken somewhere been six to a dozen practices out of hospital employment into independent practice, and three things have been barriers. One is the pay rates. They may be part of a hospital’s clinically integrated network that charges a higher rate from the increase in their market power. If a practice leaves that CIN, the rates they would get from the Blue Cross plan would be significantly lower, and they wouldn't be able to maintain their practice’s economics. Barrier two, he said, is all the stuff you need scale for. He said you actually need scale not just for contracting, but you need to have minimum sample size, risk pool size. You also need scale for purchasing technology and for data, interfaces.
“This is why we created Aledade, is to be able to create a way to integrate and bring the benefits of scale and technology and scale and contracting and value-based risk taking, without consolidation.”
The third barrier, he added, involves noncompete clauses. In certain markets, the hospitals have been very harsh about enforcing five-year/50-mile noncompetes, which essentially preclude that independent practice from practicing in their own community anymore.
