A lot has happened in healthcare over the past three years; in January 2020, the COVID-19 virus was first officially documented as having arrived in the U.S., and by March, a full public health emergency had been declared, shutting down the vast majority of non-emergency surgical procedures and throwing the U.S. healthcare system into crisis, with COVID cases overwhelming the system and leading to tremendous challenges, some of which are lingering even now. Indeed, the clinician and other staffing shortages, the increase in staffing and supply costs, and the burnout and subsequent departure of large numbers of nurses in particular, have all been devastating for the healthcare system, with revenue margins of many hospital-based health systems sliding into the red nationwide.
It is in that context that healthcare leaders are examining the landscape and considering whether, how, and to what extent, to move forward into value-based contracting, including, importantly, risk-based contracting. Indeed, though hundreds of patient care organizations continue to participate in the Medicare Shared Savings Program (MSSP) and the ACO REACH Program (formerly the Direct Contracting ACO Program), two programs for accountable care organization development sponsored by the Centers for Medicare and Medicaid Services (CMS) under the Medicare program, and commercial health plans continue to sponsor ACO programs, and the Medicare Advantage (MA) program continues forward, questions remain at the moment as to whether health systems that prior to the pandemic had not advanced significantly into risk-based contracting, will move forward significantly now.
John Klare, managing partner at the Naperville, Ill.-based Impact Advisors consulting firm, looking at that landscape, reports that, “Right now, it’s almost as though everyone’s doubling down on whatever their position was. Organizations that have dabbled in risk are feeling that that’s one of the few areas where they think they can grow business. But yes, for those who were afraid before, it’s got to seem a little scarier.” That said, Klare adds that, “As everyone knows, labor issues are a pressure point right now for every healthcare organization in America. And one of the interesting aspects of this is that if you think about your opportunities to decrease pressure on the workforce, having a full-risk contract in place will decrease inpatient admissions, and that could actually be helpful” in the overhead-cost area.
Speaking of the pandemic-related pressures on the healthcare system right now, “I think that the healthcare system in general has been incredibly taxed by COVID-19, including by inflation, labor costs, provider burnout, and the impacts of delayed care during COVID on our system,” says Melanie Matthews, president and CEO of PSW, a Population Health Company based in Olympia, Washington, and which administers what was the Direct Contract ACO but on Jan. 1  became the REACH ACO, and the MSSP contract, for MultiCare, the Tacoma-based health system, and which helps manage risk-based contracts for health systems in several states. “In general, the healthcare system is stressed. From a policy perspective, there continues to be interest in policy direction to continue down the value-based care path, to reward performance based on quality and cost… and engaging in models with predictability and that are economically viable.”
Per that, Matthews goes on to say that, “Because we’re responsible for a total population attributed to us, we’ve had the opportunity to engage in and address preventative health and the social determinants of health, made sure our patients made their appointments, sought care, where there wouldn’t have been the incentives for the prospective outreach we’ve done. That shows to me how important this is, because you’re not just engaging the patient when they have to use the health system; that’s the whole point of this. And per health equity, there’s good research to suggest that Medicare ACOs are doing preventive care such as COVID and flu vaccines across all racial categories and are providing prevention better than fee-for-service-based models.” Moving forward with value-based contracting is simply the right thing to do for patients and for the healthcare system, she emphasizes.
Pioneering a new superstructure in Arizona
One ongoing initiative that is providing numerous lessons learned has been evolving forward in Arizona, where, in 2016, the Phoenix-based Banner Health came together with the health insurer Aetna to create Banner|Aetna. A true joint venture with joint ownership, Banner|Aetna brought together the resources and capabilities of Aetna as a health insurer as a partner together with those of Banner Health, an integrated health system that encompasses 3,000 primary care physicians, 19,000 specialists, 38 hospitals, 36 walk-in clinics, 13 health centers, and 172 urgent care centers.
And Banner Health leaders have an important story to tell in terms of their health system's accomplishments. Indeed, they announced last September that “The Centers for Medicare & Medicaid Services (CMS) recently released performance data for Medicare Shared Savings Program (MSSP) ACOs for performance year 2021. Banner Health Network (BHN) providers not only continued to deliver exceptional patient care for its nearly 70,000 Medicare Fee-For-Service beneficiaries in Arizona last year, but also helped save Medicare $34.8 million by continuing to meet quality and cost goals. While the average cost of savings is 4.17 percent for Arizona MSSP ACOs, BHN exceeded that with a savings of 5.03 percent. BHN is part of the Advanced Track MSSP which is the highest level of financial risk in the program.
Further, the Banner Health leaders noted in that announcement that, “According to the CMS data, BHN received a quality score of 98.93 percent to earn high quality scores on performance measures that include diabetes, blood pressure control, breast cancer and prevention of cardiovascular disease, among others. The $34.8 million of gross savings to Medicare resulted in a shared savings payment of $25.6 million to BHN, half of which will be distributed to accountable care physicians who participate in Medicare Shared Saving Program. BHN has partnered with the Centers for Medicare & Medicaid Services since 2012 and has generated more than $176 million in savings to Medicare while continuing to see an upward trend to quality scores. BHN shared in this savings for 9 of the past 10 years.”
All of this work on the Banner Health side has been paired with the capabilities of the Banner|Aetna partnership to create something new--and already successful. What’s behind their success? Tom Grote, Banner|Aetna’s CEO, and Robert Groves, M.D., executive vice president and CMO at Banner|Aetna, have some answers to share. As Grote explains it, “We started with an ACO relationship and worked together on an ACO for five years and enjoyed some success with that. But ultimately the issue was that we weren’t doing much to fundamentally change the way healthcare was being delivered in the market or change the member experience. So we agreed that we could do both, and ended up coming together and forming a 50/50 joint venture that launched in 2017. We set it up in a way that tried to leverage the assets and capabilities of the two organizations, so we ended up having Banner focusing on the care management area and managing the network and engaging in our specialty pharmacy, and had Aetna focus on the areas they were experts in, administration of the insurance operations, handling the actuarial work and underwriting, etc., with a joint vision that we would try to connect those better than we had in the past,” he says. “That was the idea: coming together to present a new approach to the market.”
One key element, Grote says, has been delegating most care management elements over to Banner. “We’ve also set up a multidisciplinary care team to help manage the highest-risk members and help them with their situations. If you say that 5 percent of the people will generate 50 percent of the cost, shouldn’t we help them out with additional resources and services, from nurse case managers, to social workers, pharmacists, and so on?”
What’s interesting, Dr. Groves notes, is that “Phoenix is a microcosm of what we’re dealing with on a national level. Ninety percent of doc pay even today is based on doc fees or discounted fee-for-service. How do we get over that hump? You’ve got to have all that information flowing in, so you have a 360-degree view of the patient and the population; and that’s a challenge, since 85 percent of our participants are still independent practices. The other thing that is maybe not immediately obvious, is that there’s a lot of duplication in the way the system has grown up,” and it’s been important to reduce duplication of efforts.
Still, Groves says, it’s clear that changing an organization’s physician culture is at the absolute core of resolving some of the core issues preventing optimization of care delivery and operational efficiency. “I think the very first thing to say about this is that physicians are smart; they understand that there are challenges in the current system, and that we as physicians are part of the problem. And that culture of craft-based medicine, crafted individually by each physician for each patient, that there’s no quality control in that. You need to get the data systems in place to measure quality.” It’s important to understand, he says, that “The vast majority of physicians really want to do good work; they want to take good care of their patients. And that’s where our head is, too. We’re very focused on care quality.” So he and his colleagues have introduced performance benchmarking via dashboards, to Banner|Aetna physicians in stages, first, regularly providing individual physicians with their individual quality outcomes and efficiency data, and then, since this summer, sharing everyone’s data with everyone else. In that, he adds, “One of the things I learned very early on” in architecting processes to improve physicians’ care delivery, is that “Standardization of the approach to care is improving care. I learned that lesson early on. And physicians’ jobs have changed from, I need to remember everything in crafting individual plans of care, to, I need to know when to deviate from standardized” practices that are being developed. Per that, he adds, “knowledge management at the point of care” is essential.
Putting all those elements together—optimizing the care management and claims management functions, developing strong data analytics processes, and moving the physician culture forward through the intelligent sharing of dashboarded data, in phases—have been key elements in Banner|Aetna’s success, Groves and Grote agree.
Jumping in now: challenges and possibilities facing newer entrants
What would these leaders say to those who hesitated to pioneer before the pandemic, and are now faced with a demonstrably more challenging landscape? Well, notes PSW’s Matthews, “There are disruptors being funded private equity and venture capital, who are supporting new models to support taking risk; so for organizations who haven’t jumped on, how do you partner with organizations and/or build administrative infrastructure? CMS is creating opportunities for those that haven’t yet invested; and there are a lot of convener-type organizations that have already built the infrastructure that are helping others now. So if you haven’t built this yet, you need to think where to build infrastructure; because the skills and attributes are different from the FFS [fee-for-service] model. You can build it yourself with upside opportunity; CMS has models to encourage investment; and you can partner with those who have built infrastructure.”
Per all that, Matthews says that she’s encouraged that senior officials at CMS and CMMI—the Center for Medicare and Medicaid Innovation—have unveiled over the past year-and-a-half a policy agenda focused on health equity. That agenda naturally appeals to providers, she says, adding this: “The discussion on the policy side revolves around the question of, how much should be carrot, how much stick? It’s been proven that organizations that take downside risk act more proactively. I think the administration is trying to provide more glidepaths for organizations to get onto the path,” she says. “And you can’t pass the increased cost onto payers in the same way you can pass costs along to consumers at the gas station or the grocery store. The financial challenges simply erode margins. In theory, you’re able to perform in value-based contracts, even when the fee-for-service-reimbursed providers are struggling; so there’s economic interest in the model.”
Meanwhile, Matthews quickly adds that “Providers are exhausted and depleted right now, and access is a huge issue. Providers are interested in a different model, and in value-based contracting, when you can invest in complex care and in models, it is a potential way to address caregivers’ burnout.”
There’s an additional factor as well, says Impact Advisors’ Klare, and that is the rush of disruptors into the nationwide healthcare marketplace, and the potential that some disruptions rally could upend the financial and operational assumptions that patient care organizations have relied on for decades. For example, CVS and Walgreens are moving to create nationwide networks of minute clinics, a move that could destabilize physician practices connected to integrated health systems. Moving into value-based, including risk-based, contracting, could help to cushion some physician practices from rude shocks on the fee-for-service side of things. “For those organizations reading the tea leaves, that would be a very smart move,” he says. “If I’m a provider who’s been afraid of risk for a long time, and I see Walgreens and CVS taking MA patients, I’m losing some of my patients, and it’s becoming darker, obviously. But for those organizations that see it as an opportunity, it’s a significant opportunity.”
Klare, Matthews, Grote, and Groves all agree that developing first-class data analytics to support all of this work will be vital to success. But, Klare notes, “We’re not necessarily even talking about sophisticated analytics; simply having enough capability to clearly see a patient’s preexisting conditions shouldn’t be that difficult, yet organizations are struggling. You’re going to need a comprehensive view of all types of data at once—EHR data, medication data, payer data—in order to be successful.” And, in that context, Matthews urges CIOs, CMIOs, and other senior health IT leaders “to advocate for adoption of standards, and to engage with EHRs and other tech providers around adopting those standards. Many systems have relied on their tech vendors to advocate for tech standards. But provider organizations moving into risk really need that data; and there needs to be advocacy around adopting standards.”
Meanwhile, looking at the overall picture, Matthews emphasizes that “This is a journey. It requires a lot of champions and folks who can create enthusiasm around the concept of care becoming more preventive and holistic, and it’s tricky when not all your patients are in such a model, and it’s hard to operationalize; but we need to create change.” And, Klare adds that, looking forward into the next few years, “You’re seeing the awareness of the need to assume full risk gaining momentum; and hopefully you’ll see organizations stepping up. I hope that hospital systems will step up and take responsibility for those patients. There’s another scenario where other entities like Optum and VillageMD and Agilon take patients away from hospitals in certain areas, and that would just create more strain. Hopefully, [patient care organization leaders in the traditional system] can find the path forward.”