“One Foot in the Boat, One Foot on the Dock”: Providers and Payers Forge a New Social Contract into Value-Based Healthcare

Jan. 29, 2018
The leaders of medical groups, hospitals and health systems are finding willing partners—and tons of practical challenges—as they move forward with the federal government and with private health insurers into the new world of value-based healthcare.

This summer, with so much public and media attention focused on congressional conflict over whether to repeal and replace all or parts of the insurance-related components of the Affordable Care Act (ACA), the unobservant might be forgiven for not realizing that the landscape on the ground within the healthcare industry had already shifted irrevocably. For all the conflict over the ACA’s insurance provisions, few mainstream media outlets noted the unanimity on both sides of the aisle in the U.S. Congress over retaining the aspects of the law that are commonly referred to as its “internal health system reform” elements.

What’s more, within the executive branch of the federal government, at the highest levels of the Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS), there is policy unanimity on the desire for internal health system reform to proceed ahead. Secretary of Health and Human Services Tom Price, M.D., a former practicing orthopedist and former Republican congressman from Georgia, and CMS Administrator Seema Verma, have both reaffirmed in broad terms their support for accountable care organization (ACO) development, voluntary bundled-payment programs (though not mandatory ones), and the value-based purchasing program for hospitals sponsored by the Medicare program, under the ACA. They have also left in place the Centers for Medicare and Medicaid Innovation (CMMI), a division within CMS that has been acting as a facilitator of payment reform experimentation.

Meanwhile, things are, if anything, moving even faster on the private health insurance side. While Medicare’s various ACO programs continue to expand gradually, many private health insurers are moving very quickly to try to encourage forward physician groups, hospitals, and health systems to enter into risk-bearing contracts with them. And while only a small minority of patient care organizations have yet entered into contracts that involve any downside risk, the day when significant numbers do so is coming faster than many might have predicted.

At base, all of this is being driven by financial and demographic factors that loom large over all of U.S. healthcare. Back in February, the Medicare program’s actuaries once again reaffirmed projections that they had made in 2016 that envision an explosion of U.S. healthcare system costs. In February, the Medicare actuaries predicted that total annual U.S. healthcare system spending would go from $3.358 trillion in 2016 to $5.548 trillion in 2025, with the percentage of the gross domestic product (GDP) spent on healthcare rising to 19.9 percent by 2025. That projection of an astonishing 60-percent increase in total national healthcare spending within the next nine years is itself the product of projections around the aging of the U.S. population and the accelerating explosion in chronic illness among Americans.

So where does this leave payers and providers? Scrambling to build new contracts, new ways of caring for patients/plan members, and new information technology platforms and other foundations, to facilitate the new healthcare.

Don Crane

“The bus is moving down the road, and at some rate of speed,” says Don Crane, president and CEO ofthe Los Angeles-based CAPG, which describes itself on its website as “the leading association in the country representing physician organizations practicing capitated, coordinated care,” with “close to 300 multispecialty medical groups and independent practice associations (IPAs) across 44 states, the District of Columbia, and Puerto Rico.” “It naturally got its start with the ACA, with its provisions related to ACOs and PCMHs,” Crane says, referring to patient-centered medical homes, “but also got a huge boost with the implementation of the MACRA [Medicare Access and CHIP Reauthorization Act of 2015] law, which is not being challenged. And that tailwind continues to be strong. Likewise, the private market is demanding greater value—employer coalitions, health plans, are all demanding it. And performance measurement and quality measurement programs are moving forward as never before. And there’s a more sophisticated approach now at looking at the total cost of care. So the train is not being slowed. And the reason it’s going to continue to gain momentum, is that it’s the best strategy.”

A New Social Contract

At base, something is happening now that really is unprecedented: health insurers and providers are coming together and genuinely collaborating. In the “managed care 1.0” of the 1990s and 2000s, the “social contract” around managed care involved a fundamentally adversarial relationship between health insurers and providers, with health plans trying to hold down costs by restricting and attempting to control utilization on the part of plan members/patients, and often denying claims or delaying payment. For their part, providers—particularly physicians, but also in some contexts, hospitals—constantly played a game of “utilization chicken,” finding ways to get around health plan restrictions. Instead, now, real collaboration is possible, as health plans and providers literally share financial risk for outcomes, and move forward under the banner of population health management and care management.

How are health plan leaders expressing their interest in that new kind of relationship with providers? In many ways, including through reassuring providers of their intentions. For Mai Pham, M.D., who joined the Indianapolis-based Anthem Inc. earlier this year, working to improve the plan-provider relationship is at the core of her job. Even her title reflects it: vice president, provider alignment solutions. “I think it’s completely understandable that providers would have that reflexive response” of being wary of the new approach from health plans, says the Washington, D.C.-based Pham. “But as payers—we’ve always recognized that we need to build on that understanding. And providers are not a homogeneous group. They’re very different in terms of their attitudes, in terms of the markets they work in, and in terms of their skill to do this kind of work. So step one for us is recognizing that there’s diversity among providers, and that we have to meet them where they are. And it’s simply unrealistic to expect a small rural medical practice to go from 0 to 90. On the other hand, it’s also not realistic to expect a more sophisticated medical group that’s been in this for a long time, to take only baby steps. So we as payers can take a variety of steps to move out of that—including in how we engage providers.”

Mai Pham, M.D.

There are a few main areas, Dr. Pham says, in which she and her colleagues at Anthem are working with particular vigor to move forward in terms of how they work with patient care organizations. First, she says, she and her colleagues actively solicit “input earlier in the process” of contracting with providers, “to set up processes for iterating with them.” Second, they are looking to “find creative ways to alleviate some of that administrative burden” that providers face. “And frankly,” she continues, “if you’re in a good relationship with us, we’re not as worried to have to subject you to things like utilization management [UM]. Are we there yet? No, but we’re on the way. And a major thing, and quite closely related to your target audience’s interest, is that we increasingly recognize that providers need very pragmatic day-to-day help with data and analytics, and the way we communicate with members. So we’re increasingly investing in tools. We’re offering providers tools to make things work better for them. We’re trying to offer that direct support.” With regard to the ability to focus less on UM, Pham cites CAPG as the type of organization that is already working collaboratively with Anthem to move forward on shared goals.

A colleague of hers who works on the opposite coast and who has been interacting significantly with providers for some time is Antonio Linares, M.D. The Sacramento-based Linares, whose title is regional vice president and medical director, Anthem national accounts, says, “I was on a panel a year ago talking about the progress to date in value-based payment initiatives. And at that time, you may recall, people were debating whether the glass was half-full or half-empty in terms of whether we were progressing in the right direction or stalling. In that context, I think that we’re continuing to generate greater momentum with regard to payment for value versus payment for volume. And in that value category, when I did that presentation, we looked at four dimensions of value.”

Looking at those four dimensions, Dr. Linares says, “One is, are patients getting timely access to care? And we say, by contract, providers must provide after-hours and weekend access. That has been well-received, and with new technologies, providers are moving ahead with telemedicine and other areas.” The next dimension, he says, is “the provider agreement in their contract to accept data and to use hot-spotter-type reports to improve care.” Were physicians aware that 10 of their patients were seen in EDs in the past month? “Practices are continuously surprised when you come to them with reports saying, here are patients who have not had primary care visits in the past few months but accessed ERs, for example.” In the context of ACO contracts, Anthem alerts physicians to patients’ ED use, accessing of out-of-network labs or outpatient facilities, or high-cost imaging facilities, he notes. The third and fourth dimensions are around quality and around rapid access to appointments. Importantly, he notes, the quality metrics on which physicians and patient care organizations will be measured, are mutually agreed on in advance.

Cindy Lee

That entire arena, around the metrics for measurement of quality, efficiency, cost-effectiveness, and patient/plan member responsiveness, remains an area of tension, says Cindy Lee, a director at The Chartis Group who leads the Chicago-based consulting firm’s value-based care practice. “When we talk to providers,” Lee says, “one of the things that they cite as a frustration is the number of measures they’re required to report across the different programs and agencies. And with MACRA and MIPS [the Merit-based Incentive Payment System that is part of the MACRA law], there’s a heightened awareness these days,” she says. “And the data are often diffused across organizations, so it takes quite a bit of effort and time to report data, even though the requirements might be similar. And the ways in which organizations will manage care across the continuum can become a frustration. An example is that when a patient ends up in an ED, which can be a leading indicator of a potential admission, it can take a lot of time to get that data back, for use. So for the actual clinician, that can be challenging, because the data lives in so many different places. When we get to the national care management model level, providers will say, this isn’t any different from what I’ve done before to optimize care management and manage costs, but the reporting requirements and expectations are becoming elevated now,” Lee says.

Physician and Hospital Leaders Put the Pedal to the Metal

Despite the manifold challenges involved, innovative physician groups, hospitals, and health systems are indeed moving forward now, some of them quite rapidly, into the new healthcare.

What does the fundamental strategy have to be, for provider leaders, in all this? “First, you never lose focus on the clinical model. What’s right for the patient?” emphasizes Jeffrey LeBenger, M.D., chairman and CEO of the Berkeley Heights-based Summit Medical Group, a multispecialty physician group practice that covers a broad swath of northeastern New Jersey. With nearly 800 physicians and other providers in seven counties in northern-central New Jersey, and with excellent performance results—“We’ve done very, very well in our population health process, meaning that we beat the market in PMPM [per member per month] costs in the state by almost 8 percent in the past year,” Dr. LeBenger notes—the key to success for himself and his colleagues at Summit Medical Group has been focusing efforts on managing the care of the sickest 5 to 10 percent of patients attributed to them through their ACOs, both federal and private. “Everybody says it’s population health, population health,” he says. “To be honest, I think that’s a bit wrong. You have to look at your model of healthcare.” And all of that will be driven by data analytics and continuous clinical performance improvement.

To be sure, the challenges facing the leaders of patient care organizations as they move forward into value-based healthcare through risk-based contracting are far broader and more intense than many who haven’t really started on the journey even realize, say industry leaders. One industry leader who holds that view is Barbara Spivak, M.D., president and CEO of the Mt. Auburn, Mass.-based Mount Auburn Cambridge Independent Practice Association, or MACIPA. Dr. Spivak, who has been CEO of MACIPA since September 1997, helped lead the organization into the federal Pioneer ACO Program, which MACIPA participated in for three years; MACIPA is now in Track 3 of the Medicare Shared Savings Program (MSSP) for ACOs. And though her organization continues to make progress in terms of quality, utilization and care management, within the federal programs, she says, speaking of the payment landscape in Massachusetts, “We’re in a system here” in the Bay state “that doesn’t really value healthcare, in the sense that doctors are still being paid fee-for-service for everything they do, and the value-based part of this is coming at the system level.”

Barbara Spivak, M.D.

What that means, Spivak says, is that, “As a result, we live in a very odd world where the doctors are being paid fee-for-service basis, but in the end, are responsible for total cost. There isn’t a sense in these programs, public or private, that in order to really manage care, physicians, hospitals, and home care organizations need to bind together around infrastructure—care managers, disease managers, social workers, health coaches, data managers, pharmacists. There are a lot of things you need in order to manage care, that cost money.” As a result, she says bluntly, success in value-based healthcare will come as clinicians focus on “helping the patients better maneuver through the system and get better care. In the end, that will help us save money, because the most expensive things in healthcare now are not doctor visits, but hospital stays, post-acute stays, and pharmacy. And I could argue that the more patients see physicians and nurse practitioners, the less they’ll use other services.”

In some cases, pushing forward into value-based healthcare, in some healthcare markets, is requiring providers to push health plans to move forward, rather than the other way around. Terri Steinberg, M.D., chief health information officer and vice president, population health informatics, at the New Castle, Delaware-based Christiana Care Health Services, says that “Christiana Care has really battled with payers to share risk. Why did we do it? There’s a countless number of care management behaviors that can only be supported under a risk-based contract,” she testifies. “We use an embedded care management model, where individuals are assigned to a specific care model, embedded in the EHR. Care management is really driven by both big data and small data. [For] big data—we take file feeds from all different sources (including Lexis Nexis) to generate a pure risk score, and that score drives the activity of the care managers. The social determinants are the most important single factor. So we’ve endeavored to take data from all sources, including socioeconomic, for the purposes of health risk assessment. Once you’ve done that, that’s where the ‘little data’ comes in. Finally, there’s the notion of using care management to drive provider behavior. And we use claims management like everyone else. And we see tremendous range of costs, for example, Provider A versus B on total knee replacement. And we show providers their cost profiles. And if you want an orthopedic surgeon to move from Implant A to Implant B, it’s not the hospital that will change that surgeon’s behavior, but the referring primary care physician, who says to that surgeon, you’re impacting my bottom line.”

Success Over Time in Orlando

Still for all of those challenges, successes are being scored by some hospital-based health systems. One organization that has done quite well in all this is the Orlando-based Orlando Health, which encompasses eight hospitals in central Florida, and 900 employed and 2,800 affiliated physicians, and a health system staff of over 18,000. There, Jerry Senne, vice president of value-based care and population health, and Brandon Burket, director of value-based and accountable care, feel proud of what they’ve been able to accomplish in their health system’s participation in the MSSP program; Orlando Health joined the MSSP program on January 1, 2013, and, Burket notes, “We’ve been able to generate shared savings every single year. We’ve also generated some of the highest quality scores” in the program, he notes. In the first year of the MSSP program, he notes, any organization that reported data earned a 100 percent score, including Orlando Health. And already by the second year, “We were at around 92 percent, which put us in the top decile in the country” in terms of savings, with scores rising slightly higher each year since then. Meanwhile, Orlando Health continues to expand the number of patients involved in some form of ACO, with private ACO contracts with four private health insurers—United Healthcare, AvMed, Cigna, and Blue Cross Blue Shield of Florida. Altogether, nearly 110,000 Orlando Health patients are enrolled in some form of ACO, with about 16,000 of those in the Medicare Shared Savings Program.

Jeffrey LeBenger, M.D.

As for the health system’s experience of value-based healthcare, Senne says that “There’s no doubt that the ACOs have been very, very helpful in terms of creating an environment in which physicians and hospitals can work together to begin to manage care. The arrangements start out as upside-only, gainshare arrangements,” Senne says, but participation in downside risk-sharing is coming soon. “A couple of key things have been catalytic to” ACO participation, from his perspective, Senne continues. “One was the federal government’s and payers’ willingness to cooperate and share based on quality and performance. Prior to that, it was full risk or nothing. Second, it allowed physicians to remain independent but still participate in those programs. Third, it created an arrangement to allow for attribution of patients; and for the first time, it allowed members to be attributed without active enrollment. So ACO development has been successful, but not sufficient for the future. And it will be important for healthcare systems and ACOs to move upstream on the risk curve, to be able to participate more in risk and perform against a fixed annual budget, which is basically the risk formula.”

One Foot in the Boat, One on the Dock—For the Foreseeable Future

As everyone interviewed for this article agrees, the next several years will be challenging for patient care organizations, as, inevitably, they move further into risk-based contracting, while still maintaining a significant share of modified fee-for-service payment going forward. This reality relates to what many have been referring to as the “one foot in the boat, one foot on the dock” phenomenon.

There really is no way around that challenging reality, given how challenging moving into value-based healthcare actually is for providers, says CAPG’s Crane. “That’s how things are right now, and it’s hard. So you have to build two systems”—process systems and information systems—to move forward successfully in the next several years. “Doing that is costly and difficult, and I sympathize with it. Think about the Boy Scout model for a moment—you need to be prepared for what’s coming next, or you’re going to miss the boat or the bus or the train,” he says.

In the end, Crane says, the reality is that, “In the fee-for-service world, a whole lot of the purchasing is done by the individual patients—the patients are directing where they get their care, often in open networks. As we transition to population health, and maybe even population-based payment, populations move around in blocs—Boeing employees or seniors in San Jose, for example—and all of a sudden, your whole patient moves via bloc-based contracts. And if you’re on the inside of that, you’re not losing two patients, you’re suddenly losing all of your patients from one group. And so if you don’t want to miss the train, you need to be prepared.”

What are the implications of all this for healthcare IT leaders? They are many, especially around IT infrastructure, interoperability, and analytics capabilities. In any case, say all those interviewed for this article, the transition into value-based healthcare will continue to be a step-by-step one, and challenging for the foreseeable future. It’s time to gear up for the journey, they say—and to expect bumps along the way.