In California, a First-Ever Multi-Plan, Integrated Approach to Value-Based Contracting

California continues to prove itself as a pacesetter state when it comes to innovating around value-based healthcare contracting. Last month, leaders from the purchaser, health plan, and provider worlds announced a groundbreaking value-based payment structure that involves three major health plans that are competitors in the state’s healthcare market working together with an organizing purchaser organization, to pursue integrated care delivery and care management work with physicians in group practices across the state.

The Jan. 30 press release, published by the San Francisco-based Purchaser Business Group on Health, which represents more than 40 employers nationwide, and explaining it all, began thus: “In an unprecedented collaboration, three leading California health plans — Aetna, Blue Shield of California and Health Net — have united to co-implement a shared value-based payment model under the California Advanced Primary Care Initiative’s Payment Model Demonstration Project. Led by the California Quality Collaborative (CQC) and the Integrated Healthcare Association (IHA), the new payment model will span 11 provider organizations statewide, representing over 100 care sites and a collective patient population of approximately 17,000. The demonstration project prioritized recruitment of small independent practices and will address long-standing disparities in primary care payment, promote health equity, and improve population health in California. It is designed to scale across the state and beyond.”

“Participating in this project is crucial for us as a health plan because it aligns with our commitment to promoting healthcare excellence in California,” said Todd May, M.D., Vice President Medical Director for Commercial at Health Net, in a statement contained in the press release. “By co-investing in a unified value-based payment model, and providing technical assistance for practice transformation, we’re better supporting primary care practices in ways that can improve patient outcomes. And high-functioning primary care is the foundation of a high-quality and cost-effective health care system.”

The press release went on to note that, “Through the demonstration project, participating health plans will offer  a common value-based payment model, which is designed to invest more revenue into the practices, rewarding improvement and strong performance on the Advanced Primary Care Measure Set. This approach provides flexibility while ensuring a focus on meeting patients’ needs with tailored, high-impact care.”

In addition, it noted that “CQC is providing comprehensive technical assistance to help participating practices implement the new payment model, integrate behavioral and physical health services, improve care coordination and achieve better patient outcomes. IHA selected Cozeva to serve as the common reporting platform for the initiative. Practices will be able to view data on their patients across plans for actionable insights related to performance to help close care gaps and better manage their patient panels.

“This project marks a significant step forward in our mission to elevate primary care across the delivery system,” said Crystal Eubanks, Executive Director at CQC and Vice President, Care Transformation at the Purchaser Business Group on Health. “Health plans are doing something that’s never been done before — they’re not just aligning payment models but co-implementing a unified one. They’re paying differently and paying more to help primary care practices deliver high-quality care while addressing cost and advancing equity across the state.”

The press release noted that, “Unlike other states that are working toward payer alignment, these California health plans have taken a step further by fully implementing, coordinating, financing and operationalizing a single payment model. This streamlined approach significantly reduces the administrative burden on practices, allowing them to focus more on care delivery.”

“At Blue Shield of California, we believe payers must collaborate boldly on innovative payment models to advance primary care. Done right, this project will help clinicians connect with the joy of practice by aligning payment with what inspired them to pursue medicine in the first place — delivering quality-oriented, data-enabled, patient-centered care,” said Nina Birnbaum, MD, Medical Director, Blue Shield of California.

“This project is an opportunity for payers to collaborate in support of California primary care providers who play a vital role in our members’ care,” said Pegah Mehdizadeh, D.O., Executive Director West Region and Chief Medical Officer for Aetna California. “Aetna is committed to partnering with providers on value-based care arrangements like this one that empower and incentivize delivery of high-quality whole-person care and support our goal of helping members achieve better health.”

And Dolores Yanaghara, general manager at IHA, stated that “The demonstration project reflects the growing momentum among California’s health care stakeholders to align around a shared vision for advanced primary care that improves patient outcomes and reduces costs. “By designing a common value-based payment model with guaranteed upfront payments and enhanced incentives for performance on disparity-sensitive measures, we’re helping practices focus on what matters most — delivering high-quality, equitable care.”

Following the announcement, Healthcare Innovation Editor-in-Chief Mark Hagland interviewed several of the leaders involved in the initiative. Below is his interview with Crystal Eubanks of PBGH and CQC.

What is PBGH’s perspective on this important work?

I think about purchasers wanting to drive value, and anchoring advanced primary care; this will be the anchor that will drive cost savings and outcomes improvement. And through CQC, we work directly with providers and health plans. We had been focused on technical support. But we were able to produce this at scale and reach 4,500 providers. And we realized that we had a model that works, and that if we actually had payment driving this—we were able to produce $180 million in cost savings in five years; that drove PBGH to move into contracting standards; and the other element was the technical assistance from CQC; and partnering with IH.

So how do you bring this to bear to drive change? The challenge in California is that we don’t have a dominant payer; we work with providers who work with eight payers. I saw that the real barrier was around how we were paid.

You didn’t get all the payers involved in the initial rollout; would you like to get more?

We pitched this idea of working collaboratively; we asked, could we align on a payment model? Seven payers aligned with that, and six continued forward. And we asked, could we implement this together and co-fund this? And so through that process—some of the health plans couldn’t participate—some didn’t have the data infrastructure to launch when we wanted to launch; but they are supportive. And we had three plans that were ready to work with us.

So a few other health plans might join you in the future?

Yes, that’s the hope. That was the point of the demonstration project that not only can these plans go into their c-suites and move this statewide, we could have others join us.

Providers have been frustrated by having so many standards and processes, yes?

Yes, it’s the administrative burden we’ve put on them. And they all want to do that, but they’re not going to approach each other, as competitors. They’ve worked with CQC and IHA; IHA was designing an early payment model with Blue Shield, and CQC was working on technical standards. And our three public purchasers—Covered California and CalPERS, which are PBGH members, and the MediCal agency, Department of Health Care Services (DHCS)—all got aligned around the same standards, as part of this.

How hard was it to get all the health plans to row together?

It was not as hard as I had expected; they had been collaborating on projects for 20 years. It was really about being in a room. And in 2022, we had closed meetings, and asked, what are your real barriers to making this happen, particularly advanced primary care? We spent time building trust. So building the pilot and operationalizing it, these are peers who don’t have equivalent peers internally, so this worked. And finding the right people who are champions.

They’re still pushing hard in their organizations, sometimes upstream, and having to get resources for this. So they have to be internal champions. And this has been the most fulfilling thing of my career that I’ve ever done. We love being in the room together. And because of that passion, and they’re honest when they can’t do something, so one plan will say, I can go this far, but not that far, I don’t have the infrastructure—we were meeting weekly, in addition to the work happening inside their own organizations. This has been hard, particularly the technical piece of it, combining all the data together.

One of the challenges will be ongoing work with the data, right?

Yes, that’s where we’ve had some challenges and some delays in the timeline. It’s the data fields, the timing of when claims data comes in and is processed, and the cadences are different in different health plans, so we’ve had to work at aligning those cadences and working with the vendor. So practices are going to see all three health plans’ data on one platform, across product lines, giving them more than what’s just in the demonstration project. And we have the standards set, so there’s no reason other plans can’t join.

And you are working on that?

Yes, and Blue Shield and Health Net have Medicaid lines. This is the place we can most imminently innovate. Particularly Los Angeles County, given the sheer size and diversity and number of plans present; we decided, if we can make it work in L.A. County, we can make it work elsewhere. And when we mapped the overlap between plans and practices—we chose practices that were smaller and independent, but you need a significant number of lives per your business model, to really motivate to change how you were doing your business.

The diversity of sizes of medical practices in California surprises me a bit; there are still an awful lot of smaller practices.

Yes: Northern California has significant consolidation, but Los Angeles and Southern California have a lot of smaller practices. With the fires in L.A. and particularly in Pasadena, a lot of small, independent practices serve communities, and in the fires, have been significantly impacted; but it is unique about how predominant smallness remains. And they’re far under-resourced compared to other folks.

What will happen in the next year?

We have one year: the payment model turned on, on January 2. That’s the demonstration project. We paired them with coaches from CQC. How to use the data coming from the plans, where to focus energies. So we’ll work for a year of intense effort, and we’ll see how far we get for a year. But we’re also trying to figure out where we make the biggest change. Is it the data? The coaching? The investment in infrastructure, including data exchange? We’re not going to be prescriptive, but we are going to track outcomes, so that we can determine where practices can best invest to make the most impact going forward? And we’re also going to track lessons learned as we go forward, among both the health plans and practices, what works and what doesn’t. So at the end of the year, we’re going to gather it all up and publish a report, and determine how we scale this up.

And there is room for other plans to join you?

Not within this year, just given what would need to happen; but this is part of the California Advanced Primary Care Initiative, and there are other projects involved; one is integrating behavioral health. We’ve been trying to figure out the payment challenges in California. So we’re having payer work groups work on that. I want change at scale; we just can’t do this incrementally any longer.

And we want to show the ROI and show the cost savings we’re able to demonstrate through this program, because this is what these folks will take to their c-suite and take their efforts statewide.

There will probably be data struggles, correct?

Yes, and that’s for the plans to bear, not the practices. The practices are having to change some coding, but that’s best practice anyway, in the shift to value-based care. But this is for the plans to figure out; they have to align the cadence of what they’re giving to practices, and have to reduce the data time-lags. We’re trying to get it as real-time as possible, with all the data hitting at the time.