Aligning Incentives in the Forward Evolution Around Value-Based Payment: Major Obstacles Cited
As Associate Editor Heather Landi noted in a June 25 report, a new study has cast doubt on the level of progress being created in value-based payment models across the U.S. “The penetration of population-based value-based payment models is not yet having an impact on curbing growth in total cost of care, according to a new analysis by the Healthcare Financial Management Association (HFMA), Leavitt Partners and McManis Consulting,” she wrote, referring to the study, entitled, “What is Driving Total Cost of Care?” which analyzes the factors influencing total cost of care in U.S. healthcare markets.
“One of the key findings of the analysis is that the early years of value-based payment (VBP) models did not show a reduction of the total cost of care or improvement in clinical quality outcomes at the market level, according to researchers who analyzed performance results of accountable care organizations and other population-based VBP models. Researchers concluded that at value-based payment models have penetrated broadly in some markets, but not deeply in most. The three organizations, with support from the Commonwealth Fund, used commercial data from 2012 to 2014 and Medicare data from 2007 to 2015 to conduct two quantitative analyses: the first examined correlations between the penetration of population-based VBP models and total cost of care for Medicare and commercial payers; the second looked at other market factors related to baseline Medicare costs and cost growth. A qualitative study of nine geographically and demographically diverse markets also was conducted.”
The authors of the report—James H. Landman, Ph.D. (HFMA), Keith Moore (McManis Consulting), David B. Muhlestein, Ph.D. (Leavitt Partners), Nathan J. Smith, Ph.D. (Leavitt Partners), and Lia D. Winfield, Ph.D. (Leavitt Partners)—write this in the report’s introduction:
> The penetration of population-based value-based payment (VBP) models is not yet having an impact on curbing growth in total cost of care. The efficacy of these models in reducing growth in total cost of care has not yet been proven, however, as even in markets where these models are more prevalent, most models do not yet incorporate sufficient financial incentives to impact care delivery significantly.
> Although more time and evidence are needed to prove the efficacy of population-based VBP models, there are other models that may be more appropriate for different populations. Alternative VBP models of interest to stakeholders interviewed for this study include episode-based payments, reference-based pricing, on-site health centers for employers and their employees, consumer-driven models tied to more effective transparency tools, and models that target the needs of specific patient populations.
> The question of “what type” of competition may be more important than “how much” competition. Lower-cost markets appear to benefit from competition among healthcare systems with well-organized provider networks and geographic coverage across their market. Health plan competition also appears to be a significant factor, especially with respect to encouraging innovation in payment models and plan design within a market.
> Lower-cost markets also appear to benefit from organized mechanisms, including state-sponsored or endorsed reporting agencies and employer coalitions, for more transparent sharing of information on provider quality and costs. Interviewees also believe that greater transparency of quality and cost information for consumers is necessary, while acknowledging that transparency tools that have been offered thus far have had limited impact.
> Healthcare leaders across markets believe that further changes to payment and care delivery models are inevitable and will likely include value-based components. In most markets, however, it is not yet clear what or who will be the catalyst to push further change.
What are a few underlying causes or issues?
> Few population-based VBP models offer significant incentives to manage total costs of care. VBP contracts for most provider organizations interviewed for this study had upside risk only; very few organizations were yet taking on downside risk. Both health plans and provider organizations felt it was important to take an incremental approach to risk. The result, however, is that financial incentives are not in place for broad-scale changes to care delivery.
> Incentives have not yet been aligned from the system level to the clinician level. Across most provider organizations interviewed for this study, clinician compensation remains heavily reliant on productivity-based compensation. Within some physician practices, especially those focused on primary care, there was a sense that change was closer at hand and compensation metrics tied to quality, access, and patient panel size were being introduced.
> Infrastructure costs can delay positive realization of a return on investment. For organizations that are participating in population-based VBP models, the infrastructure costs for patient population analytics and care management can be significant and are likely to significantly offset any savings realized during early years.
And what can be done? The report’s authors write that, “Given our finding that VBP models may have penetrated broadly in some markets, but not deeply in most, we recommend that both government and commercial payers continue to experiment with models that increase incentives to make changes to care delivery models that could increase both the quality and cost-effectiveness of care.” In addition, they found in their research that “[L]ower-cost markets had competition among a few health systems that were highly aligned with physician groups, whether employed or independent.” Those markets also had some degree of competition among health plans, and more innovation in payment and care delivery models.
Different markets, different realities
All of the findings of this report hold huge implications for the leaders of all patient care organizations that are moving into value-based care delivery and payment models, whether ACO models or others. And though the authors of the report focused primarily on the learnings coming out of the Medicare Shared Savings Program (MSSP), the implications hold for many types of VBP contracts.
Those implications will also inevitably play out differently in different markets. In our Health IT Summit series this year, we at Healthcare Informatics have been hosting, and will continue to host, discussions around value-based healthcare, in local markets across the country. We’ve just held great discussions in Minneapolis, Nashville, and Denver, and are about to go to St. Petersburg, Florida, and to Boston. What do these markets have in common? And how are they different?
It turns out, not surprisingly, that every healthcare market really is different. Each has a different landscape, around the makeup of the health plans, hospitals and health systems, physicians and physician groups, and employer-purchasers. And so these broad trends are inevitably playing out in very different ways. Every one of the markets I’ve referenced above has a couple of or a few very powerful health plans. Meanwhile, they vary dramatically in terms of the levels of market domination on the part of hospitals and health systems. The Boston market is particularly interesting, as it is one of the leading healthcare markets in terms of quaternary and specialty care, and which is dominated by a small number of very large health systems, and is undergoing rapid consolidation, with fewer and fewer standalone hospitals left, and most physicians already affiliated with large integrated health systems.
Among others, we’ll be hearing from senior executives at UMass Memorial Health System about how they are advancing their healthcare IT foundation in order to support population health efforts; from executives at Mercy ACO in Iowa, about their successful leveraging of data analytics to support their highly successful MSSP ACO; and from executives at the Compass Medical Group regarding the new patient engagement models they are creating, driven by the need to evolve forward on telehealth, patient portals, and mobile healthcare.
In all those discussions, we’ll be pursuing key questions connected to the findings of this recent HFMA report. I am particularly fascinated by issues around how any ACO or other organization can effectively shift to incenting clinicians and groups to take on the responsibility for total cost of care. That is an area that is more problematic than practically any other right now, as the incentives remain frankly too scattered to be able to bring together effectively. Reaching down to individual-clinician incentives and to the shift towards downside risk, remains exceptionally challenging right now.
A key finding in terms of the discussions we’ve been having at our Health IT Summits? We’re still very, very early on in our forward evolution around this as a healthcare system. So stay tuned—things are getting more and more interesting every day—and more learnings will emerge sooner rather than later, in all this.
