Senior Leaders Push Forward Through the Complexities of Value-Based Contracting

July 12, 2022
Several senior leaders share an update on their learnings about the payer and provider relationship

The past few years have been ones of tremendous tumult when it comes to the subject of value-based contracting, with the entire enterprise of value-based care delivery and payment moving forward U.S. healthcare system-wide over time, but very unevenly, in fits and starts, and with countless asterisks around progress of various sorts. What’s become clear is that a certain number of pioneering patient care organizations are moving forward with alacrity, summoning the will to take on risk-based contracts, and in some cases, downside/”two-sided” risk contracts, with the public and private purchasers and payers of healthcare. Physician-governed organizations, which can easily be more agile, are generally moving forward far faster than are hospital-based organizations, with their high overheads and numerous other complexities.

Our annual State of the Industry Survey, whose results were published in our January/February cover story, offered some glimpses into the overall landscape, one strongly influenced by the multiple impacts of the COVID-19 pandemic, which further fragilized already delicate revenue margins for the majority of U.S. hospital-based organizations. A year ago, when we asked survey respondents, we got the following results: 35 percent were participating in the Medicare Shared Savings Program (MSSP); 22 percent were participating in the Next Generation ACO (accountable care organization) Program; 27 percent were participating in a Medicaid ACO program; 42 percent were participating in an ACO or value-based contract with a private health insurer; while 38 percent were participating in no value-based program (of course, the percentages of participation add up to more than 100 percent, since many organizations are participating in multiple types of programs).

But this year, the percentage of those participating in the MSSP has dropped slightly from 35 percent to 32.67 percent; the percentage participating in the Next Gen program (which has just been shut down) dropped to 14.85 in 2021; the percentage participating in a Medicaid ACO program has dropped from 27 percent to 19.8 percent; the percentage involved in a private health plan contract has fallen from 42 percent to 37.62 percent; but the percentage not participating in no value-based program has dropped to 29.7 percent, meaning that more are participating in some sort of value-based program.

Interestingly, though, the percentage of organizations taking on downside/two-sided risk has shifted in interesting ways. For example, the percentage of organizations with 0-5 percent of their revenues coming from two-sided risk contracts has gone from 22 percent a year ago to 32.67 percent this year, though the percent with 50-10 percent of their revenues in two-sided risk has gone from 12 percent a year ago to 9.9 percent this year. Organizations with 10-15 percent of their revenues at downside risk? 18 percent last year and 10.89 percent this year. How about 15-20 percent? Only 4 percent last year but 9.9 percent this year. More than 20 percent? Only 4 percent last year, but 5.94 percent this year.

In the context of all those shifts and changes, Healthcare Innovation spoke with Melanie Matthews, CEO of PSW, formerly Physicians of Southwest Washington, who shared where her organization is today in its complex journey. PSW contracts on behalf of thousands of physicians across Washington state and the Pacific Northwest and consults with physician groups and ACOs [accountable care organizations] across the country, to assist them with enhancing their population health management and care management work.

“We are contracted with physicians in our ACO and our payer relationships, and we engage physicians by showing them their quality outcomes related to their patient panels,” Matthews explains. “And then we provide support and wraparound services for their population that's in our contract. So if they have, say, 500 patients who are in our network that we're managing with our value-based care, then we're providing education on best practices for quality and interventions to reduce readmission, and avoidable emergency department visits, and we provide services like Whole Person Care Services involving social determinants of health, so that we can provide them with help to schedule appointments, get access to appointments, transportation, food delivery, medication delivery, and so on.” It is those kinds of detailed interventions that are made possible under accountable care contracts, Matthews adds. “We are essentially funding positions that will help create care transitions and improve quality while lowering cost.”

Innovations in value-based care in Indiana

Patrick McGill, M.D., executive vice president and chief transformation officer at the nine-hospital, Indianapolis-based Community Health Network, and practicing family physician, notes that value-based contracting innovations are happening in central Indiana, as well. Community Health Network is continuing to participate in the Medicare Shared Savings Program (MSSP) and the leaders at the organization are also expanding their private-payer collaborations.

“We’ve been expanding into direct-to-employer contracts” as well, McGill notes. “We just launched one this year with a local municipality. That was the product of a couple of years of relationship development; and we’ve also been looking at developing some narrow-network types of products to really align patients to the health system.”

“The essential point,” says McGill, “is the learnings that are continuously being gained from participating in a variety of value-based contracts with private payers. We’ve got over 200,000 patients either cared for under the MSSP, under two-sided Medicare Advantage contracts, or value-based contracts with Anthem, Humana, and Aetna; Anthem is the primary player here.”

The key difference between the MSSP program, in which CMS essentially sets the terms of all contracts, as it needs to, and the private plan contracts, is that, “On the commercial side, with the shared-savings contracts, it allows for a different conversation, because you’re able to focus on what services are needed by the patients, including social determinants of health needs like transportation; and you’ve got partnerships in terms of care management,” McGill says. And, he adds, everything that has happened in the past few years gives him assurance that Community Health Network is on the right path, moving ahead even in a market that had not previously been witness to the major health plan consolidation that so often prompts value-based contracting with providers forward.

A look into Medicaid managed care

Healthcare Innovation also spoke with Nabil Chehade, M.D., executive vice president, chief population and digital health, chair collaborative care partner about his specific journey at Cuyahoga County, Ohio-based MetroHealth. The system has more than 600 doctors, 1,700 nurses and 7,800 employees and manages four hospitals, four emergency departments and more than 20 health centers and 40 additional sites throughout Cuyahoga County. The system serves more than 300,000 patients, two-thirds of whom are uninsured or covered by Medicare or Medicaid.

Regarding Medicaid managed care, Chehade says that value-based Medicaid managed care is just like any other Medicaid program. “It’s no different than fee-for-service except there is the opportunity to enter into a value-based program,” he comments. “Having said that, we’ve been successful with the majority of our managed Medicaid plans entering a value-based program. The most advanced that we’ve been with this entering into a total cost of care that is upside only.”

He explains that MetroHealth has wanted to drive into more aggressive, almost all capitation and the problem lies with the managed care organizations that are hesitant to enter into such a program with MetroHealth, not the other way around. “It doesn't matter how much as an organization you already have to make sure that the organization that you're contracting with is ready to entertain such aggressive contracts,” he adds.

“If we're talking about how to manage the value-based contract in the Medicaid population, it certainly is very, very different than commercial and Medicare. One [thing] is, you don't have a captive audience.  Those patients can roam freely from one health system to the other. Many times, what you are saying is best practice to provide to this Medicaid population in order to close that care gaps or to lower the total cost of care is not applicable to that population. It just cannot transfer easily.”

“To truly cater to those patients’ social determinants of health, if you don't facilitate and provide programs for them around social determinants of health, you cannot manage better care for them or the total cost of care,” he adds. “You have to understand the level of their social economic driver. For us, our Medicaid population is 50 percent pediatrics. For example, [something] as simple as getting the postnatal visits—getting the young baby between newborn and 15 months to come in and maybe check vaccines. We take it for granted that if you give them an appointment, they're going show up. Sometimes you rely on them to make their own appointment. Neither one of these will work. You have to make sure that you are proactively making all those appointments from one person to the other because they frequently need visits in the first 15 to 18 months. You have to make sure you don't leave anything for chance, it’s not a successful strategy. You need to figure out what would prevent this mom from bringing her baby in—and I’m pointing to the mom because most of the time that’s the caregiver in the family. Is it transportation? Is it arranging childcare for other kids? You have to make sure those things are addressed, otherwise they’re not going to show up for the appointment. So, when you ask about the Medicaid population, it is very feasible, it’s very doable.”

When asked about risk-based payment, Chehade says that “In the Medicare population we are fully at risk with our global direct contracting entity we take upside downside risk, it’s a medical loss ratio program that is fully capitated. We are ready to do the same in the Medicaid population. We believe it is the ultimate proof of being able to take care of a large population at scale. The only reason we feel comfortable about doing this, and we want to jump directly into capitation and not play games, have upside downside risk, because many times when you do that, you start being your worst enemy.”

“In other words, from a healthcare delivery perspective, if you lower your total cost of care, improve your quality in one year and the benchmark is beating yourself from the prior year, it's a race to the bottom and that does not make any sense,” he adds. “It’s not sustainable and most payers want to drive you into their value-based contract that way, by taking downside risk. What we strongly advocate for is a total capitation or percent of premium. Give us the percent of premium and let us manage you. It can cost us more; it can cost us less. If it costs us less, we gain. If it costs us more, it's not on us, but it is tied to the premium that they get from the department on these patients. So it’s not against my priority of performance. If you're really high performing, it's just a race to the bottom. It’s the same way whether it's its quality or it's more prominent on the total cost of care. For instance, I know for certain when we  [MetroHealth] are compared to the Medicaid population in Ohio, we are of the lowest cost provider, and we have that data and we are in the bottom 5 percent from the top cost. So if I already know I am one of the lowest cost providers, if you're going to tell me you need to outperform yourself, it does not make any sense because there is a limit on how much you can lower the cost. If you tell me, you're going to be rewarded to keep the cost down continue to be market trend, the answer is yes. This is very simple.”

There are many unknowns and uncertainties facing provider organizations of all kinds, in the next few years. But what’s clear, as all those interviewed for this article agree, is that the leaders of pioneering organizations like PSW, Community Health Network, and MetroHealth, are seizing the initiative, and are helping to redefine the relationship between payers and providers on their own terms, by moving forward and actively reframing that relationship. Theirs are the organizations that everyone in the industry should be tracking, as the healthcare system moves forward in the coming years.

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