22 Reasons For Slow Value-Based Payment Adoption

Medicare reports that 30 percent of their payments are tied to quality or value. A closer look shows their reporting is confusing, misleading and incomplete. They contrast with studies showing 94.7 percent of physician reimbursement is fee-for-service and the hospital reimbursement I have analyzed is between 96 to 98 percent fee-for-service.

If value-based payments are 5 percent or less of their revenue, how and when should physician practices and healthcare systems invest millions in people, technology and process redesign? A former Blue Cross Blue Shield CEO confided to me that value-based payments from Medicare and Commercial health plans are only window dressing and adoption will be slow as long as less than 5% of healthcare organizations’ revenue are at risk.

Physician Practice and Healthcare system CEOs are paid to develop and promote strategies to ensure their organizations thrive in the future. They know the future includes more value-based payments and less fee-for-service payments. They tell me they are willing to invest millions in people, technology and process improvement even though it would negatively impact their current low operating margins. They are even willing to take a hit on their inpatient revenue from effective care management to prepare their organizations for the new payment models. The hesitation comes from the lack of a proven, cost-effective way for success.

Here are a list of common concerns I have heard from dozens of healthcare board members, CEOs and executive leadership team members over the past few years:

1. Lack of a framework for Managing Health – There are best practices, extensive research and a framework for managing healthcare, such as how to test, diagnose and treat coronary artery disease (CAD) or diabetes. We know to send the CAD patients to a cardiologist. Beyond providing Care Management to High-Need-High-Cost and Transitions of Care patients, we lack a framework for managing health.  What do with patients with poor medication adherence, inadequate nutrition and limited physical activity?

2. It’s a fraction of revenue – How do we engage leaders to focus on tomorrow (4% of their jobs are tied to value-based payments) when we need them to improve the performance of today (96% tied to fee-for-service)? There will be no tomorrow without success with today’s 96%. Some leaders have decided to make up revenue lost with value-based payments by increasing fee-for-service volume (i.e., see one more patient), resulting in an unintended consequence of value-based payments.

3. Cost to recover potentially lost value-based revenue – How much would it cost to move from capturing 60% of your value-based revenue to 100%? Would it be better to invest that money in Cardiology, Oncology and Orthopedic services that would improve patient outcomes and be more predictable?

4. Lost in Isolation – Most healthcare providers already have over a dozen different value-based payments arrangements or managing health initiatives.  This includes Medicare Advantage contracts tied quality measures, Medicare programs like readmission penalties and managing employees healthcare costs. While there may not be cost-effective ways to address each individually, combining them into one managing health approach may be the answer.  Medicare plans to roll out mandatory Cardiac Episode-Based Payments in 98 metro areas in July 2017.  Analysis from Avalere reveals that 85 percent of hospitals required to participate would not experience gains or losses that exceed $500,000 per year. With this representing less than 1% of the hospitals revenue, if it is evaluated in isolation it may not get the investment to cost effectively improve outcomes.

5. Slow drip – These programs keep coming from the Comprehensive Care for Joint Replacement (CJR) that began in April to MACRA that begins tracking performance in January to impact physician payments in 2019.  U.S. Senate Majority Leader Everett Dirksen famously said, “a billion here, a billion there, and pretty soon you’re talking about real money.”  1% here, 1% there, pretty soon value-based payments may add up to real money.

6. Fragmentation – One CEO stated they are doing over 10 Managing Health Initiatives yet it is all fragmented and not a coordinated effort. He cited six different organizations (including health insurance providers) hiring Care Managers that contact patients. This will frustrate the Acute MI patient receiving many uncoordinated calls from the three organizations that have this patient in the denominator of their value-based payment calculations (i.e., bundled payment, MSSP and re-admission reduction).

7. Need one physician workflow– CEOs know that can’t give physicians one more care gap list or it may get ignored like the last one. They need to offload work from physicians to a team to complete the pre-work before they can give physicians new responsibilities. For Physicians to have the time to develop trusting relationships with patients and help them with medical decision making, they will need the be supported by an efficient and effective team-based workflow.

8. Value-Based Care Bermuda Triangle – I find that most healthcare systems have a Bermuda Triangle between Employed Physicians, Hospital and ACO/CIN/IPA. Each of the three points of the Bermuda Triangle have separate contracts and/or fee schedules with the payers or Medicare. What needs to be done gets lost in the VBC Bermuda Triangle. Hospitals are losing over $100K on each physician practice.  Physicians are frustrated by decisions by the hospital. ACO/CIN/IPA’s (owners of the ACO contract) are frustrated by being ignored by the hospital and physicians. This makes it difficult to develop a well-integrated team with the division of work, budgets, expenses and revenue sharing.

9. Population Health Platform Disillusionment – Yes, there are thousands of population health vendors and they all say they can do it. When I went to HIMSS three years ago, almost every booth stated they are a population health solution provider. Most are either retrofits of legacy products or they have one customer somewhere that may be hard to replicate. The most advanced ACOs tell me they are underwelmed by what is out there and no one has it all yet.

10. Technology interoperability tug of war – Health plans want healthcare systems to use their technology platform, yet healthcare systems can’t use 5 different health plan portals to see which of their patients were admitted to the hospital last week. Health plans and healthcare systems each want their technology platforms to be the standard and everyone else to provide data feeds and interoperability.

11. Zombie ACOs – There are many ACOs that stopped spending money on Care Management after the first year. Once they realized they couldn’t afford to spend millions without receiving gain share payments, some stopped doing almost everything. It may help explain why only 51.8% of MSSPs saved money last year, barely better than a coin flip. The physicians I speak to in these Zombie ACOs now have a very negative view of the program. It may take a long time to win these physicians back.

12. Payers are too slow – Payers are often even slower that healthcare systems in adoption. Just like healthcare systems, they need to invest in people, technology and process improvement. They need to work collaboratively with providers to be successful, which may require a new approach. For example, just like healthcare systems, their legacy platforms are designed to manage medical claims adjudication and need new data sharing capabilities to support the team-based approach to managing health. They are also afraid of sharing with local providers as they may figure out that their hospital competitors are being reimbursed with a higher rate.

13. Low Baselines – The average 2014 Medicare beneficiary cost was $15,985 in Miami-Dade County, FL and $6,210 in Santa Fe, NM. While this doesn’t necessarily state the conditions of the beneficiaries, it may be much harder to get $1,000 per beneficiary savings in Santa Fe as compared to Miami.  The 2015 results from Medicare MSSP 203 participants that generated savings began with a per beneficiary benchmark $979 higher than participants that didn’t generate savings. The more advanced Pioneer ACOs have cited low baselines as the reason for dropping out of the ACO programs. After these ACOs lower average Medicare beneficiary cost, they became victims of their success. Medicare is working on ways to avoid penalizing these high performers.

14. No cure for Managing Healthcare vs Health schizophrenia  – One healthcare system CEO in an executive team meeting stressed the importance of value-based payments initiatives and becoming the lost cost provider of overall health. The next month he complained that MRIs and CT scans were down. Unfortunately, the CEO needs his team to do both, manage the 96% (managing healthcare) and the 4% (managing health). There needs to be clear direction and incentives.

15. Long feedback cycles – People love quick feedback, especially in our modern day when we play video games till 2am to beat our high scores. Physician want feedback on whether the patient’s new blood pressure medicine is working, so they can get it right. Most of the value-based programs take 6 months (episode-based payments) to 18 months (ACOs) to provide performance feedback. The lag in time combined with many team-based actions can make it challenging to determine the cause and effect of what works.

16. Teams take a long time to build – It took LeBron James a couple of seasons in Miami before their team came together to win a championship. Physicians need to rely on, trust and integrate with a team that includes Care Management. They will also become part of many different teams based on the conditions and needs of their individual patients. This can take a couple of years.

17. Lack of a Managing Health Playbook – What is the division of labor? What is the role of the physician, practice clinical staff, practice administrative staff, care managers (nurses, social workers, health coaches), information technology staff, hospital and ER case management, specialists, diagnostic testing (Lab, radiology), data scientists, physician engagement specialist, community services and community health workers?

18. Legal Concerns – Healthcare organization’s legal teams are stressing caution with federal self-referral laws (Stark Laws), anti-kickback statutes and beneficiary inducements across each value-based initiative. Healthcare systems are beginning to partner with Uber and Lyft for transportation services for their High-Need-High-Cost and Care Transition patients, yet it needs to be carefully implemented to ensure it in not a beneficiary inducement. Was the ride provided to a patient for cardiac rehab an inducement under the anti-kickback statutes? Can physicians be rewarded for keeping patients in network, knowing this will improve patient outcomes and lower overall costs?

19. Dealing with low performers – Healthcare systems leaders have spent their careers attracting, affiliating with and purchasing primary care practices. What happens if practices are not adopting a managing health culture by improving quality measures, overall health and reducing overall claims cost? Performance-Based contracts by Medicare and Commercial payers are typically with the healthcare system ACO, CIN or IPA. If half of the physicians embrace value-based contracts and save $5M and the other physicians’ patients cost $5M more, there are no gain share payments for any one. Would the ACO, CIN or IPA be able to keep deserving high performers engaged if they don’t reward them incentives because of low-performers? Would they be able to kick out the low performing practices and risk healthcare system referrals?

20. We don’t know what high performers are doing – While 51.8% of ACOs saved money last year, we have no insight into what they are doing. We don’t know how they dealt with the VBC Bermuda Triangle, the division of labor and division of incentives. Each ACO, CIN, IPA, physician practice, care management and patient intelligence (EMRs, Data Integration, Data Analytics) organization are different. Even if we knew what works, can it be transferred to a different organization?

21. Performance-Based Contracting – Employed Physicians, Affiliated Physicians, Payers, Specialists, Post-Acute Providers, Vendors, Employers, Life Sciences will all eventually require performance-based contracts to ensure alignment. Each contract must clearly articulate Patient Attribution (the denominator in every value-based model), Quality Measures, Baseline Calculations, Documentation (including risk adjustment factor coding), Data Sharing, Gain Share Calculations, Division of Labor and other incentives. It’s a lot of work to create these contracts and time consuming to manage them.

22. Lack of Managing Health best practices – We have managing healthcare research, science and technology built around the healthcare treatments and services that work. Other than addressing high-cost-high-need patients, care transitions and quality measure care gaps, we have very little guidance on managing health. How do we address human behavior complicated by social determinants? What is the best way to cost-effectively discover, diagnose and treat adverse human behaviors?

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