Care Transformation Center Blog

Still a value-based care skeptic? Why you need to get aggressive.

“We want to be prepared for when the market tips, but we don’t want to tip the market.” —Quote from a health system member in the Midwest

I have been partnering with health care providers to transition to value-based care for nearly 10 years. And in that time, momentum for industry-wide transformation has increased year over year. But there are still some who remain unconvinced that value-based care will have a meaningful impact on their organization, so they’re either dipping their toe in the water or staying on the dock altogether. We’ve profiled these organizations and refer to them as “the intenders” and “the skeptics,” respectively.

If you’re in either one of these two stages, you need to act now to get to the next stage, regardless of where your market is.

Take for example the health system quoted above. For about six months, we were talking with this organization about building a Clinically Integrated Network. In that time, the following happened: the health system began their first year of mandatory bundled payments for joint replacement; another health system from a nearby town recruited some of their independent physicians into a Track 3 Medicare Shared Savings ACO; and venture capital firms started to pour in when the market was selected to participate in CPC+, another Medicare program. To say that our conversations around taking on risk have now changed would be a drastic understatement.

This type of scenario is happening to health systems across the country in the skeptic and intender stages. One minute, the market doesn’t seem to be moving toward risk, and the next minute, it’s moving too fast to keep up.

Medicare is getting aggressive with inpatient and outpatient payments

In January 2015, the Department of Health and Human Services (HHS) announced a goal to have 30% of Medicare payments tied to alternative payment models by the end of 2016. In March, HHS estimated it reached that goal—nine months ahead of schedule. HHS isn’t stopping at 30%, though. By 2018, they aim to have 50% of payments tied to these models and they have put several plans in place to meet their goal.

First, Medicare is leading efforts in episodic bundling where hospitals are at risk for utilization that occurs in the 90+ days after discharge. Medicare initially encouraged hospitals to voluntarily participate, but has started rolling out mandatory bundled payments through the Comprehensive Care for Joint Replacement (CJR) program and a newly released proposal that expands CJR, adds new models for cardiac care, and solicits feedback for numerous other bundles.

Combined, these new mandatory bundles will cover conditions that make up 9% of total Medicare discharges, and hospitals will be at risk for up to 20% of cost overruns by 2020. While the proposed cardiac bundles will initially only apply to a quarter of metro areas, CMS has made it clear this is just the beginning of bundled payment accountability by generically calling the program “Episode Payment Models” instead of a condition-focused name.

Second, Medicare hopes to encourage adoption of greater risk bearing with the Medicare Access and CHIP Reauthorization Act (MACRA), which ties physician reimbursement to one of two quality programs—one of which incentivizes participation in “advanced alternative payment models.”

The “advanced” aspect is important, because not all of CMS's alternative payment models qualify. The ones that do qualify require real downside risk. These include tracks 2 and 3 of the Medicare Shared Savings Program, the Next Generation and Pioneer ACO programs, and a special qualification pathway for medical home models like the Comprehensive Primary Care Plus (CPC+) program.

Although payment adjustments under MACRA don’t kick-in until 2019, they are based on next year’s performance (2017). And for those organizations not participating in advanced payment models, penalties for poor performance will be as high as 9% by 2022.

Moving from skeptic or intender to builder

The most difficult transition to make across the spectrum of value-based care is moving out of the skeptic and intender stages, and into “the builder” stage. Being a “builder” is an ambitious path that requires executive-level commitment, dedicated resources for care transformation, and at least two contracts with accountability for total cost of care.

For providers needing to quickly move to the builder stage, I recommend putting together an economic road map to help understand the financial impact that various strategies will have on your organization now and over the next several years. It should outline both corporate and local value-based care transitions, as well as market factors that affect the pace of the transition. As an aside for you skeptics, the right value-based economic model can enhance current fee-for-service revenue streams while taking on new risk-based payment models.

Don’t stall out in the early phases of value-based care. Move to the builder phase as soon as possible, because if you’re not at that phase, I hate to say that you’re already behind.

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