Value-Based Programs Are the Reality for Healthcare Systems

Wayne Kuznar

Value in Oncology

Washington, DC—Systems and processes of care must be redesigned so that patients receive care in a highly reliable system, in which the right treatment is delivered at the right time by the right person, said May Pini, MD, MPH, Principal, Population Health, Premier, at the Sixth Annual Conference of the Association for Value-Based Cancer Care.

In the new world of value-based payment models, health systems and their affiliated practices must have the infrastructure for population health management, which is defined as managing the care of a group of individuals with the goal of improving quality, efficiency, and patient satisfaction and lowering the cost trend for the overall group, she added.

The Affordable Care Act created and exacerbated numerous market forces, including a government budget strain with the aging of the US population, insurer competition and consolidation, payment model evolution toward value rather than volume, and increased consumerism.

Emerging Payment Models

The introduction of bundled payment programs, as well as oncology medical home models, are accelerating at the federal and state levels.

“We’ve seen a shift and a decrease in the percentage of Medicare beneficiaries whose care is reimbursed through the traditional fee-for-service [model],” said Dr Pini. “Concurrent to this, we have seen an increase in the percentage of Medicare beneficiaries whose care is reimbursed through Medicare Advantage plans, or through accountable care organizations [ACOs].”

Commercial payers have followed suit with announcements about aggressively transitioning to value-based payment models.

Dr Pini reviewed several emerging value-based payment and purchasing models.

The Hospital Readmissions Reduction Program is designed to incentivize the healthcare system to focus on transitions of care after a patient is discharged from the hospital. Medicare payments are penalized up to 3% if the hospital readmissions rates are deemed excessive.

With inpatient value-based purchasing, a percentage of inpatient base operating payments are at risk based on quality and efficiency metric performance. This amount will increase from 1% in 2013 up to 2% in 2017. The policy is budget neutral in that hospitals must fail to meet targets in order for bonuses to be generated for other hospitals.

Efficiency measure spending is total risk-adjusted spending per beneficiary for an episode of care starting 3 days before inpatient hospital admission and ending 30 days after hospital discharge (Figure). “It means that hospitals are now being held accountable for the entire spending, not just for services in the hospital, but also for what happens to the patient out of the hospital,” Dr Pini said.


Bundled payment for an episode of care offers the health system and the care delivery system the opportunity to share in any cost-savings. The downside risk of this program is that payments may be owed to payers if care delivery systems spend more than the target spending amount.

In addition to the numerous bundled payment programs emerging from the Centers for Medicare & Medicaid Services, private insurers and commercial plans are partnering with health systems and care delivery networks to enter into bundled payment arrangements for certain services. Employers are also looking to enter into bundled payment arrangements with health systems, and states are similarly rolling out bundled payment programs, she said.

In an ACO that has an upside risk contract, savings are shared when the actual spending amount is less than the projected spending amount. It does not mean that the program is completely without risk, because of the infrastructure costs that are incurred “in trying to be successful in bending the cost curve,” said Dr Pini. In an ACO with a downside risk contract, spending more than the projected spending amount at the end of the performance period generates a payment to the payer.

The Medicare Shared Savings Program (MACRA) continues to grow. In January 2016, there were 434 ACOs with more than 180,000 physician participants, covering approximately 7.7 million beneficiaries.

The Oncology Care Model (OCM) is a voluntary 5-year program that launched on July 1, 2016. The OCM includes all cancer diagnoses that are treated with oral or intravenous chemotherapy. Similar to the Medicare Shared Savings Program, the OCM allows physician practices to share in cost-savings with the payer if spending for this patient population remains below the projected target spending amount. The savings are contingent on meeting quality thresholds. OCM participants receive a $160 enhanced service payment monthly per beneficiary. There are several practice requirements for participating in the OCM, such as providing patients 24/7 access to clinicians who have real-time access to patients’ medical records.

The Medicare and CHIP Reauthorization Act, which affects Medicare Part B payment to physicians, has 2 payment tracks—the merit-based Incentive Payment System (MIPS) and the advanced Alternative Payment Model. In addition to payments to physicians and physician extenders being affected, over time, other providers (ie, clinical social workers, physical therapists, dietitians) will also be affected.

The incentive payment system is expected to hit small practices the hardest; it is projected that more than 700,000 practices will be eligible for the MIPS track, and <12% will be eligible for the advanced alternative payment model track. Under the value modifier, only 1% of groups received an upward payment adjustment in 2016, and 0.4% of groups received a downward adjustment, said Dr Pini.

“Health systems are using this opportunity to think about how they can align and partner with independent physician practices to start helping them do these types of things and be more successful in payment programs that are affecting their revenue streams,” said Dr Pini.

(The final MACRA rule was released in October 2016; it established a transition year in 2017 that modifies reporting requirements, weakens thresholds for participation, and reduces the risk that providers must accept, but preserves the downside risk.)

Crossing the Bridge to Value-Based Care

Health systems hope to increase their market share and their ability to fill hospital beds with only appropriate hospitalizations.

To do this, health systems must develop their primary care capabilities and transform their primary care practices into patient-centered medical homes, she said. In addition, health systems must create robust care management programs that can manage high-risk patient populations, such as those with chronic diseases.

Care management is a key capability, Dr Pini explained. Care management initiatives span across specialties and sites of care to increase quality, more effectively manage costs, reduce variation, and eliminate unnecessary waste in the delivery system. To achieve these goals, the healthcare delivery system works to define baseline performance and identify areas where the network can demonstrate value.

The delivery system must also be integrated, incorporating evidence-based care models and clinical pathways that are standardized across the systems.

“All of this has to be driven by the right electronic health record infrastructure, as well as data analytics capabilities,” said Dr Pini.

Care coordination across the care continuum is needed to facilitate the transitions from the hospital to the primary care provider, who may also have a specialist involved in managing the patient’s care. The coordination needs to extend from the hospital to the postacute care providers, including skilled nursing facilities, long-term rehabilitation facilities, home health services, or to the transitioning home.

“Without this type of coordination, there’s obviously a lot of waste in the system where you get duplicative services,” said Dr Pini.

The patient-centered medical home is the foundation of care coordination. “The goal is to create a robust primary care service, so that you’re providing comprehensive and coordinated care, with a team based approach, so that patients have enhanced access to the delivery system,” she said.

Value-based care redesign and new payment models must be paced in tandem for true population health transformation to occur, concluded Dr Pini.