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Transcript of Value-Based Healthcare Strategies
Value-based Healthcare Strategies:
How Should Industry Stakeholders Respond to Current
Policy Trends?
Courtney Sanvido, Colin Bertram, Greg Jarvis, Chien-Wei Lan
April 18, 2016
| Value Based Healthcare Strategies | Georgetown University Student Consulting Team
2
CONTENTS
EXECUTIVE SUMMARY: OBJECTIVE, METHODOLOGY & RESULTS
SECTION A: VALUE-BASED FRAMEWORKS
3
1. Regulatory Environment: Legislative Fixes and Gaps
○ Medicare Access and CHIP Reauthorization Act (MACRA) 5
○ CMS Alliance to Modernize Healthcare 7
2. Various Pay for Performance (P4P) Models
○ Medicare Hospital Readmissions Reduction Program 7
○ Hospital Value-based Purchasing Program 8
○ Hospital-Acquired Condition Reduction Program 8
SECTION B: OPERATIONALIZING THE FRAMEWORKS
1. Financial and Strategic Implications 9
2. Therapeutic Specific Value-based Models 10
3. Bundled Payments, Pharmacy, and Specialty Pharmacy f r Coordination
11
SECTION C: RECOMMENDATIONS FOR STRATEGY DESIGN, BUSINESS PLANNING, AND OPERATIONAL ASSESSMENT
1. Recommendation One: Pharmaceutical Best-Practice Forums 13
2. Recommendation Two: Explore Cost Sharing Strategies Between Payers
14
3. Recommendation Three: Encourage Late-adopter Providers to Develop Value-Based Models
15
4. Recommendation Four: Encourage Providers to be More Patient-Centered
15
5. Recommendation Five: Create Cost of Care Episode Report Cards 16
6. Recommendation Six: Lobby for Tax Incentives to Adopt VBC 16
REFERENCES r18
| Value Based Healthcare Strategies | Georgetown University Student Consulting Team
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EXECUTIVE SUMMARY
Objective
The Kinetix Group (TKG) requested that the Georgetown University Student Consulting
Team (GSCT) conduct an analysis of emerging public and private value-based payment
models and develop strategic recommendations that will better align the interests of
healthcare providers, payers, manufacturers, and patients. The GSCT conducted an
industry analysis in order to identify common factors for success and points of failure
within these models, and present how TKG can apply these lessons towards serving
their clients.
Methodology
We conducted research across multiple channels, drawing heavily from Centers for
Medicare and Medicaid Services information, publicly available data on private payers,
healthcare journal articles, and interviews with industry experts. Analysis of policy
initiatives such as the Affordable Care Act (ACA) and the Medicare Access and CHIP
Reauthorization Act (MACRA) provided the most insight into the national direction of
value-based initiatives. Our research was driven by developing an understanding of
these policies and the industry’s response.
Results
Based on our analysis, the GSCT provides recommendations for the many stakeholders
in the healthcare system, including the pharmaceutical industry, providers, and third-
party payers. The success of value-based healthcare will be largely contingent on
system harmonization, with all stakeholders understanding why the shift from volume to
value is in their best interest. Participants must understand how the shift to value will
create more risk and responsibility for their organizations. Stakeholder will need to
identify what they can do to induce organizational change and how they can benefit
from the shift to value-based reimbursement. Providers, patients, payers, and
pharmaceutical companies will all insist that the other parties assume their fair share of
that risk, and will lobby policymakers in order to limit their own exposure.
| Value Based Healthcare Strategies | Georgetown University Student Consulting Team
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SECTION A: VALUE-BASED FRAMEWORKS
While value-based payment models have existed for several decades in the United
States, there has been a recent explosion in the prevalence of these models. It has
been driven by a rapid increase in national healthcare spending without an equivalent
increase in outcomes. Consumers of healthcare services and federal policymakers have
increasingly demanded a reversal of this trend, putting pressure on both public and
private health systems to improve outcomes while decreasing costs. While it has been
difficult to track cost and outcome metrics in the past, recent technological advancement
in data collection has increased end-to-end transparency and enabled widespread
systemic change. The following section will identify how the public and private sectors
have responded to consumers’ and lawmakers’ demands for value.
1. Regulatory Environment: Legislative Fixes and Gaps
The Affordable Healthcare Act of 2010 and the Medicare Access and CHIP
Reauthorization Act of 2015 created a roadmap to shift healthcare spending from
volume to value-based models. While the ACA remains a controversial piece of
legislation, MACRA passed both chambers of Congress with broad bipartisan support.
There is an understanding among legislators that the current rate of growth in national
healthcare spending is unsustainable, and they have embraced value-based payment
models as a way to slow this growth. However, this legislative action was limited to
Medicare, suggesting that Congress is mainly concerned with rising healthcare costs as
they pertain to the federal budget. Together, Medicare Parts A and B make up
approximately $361 billion of the 2016 budget, representing an opportunity for
legislators to demonstrate a proactive approach to fiscal responsibility.1 However,
national healthcare spending is increasingly being viewed as a broad economic
problem, with total national spending exceeding $3 trillion in 2014. Sustained national
spending at this rate will limit opportunities to invest in other areas.2
In order to effectively slow the growth of healthcare costs, value-based payment models
need to be expanded into the private sector and implemented throughout the entire
value chain. The federal government could incentivize a shift towards value among
private insurers through a series of tax breaks, but has yet to engage the private sector
outside of the creation of the CMS Alliance to Modernize Healthcare.3 Additionally, there
is no current pending legislation that would expand value initiatives to pharmaceutical or
medical device manufacturers, and CMS is barred from experimenting with such models
due to policy restrictions.4 Another government action that could have negative impacts
on pharmaceutical companies would be the FDA requiring comparative efficacy
| Value Based Healthcare Strategies | Georgetown University Student Consulting Team
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standards on new drugs or devices as part of the approval process, or reducing the
duration of patent protections. While neither of these actions is currently pending, public
opinion can rapidly galvanize a legislative response, and pharmaceutical companies
should remain wary of this possibility.
Medicare Access and CHIP Reauthorization Act: What it Hopes to Accomplish
MACRA has three main policy objectives: 1) the repeal of the Sustainable Growth Rate
(SGR), 2) creating a framework for a shift from volume to value, and 3) combining and
standardizing previous quality reporting systems. The broader focus of the legislation is
to shift Medicare payments from Fee For Service (FFS) reimbursement to Pay for
Performance (P4P) models. The Centers for Medicare and Medicaid Services (CMS)
has a stated goal of tying 90% of Medicare claims to value models and 50% to
Alternative Payment models by 2018. Financial incentives are structured to reward early
adopters and penalize doctors that choose to retain a standard FFS reimbursement
model.5
Sustainable Growth Rate Repeal
The repeal of SGR was widely supported, as it had been subject to temporary annual
fixes since it was first implemented. SGR has been replaced with annual updates to the
physician fee schedule as follows: 0.5% annual update from 2015 - 2019, 0% update
(freeze) from 2020 - 2025, 0.25% annual update for MIPS participating physicians 2026
and onward OR 0.75% annual update for APM participating physicians 2026 and
onward. As the future annual updates show, providers will need to prepare for tighter
margins during the five year fee schedule freeze from 2020 to 2025. Furthermore, it will
be highly favorable to participate in MIPS or APM from 2019 and onward in order to
continue receiving physician fee schedule updates.6
Merit-Based Incentive Payment System
The Merit-Based Incentive Payment System (MIPS) combines existing quality reporting
programs into one new system based on quality, effective and efficient use of
resources, clinical practice improvement, and meaningful use of certified EHR
technology. MIPS replaces three reporting programs which will sunset on December
31st, 2018. These three programs are the Physician Quality Reporting System (PQRS),
the Value-based Payment Modifier (VBPM), and the Medicare Electronic Health Record
(EHR) program. PQRS requires Medicare Part B providers to report on a minimum
number of quality measures across various domains or face a 2% payment reduction.
VBPM compares providers’ outcomes data to their Medicare claims and adjusts
reimbursements according to cost efficiency. In the Medicare EHR program, eligible
| Value Based Healthcare Strategies | Georgetown University Student Consulting Team
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providers and hospitals must demonstrate meaningful use of electronic health records.
Meaningful use includes activities and capabilities such as electronically transmittable
records, engagement of individual patients through personal health records or portals,
and reporting of quality measures and public health data. Participants not able to
demonstrate meaningful use will face a reimbursement penalty of up to 1% annually or
a 25% reduction in the Inpatient Prospective Payment System market basket update.7
Providers’ MIPS Composite Score is calculated through 4 different categories of
metrics: Quality Measures (50% of score in 2019, 45% of score in 2020, 30% of score
2021 onwards), Resource Use Measures (10% of score in 2019, 15% of score in 2020,
30% of score in 2021), Clinical Improvement Activities (15% of score), and Meaningful
Use of EHRs (25% of score). MIPS Composite Scores will be made publicly available
on Physician Compare. Providers with scores above or below the performance
threshold (calculated annually) are rewarded or penalized a percentage of their total
Medicare payments. Reimbursement adjustments for the next 5-10 years are up to 4%
in 2019, 5% in 2020, 7% in 2021, and 9% in 2022 and onward.8
Alternative Payment Models
MACRA also established innovative care models for delivery and payment that
emphasize quality and value. MACRA defines APMs as any CMS Innovation Center
Model, any Medicare Shared Savings Program (MSSP), a demonstration under the
Health Care Quality Demonstration Program, or a demonstration mandated by federal
law. APM participants may be qualifying or non-qualifying. Qualifying participants
receive an annual 5% bonus lump sum payment for 2019-2024, are not subject to
MIPS, and receive higher fee schedule updates for 2026 and onward. To qualify, a
participant must meet a threshold of their payments or patients through an eligible APM
(25% in 2019 and 2020, 50% in 2021 and 2022, and 75% in 2023 and onward). An
eligible APM is a more advanced APM that must meet certain criteria: 1) base
reimbursement on quality measures comparable to MIPS, 2) requires participants to use
certified EHR technology, and 3) bears more than a nominal amount of financial risk or
is a medical home under section 1115A(c) of the Social Security Act. Non-qualifying
participants receive favorable MIPS scoring, especially under the clinical practice
improvement section.9
Accountable Care Programs
Accountable Care Organizations are groups of healthcare providers which coordinate
care and assume financial accountability for a population of Medicare patients. As of
January 2016, there are a total of 477 qualified ACOs enrolled in CMS’s five
accountable care programs, covering over 8.9 million beneficiaries nationally. The
| Value Based Healthcare Strategies | Georgetown University Student Consulting Team
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Pioneer ACO program generated savings three years in a row, which will likely result in
CMMI extending the life of the program. The total savings of fiscal year 2014 were $120
million, and average savings per ACO were $6 million. The Pioneer ACOs also showed
quality outcome improvement; mean quality score increased from 72% to 87% from
2012-2014. To build upon the success of the Pioneer ACO model, the Next Generation
ACOs will emphasize financial incentives for those that have more progressive care
models. Next Generation ACOs aim to further improve health outcomes and reduce
expenditures by incentivizing greater opportunities for coordinated care.10
CMS Alliance to Modernize Healthcare and the Healthcare Payment and Learning
Action Network
These initiatives were developed in order to “drive alignment in payment approaches
across the public and private sectors of the U.S. healthcare system.”11 Together, they
represent the extent of federal action in encouraging private health insurance
companies to convert from Fee For Service models into Pay For Performance models.
The initial work of these initiatives has been to standardize how concepts are
understood throughout the industry. While these initiatives have succeeded in creating a
dialogue across the industry, they lack substantive mechanisms to encourage
compliance. For profit insurances will be reluctant to reveal truly innovative approaches,
as they will view these as a source of competitive advantage.
2. Various Pay For Performance (P4P) Models
Pay for performance models are healthcare delivery and payment programs which
emphasize quality, cost-efficiency, and value of care. P4P programs tie financial
incentives and penalties to structure, performance, and outcome measures. P4P
models exist in both the private and public sector. The most widespread of the P4P
programs are the ones that CMS has designed. These are the Medicare Hospital
Readmissions Reduction Program, Hospital Value-based Purchasing Program, and
Hospital Acquired Condition Reduction.
Medicare Hospital Readmissions Reduction Program
CMS’s Medicare Hospital Readmissions Reduction Program reduces reimbursement to
acute care hospitals with excess patient readmissions within 30-days of discharge. This
P4P program focuses on the prevention of complications from hospital treatments,
inadequate treatment, inadequate care coordination and follow-up care, and
unexpected worsening of disease after discharge from the hospital. Although these
policies have been in effect since 2012, a study conducted by US News and World
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Report Health demonstrated that nearly 2,600 US hospitals were penalized under this
system in 2014, resulting in total reimbursement penalties of over $420 million. The
program has resulted in a national drop in readmissions, but one in every five patients is
still readmitted, indicating that the program is working but still has room for
improvement.12,13 Given this, TKG can help implement proactive, cross-continuum
touch-points in post-acute care clinics to help prevent these patients from rebounding
into the hospital. Health systems and physician practices will need to form integrated
care delivery systems in order to manage the cost of care for these patients and ensure
they have high rates of post-acute follow-up. Practices will not only need to ensure they
have same-week access and capacity to handle the patients, but they will need to prove
proactive management of and high compliance rates with patients attending these
appointments.
Hospital Value-Based Purchasing Program
CMS’s Hospital Value-Based Purchasing Program adjusts a portion of payments to
hospitals based on: 1) how well they perform on each measure compared to all
hospitals, and 2) how much they improve their own performance on each measure
compared to their baseline performance at a prior period. These measures focus on
outcomes, patient experience, and cost and the program is funded by a 1.75%
reduction from hospitals’ DRG payments for FY 2016. These funds will be reallocated
based on each hospital’s total performance score. It is estimated that about 1,800
hospitals will receive a bonus while 1,235 will be penalized up to 1.75%. Adjustments
will increase to 2% in FY 2017.14
Hospital-Acquired Condition Reduction
In CMS’s Hospital-Acquired Condition (HAC) Reduction program, Medicare reduces
payments to the worst performing quartile of hospitals with respect to hospital-acquired
conditions (HACs). The Total HAC Score is based on 4 quality measures: 1) PSI 90
Composite, 2) Central Line-Associated Bloodstream Infection (CLABSI), 3) Catheter-
Associated Urinary Tract Infection (CAUTI), and 4) Surgical Site Infection (SSI) - colon
and hysterectomy. Total savings in FY 2016 is estimated to be about $364 million with
758 out of 3,308 participating hospitals being penalized up to 1% (up from 724 hospitals
in FY 2015).15
| Value Based Healthcare Strategies | Georgetown University Student Consulting Team
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SECTION B: OPERATIONALIZING THE FRAMEWORKS
For the providers who operate within a value-based system, it is imperative that they
understand their opportunities for increased financial rewards and the potential for
financial risk. Hospitals that are subject to mandatory quality measures will need to
know how they are being judged. For the providers that choose to remain outside of an
Alternative Payment Model, it will be important to understand how the value metrics
from MIPS will determine their pay, how these metrics will change over the coming
years, and what updates their practices will need in order to maximize their financial
rewards. For existing ACOs and current members of Alternative Payment Models, it will
be important to not just maintain their current profit-maximizing operational practices,
but to establish relationships with other providers who can increase the efficiencies of
their model. In order to achieve this, they will need a system to assess their needs and
to judge the worthiness of potential partners. Finally, for the small providers who wish to
gain advantages by joining an ACO or APM, it will be necessary to have a means of
conducting a self-assessment as to what strengths they possess that would make them
an asset to an ACO, or what weaknesses may need correcting before they will be
allowed into the organization.
1. Financial and Strategic Implications
Financial
Under the three pay-for-performance programs mentioned above, each hospital has
5.75% of their total reimbursement at risk. The risks are as follows: VBP may adjust
reimbursement up to 1.75% (2% in FY 2017), Readmissions reductions may adjust
reimbursement up to 3%, and HAC may adjust reimbursement up 1%. While the
specifics and metrics of pay-for-performance programs vary by program, there are
common underlying components. These metrics include process measures, outcome
measures, cost-efficiency/utilization measures, and patient satisfaction measures.
Strategic
Firstly, providers must understand the direct financial benefits along with the indirect
strategic benefits of pay-for-performance models. One potential benefit is the creation of
a positive public perception of the provider. Although many of the regulations are
mandated, providers can capitalize on being early adopters. This would not only help
shape how patients and peers view the regulations, but it could work to providers’
financial advantage. Similarly, providers can utilize the publicly reported quality metrics
as a competitive advantage.
| Value Based Healthcare Strategies | Georgetown University Student Consulting Team
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Secondly, these reimbursement opportunities promote refinement and enhancement of
team-based care. Both the beneficiaries and providers of healthcare services share the
perception that there are many shortcomings within the current delivery system. Health
systems can use the policy initiatives as a guidepost for implementing long-needed
changes. Bundles are an excellent example of how inter-industry competition will force
care teams (pre-operative, intra-operative, acute, post-acute, and primary care) to align
in methodology, treatment patterns/technique, and pharmaceuticals/ supplies.
Finally, and arguably most importantly, reimbursement transformation is leading to
better patient outcomes. The average time it takes for a scientifically proven best
practice to be disseminated and adopted in medicine is upward of fifteen years, a time
that lags well behind appropriate standards. The regulatory and financial changes are
forcing conversations around best practices, and are creating spaces for providers to
share techniques while enabling them to develop the best care pathways for patients. If
these techniques are adopted successfully, they will tighten the quality outcome gap
between patients. Quality assurance will be more uniform, which lessens the care
inequality between patients. Doctors who are unable or unwilling to remain up-to-date
will see significant financial loss, and will likely find themselves forced out of
organizations that rely on that doctor’s quality metrics.
Many of the shortfalls in the current delivery system occur during care transitions or as a
result of the social determinants of an individual’s health. Policymakers need to address
how social determinants of health may affect outcomes regardless of the quality of care
received. This is another shortcoming that the reimbursement policy changes are
attempting to address. Not only are there newly created reimbursement codes for
treatments such as home-health, but there are funding opportunities for those systems
that successfully integrate care-coordination teams into their care models. Having these
teams integrated throughout the delivery chain is a key to success in reducing cost and
improving patient outcomes. Integration would not only decrease failures in transitions
of care, but will do so at a lower cost per hour than a provider does.
2. Therapeutic Specific Value-based Models
Oncology Care Model
The National Cancer Institute projects that annual expenditures on cancer treatment will
reach $207 billion in 2020, highlighting a need to shift the cancer care model from
volume to value. Medicare’s Oncology Care Model (OCM) is a Center for Medicare and
Medicaid Innovation program intended to improve quality, increase coordination, and
reduce the cost of cancer care treatment. OCM encourages payers and practices to
| Value Based Healthcare Strategies | Georgetown University Student Consulting Team
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shift towards value through an episode-based payment model. Reimbursement to
providers consists of two parts: 1) a per-beneficiary-per-month payment throughout the
duration of the cancer care episode (up to 6 months after the diagnosis) and 2) a
performance-based payment. To be an eligible participant in OCM, practices must meet
a variety of quality and coordination benchmarks. A few of these minimum requirements
include: 1) provide the core function of patient treatment navigation, 2) use a care plan
based on the Institute of Medicine’s 13 key cancer care components, 3) demonstrate
meaningful use of an EHR system, 4) use data to drive continuous quality improvement,
and 5) provide 24/7 patient access to a clinician throughout the care episode. Although
designed for Medicare, it is a multi-payer model in which state and commercial payers
may also participate. OCM is slated to begin in spring 2016 and last five years. If this
proves successful, this model would potentially serve as the model for other conditions,
especially those involving high cost treatments, high risk patients, or specialty
pharmaceuticals.16
Blue Cross Blue Shield Quality Improvement Pilot Initiative
Blue Cross Blue Shield Michigan’s quality improvement pilot initiative in cardiovascular
care is a private-payer benchmarking model. Its goal is for provider collaboration to
improve outcomes by using disease-specific measures. This private quality
improvement model is specifically focused on percutaneous coronary intervention and
was originally based on collaboration between six different hospitals in Michigan. This
initiative collects quality data from these participating providers through a central
registry, analyzed and provides immediate feedback to the participating clinical teams.
The pilot initiative shows significant improvements in a range of outcomes including a
59.3% reduction in emergent coronary artery bypass grafts (CABG), a 46.2% reduction
in all CABG procedures, and a 27.7% reduction in vascular complications. Fewer
procedures and complications has reduced expenses and improved efficiency. There
are now more than 33 providers participating in this initiative and will expect to bring
greater quality improvement and cost-efficiency in Michigan.17
3. Bundled Payments, Pharmacy, and Specialty Pharmacy Coordination
Bundled Payments for Care Improvement Initiative
The Bundled Payments for Care Improvement Initiative is another avenue that CMS is
using to reform Medicare. Rather than make separate payments to providers for
individual treatments or services, the Center for Medicare and Medicaid Innovation will
be testing various bundled payment models to test care coordination strategies. There
are four models that are being used to test efficacy of bundling: Model 1: a retrospective
bundled payment for entire inpatient, acute care episode, Model 2: a retrospective
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bundled payment for acute care inpatient stay and post-acute care services, Model 3: a
retrospective bundled payment for just post-acute care services, and Model 4: a
prospective payment to all providers for the entire inpatient stay. These models differ in
the way that revenue gets allocated between providers, but the main objective all each
is to increase the value of care delivered per dollar spent.18
Comprehensive Care for Joint Replacement Model
One of the earliest nationwide bundling programs is CMS’s Comprehensive Care for
Joint Replacement Model (CCRJ Model). In 2014, there were over 400,000 hip and
knee replacement surgeries, costing over $7 billion for the hospitalizations alone. Both
quality and costs vary tremendously across providers ($16,500 to $33,000 across
geographic areas). This model defines a bundled payment from entrance into a hospital
for either an MS‐DRG 469 or 470 (with or without complications) and ends 90 days after
discharge. The total expenses are all goods and services provided under Medicare Part
A and B. Total expenses are compared to Medicare’s target cost of the episode or care
and, depending on the hospital’s quality and spending performance, the hospital may
receive a payment bonus or penalty. This model is being tested from January 1st, 2016
to December 31st, 2020. All providers in the 67 selected geographic areas will be
required to participate in this bundled payment.19
UnitedHealthcare’s Cancer Care Payment Model
An example of a bundled payment in the private sector is UnitedHealthcare’s Cancer
Care Payment Model. The pilot program for this bundled payment from 2009 to 2012
showed a 34% reduction in total costs while improving quality. The bundle is a single
episodic payment provided at initial visit based patient data and diagnosis. All drugs and
treatments are reimbursed using the average market price of chemotherapy drugs.
Furthermore, hospitals proactively provide health data to UHC for all patients diagnosed
with lung, colon, or breast cancer. Since then, 550 physicians from 5 medical centers
have joined the program. Although the initial pilot program was not meant to uncover
why the bundled payment reduced costs, the initial analysis suggests that the cost-
saving came from reduced hospital stays, not lower drug costs. In fact, the pilot program
found the cost of chemotherapy treatment actually increased, but had a shorter
duration.20
The emergence of bundled payment models are forcing health systems to begin the
journey to reorganize their care models. For providers to be able to compete in the
bundle payment world, they are going to have to develop care pathways and
standardize treatments, which means huge changes for providers, health systems, and
medical device and pharmaceutical companies.
| Value Based Healthcare Strategies | Georgetown University Student Consulting Team
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SECTION C: RECOMMENDATIONS FOR STRATEGY DESIGN,
BUSINESS PLANNING, AND OPERATIONAL ASSESSMENT
The preceding sections explored several ways in which the ongoing shift to value is
forcing industry stakeholders to redefine how they interact with each other in the market.
The future state of the industry will likely be more consolidated, with fewer members
seeking their share of decreasing profit margins. Industry participants will seek every
channel, both market and nonmarket, in their attempts to remain viable in the system.
The immediate necessity will be for companies to remain profitable. Over the long term,
they will need to constantly reassess the ways in which they create value for all
stakeholders of the healthcare system. If participants cannot demonstrate their value,
they will be subject to financial penalties, scrutiny, and legislative attacks from the other
stakeholders who feel they are bearing an outsized proportion of risk. Below, we have
compiled a list of six recommendations for how industry participants can maintain their
business during times of rapid change. They consist of direct action items to be
undertaken by The Kinetix Group in service of their clients, broad recommendations
TKG can make to their clients, and long term policy goals that may better align the
industry and expedite the shift to value.
Recommendation One: Pharmaceutical best practice forums.
We recommend that The Kinetix Group engage with its biotechnology and provider
clients in order to create forums in which best practices for medication compliance can
be shared between providers. As provider reimbursement becomes increasingly tied to
outcomes, pharma will feel pressure to get patients to follow their medical advice.
Pharmaceutical companies currently have very little motivation to ensure a patient takes
the entire course of his prescription as long as the treatment is paid for in advance. If
providers are going to be held accountable for the outcomes of their patients without
being able to influence patient compliance, it is likely that they will push back on the
pharmaceutical industry in order to make them share the risk that comes from patient
noncompliance.
While our research found no indication that pharmaceutical companies are going to be
subjected to cost controls or risk sharing under the current value-based models for care,
the possibility exists for such a model to emerge in the future. Several factors are
preventing this in the short term. Medicare is currently forbidden from negotiating drug
prices, which prevents any type of risk sharing model experiment that might
demonstrate the efficacy of such a model on lowering drug prices. Additionally, the
biotechnology industry is far more unified than the provider industry, which gives an
| Value Based Healthcare Strategies | Georgetown University Student Consulting Team
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advantage to biotech in their ability to lobby Congress to prevent such measures.
However, providers are going to see an increase in their lobbying power as hospitals
and outpatient clinics continue to coalesce into larger networks. It is probable that
sometime in the near future, providers will have the ability to lobby Congress for
favorable legislation at a level equal to that of the biotech industry. In order to dissuade
the provider community from pushing for this legislation, the pharmaceutical industry
should take a proactive approach to enable providers in enforcing patient compliance.
Pharmaceutical companies have the resources to conduct a wide scale study on what
techniques have been successful in communicating with patients. TKG should
encourage their pharmaceutical clients to conduct industry research on which doctors
have the highest success rates in patients taking their entire course of treatment, and to
hold conferences in which the providers who have had the greatest levels of success
can be compensated to teach their strategies to other providers.
Recommendation Two: Explore cost sharing strategies between payers in order
to engage outlying providers in value-based models.
Small providers with low numbers of Medicare patients, greater numbers of payers
among their patient population, and/or undeveloped EHRs are commonly left out of
alternative payment models. Blue Cross Blue Shield Louisiana describes the following
strategy: “In the initial year, Blue Cross focused on engaging and enrolling those
primary care – general medicine, internal medicine and family practice – practices that
treat higher numbers of Blue Cross members.”21 Given the startup costs that come from
enrolling a provider’s patients into a new payment model, insurance companies will
show reluctance to include providers with lower numbers of their patients. Providers
without modern EHRs are similarly left out of value-based initiatives. Furthermore, the
payers who institute these quality initiatives create an opportunity for other payers to
“free-ride,” as these initiatives modernize and streamline the workflow for the provider’s
entire patient population, not just the patients who are enrolled with the insurance
provider sponsoring the initiative. If payers were to share in the costs of implementation,
it is likely that they would be able to include previously ignored providers in their new
quality initiatives.
The Kinetix Group should explore the creation of a provider database that lists all
primary care providers by the patients they have enrolled in various insurances. With a
better understanding of how the patient population is divided among payers, insurance
companies can devise an equitable strategy for instituting these new initiatives, and will
find it more financially feasible to engage with previously uninvolved providers.
| Value Based Healthcare Strategies | Georgetown University Student Consulting Team
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Recommendation Three: Encourage late-adopter providers to develop value-
based models.
We suggest that The Kinetix Group work closely with providers who are slow to shift
their care model from volume to value. As recent policies and marketplace regulations
have shown, and based on The Department of Health and Human Services’ goal of
tying 85 percent of all Medicare payments to quality or value by 2018 and 90 percent of
all Medicare payments to quality and value by 2019, all providers will have to adapt.22
Specifically, TKG should work with these providers to identify which quality measures
they are fittest to report and which quality measures need the most improvement.
Furthermore, TKG should ensure that these providers have the appropriate and
approved means to report these quality measures, whether that is through their EHR
system, Medicare claims records, or another reporting method. TKG should also help
these providers and systems adapt post-acute management systems, such as
telehealth and contracts with specific long term care facilities, to better manage risks. If
up to 9% of providers’ reimbursement will be subject to MIPS after 2021, concentrating
on these metrics offers the greatest return on investment.
A key to successful adoption of these models requires creating a “burning platform” for
change. It is imperative for practice staff to understand why the shift from volume to
value is happening, recognize the importance of value for both their patients and their
practice, and identify existing organizational mechanisms to coordinate care and
improve value.23
Recommendation Four: Encourage providers to be more patient-centered: Better
use of patient-reported outcome measures (PROMs) & health behavior changes
for incoming greater patient involvement.
We suggest that The Kinetix Group encourage providers to reassess how they integrate
the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS)
survey, as it is one of the core components in the recent shift to payment & quality of
care is patient-centeredness. The Kinetix Group must make providers aware that
greater patient involvement is key to future success. We recommend encouraging
providers and clients to involve patients directly in the discussions around and decisions
in implementing care pathways. By involving patients in these conversations, it will likely
uncover barriers not known to the provider and thereby increase patient compliance
with the improved pathway.
The Hospital Value-Based Purchasing program began incorporating HCAHPS in 2010.
It was expanded to discharges in October 2012, and accounted for up to 1.5% gain or
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loss of payments from Medicare in fiscal year 2015 for providers and will shift upward to
2% of total Medicare reimbursement in 2017.24 With a growing amount of revenue at
stake based on these scores, strategic programs must be proposed for providers such
as providing financial incentives to employees & publicizing the financial result of
HCAHPS scores within the hospital.
Recommendation Five: Create Cost of Care Episode Report Cards by provider
and care center to benchmark against each other.
Hospitals and providers will need to conduct a deep dive into their costs in order to
optimize treatment care paths. By developing a standardized cost-tracking report card,
TKG will give providers transparency around the large cost drivers per patient by
diagnosis and determine variation in these costs among providers. By using this data to
create a centralized database, TKG will be able to provide a benchmarking database for
clients which will allow better working relationships between companies involved in an
entire patient’s episode of care. This will also allow comparison of cost per DRG linked
to individual patient outcomes, which will help TKG provide best practice guidance to
other practices.
Moving forward, care paths will likely force a reduced number of vendors/SKUs and
drugs that providers prescribe and by using this data, TKG will be able to proactively
identify which pharmaceuticals and interventions have the most value in specific care
episodes. They will then be able to leverage that knowledge with pharmaceutical and
medical device clients so they can increase sales and possibly even help create
bundles with these items. Historically, physician and consumer preferences have been
the deciding factors for the supplies and technique chosen to treat patients. However,
the regulatory change is forcing a different approach and one in which will touch all
segments of the value chain, squeezing out non-value added activities and eliminating
waste. This means touching suppliers of products and medical supplies.
Recommendation Six: Lobby Congress for tax incentives for private insurers to
implement and coordinate with each other in implementing alternative payment
models.
The CMS Alliance to Modernize Healthcare and the Healthcare Payment Learning
Action Network are the two main government sponsored initiatives for shifting the
private sector to value-based models. Together, they offer an opportunity for the
industry stakeholders to discuss best practices, but provide few incentives to do so. As
long as insurance companies are competing to capture a larger market share or attract
investors to higher profit margins, they will be reluctant to share best practices or trade
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secrets that are a source of competitive advantage, and these forums will not enable the
flow of information that is required to harmonize the industry. Insurance companies
should be compensated for developing proprietary payment models. While The Kinetix
Group is limited in its power to lobby Congress, it may be in a position to offer
recommendations to its payer clients on how they can more effectively communicate the
necessity of tax incentives in advancing private value-based models.
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18
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