New payment models: Are you ready?

When describing how care delivery differs under value-based payment versus traditional fee for service, Douglas Pogue, M.D., points to the way physicians’ mindsets are changing in the BJC Accountable Care Organization.   

“Ten years ago, physicians would have said their job was to listen carefully to patients, accurately diagnose what’s wrong, and give the right treatment and advice — but it was up to the patient to follow that advice,” says Pogue, president of BJC Medical Group, a part of BJC HealthCare in St. Louis. “What’s different about the ACO is that doctors are now responsible for whether patients get better, not simply whether they get the diagnosis right or give the right treatments.”

Trustee talking points

  • Value-based payment systems are a key part of managing population health.
  • Health care organizations need to prepare the ground before they take on arrangements such as Medicare's Advanced Alternative Payment Models.
  • This can be done in a number of areas, including care and delivery models, data and finance.
  • Trustees and leadership should work together to assess whether their hospital or health system is ready to take on value-based payment.

The BJC ACO participates in the Medicare Shared Savings Program, Track 3, which is one of Medicare’s 11 Advanced Alternative Payment Models [see sidebar below]. Advanced APMs are the optional, progressive track of the Quality Payment Program, Medicare’s new physician payment program. Payment details vary, but most Advanced APMs require providers to assume downside risk for a Medicare population, in addition to improving quality. Providers must pay back a portion of any Medicare spending that exceeds a predetermined target for the population. On the upside, providers stand to share in any savings achieved, as well as a 5 percent incentive payment.

Under these arrangements, providers are moving toward assuming risk for the total cost of a patient population, including outpatient, inpatient and post-acute services. “There is a new push to take risk that was traditionally held by insurance companies and move it to providers,” says Pamela M. Pelizzari, senior health care consultant at Milliman.

Instead of being wary of this challenge, the BJC ACO board sees population health management as core to the health system’s mission and strategic goals. “We view being responsible for high quality and the total cost of care as something that is fundamental to what we stand for,” says Sandra Van Trease, BJC HealthCare group president and president of the BJC ACO.

While supportive from the start, BJC HealthCare trustees became believers when they saw the BJC ACO’s quality composite score improve to a high of 97 out of 100, up from the low 80s. “They were convinced we are doing the right thing for patients,” Van Trease says. The BJC ACO has also saved Medicare more than $16 million over five years but has not yet cut costs enough in any one year to reap shared savings.   

Van Trease is not shy about the challenges involved in taking on downside risk. “This is even harder than it looks,” she says. “In many respects, you have to fundamentally change the approach to patient care and the workflow of clinicians.”

Core capabilities

While managing a patient population is new to many health care organizations, this is no longer uncharted territory. “We can point to successful models, and we now know what works and what doesn’t,” says Christopher Stanley, M.D., director of health care practice at Navigant. As examples, he cites early adopters like Geisinger Health and Intermountain Healthcare.  

But time, talent and resources are needed. “This is not like flipping on a light switch,” Stanley says. “It usually takes one to three years of capability development and expansion before an organization would want to take on risk, especially downside risk.”

Among the various skills needed, the following five capabilities are key to success in these arrangements, say leaders involved in this work:  

1. Clinical integration

Clinical integration is both a noun and a verb, Stanley explains. As a noun, clinical integration refers to the legal frameworks set up to encourage providers from across the care continuum to collaborate around improving value. Structures vary from affiliations, such as ACOs or clinically integrated networks, to mergers that bring hospitals under the same ownership roof as physician groups and post-acute facilities.   

“You need these structures, but it’s the verb side of clinical integration that is going to drive success,” Stanley says.

The action in clinical integration revolves around reducing unwarranted variation in care. One way providers do this is by developing care pathways, which outline a standardized patient path through a treatment course based on evidence-based guidelines. As Stanley says, “If I’m having a joint replacement, what needs to happen on Day 1 versus Day 20 versus Day 89?”

Because every patient is unique, cancer teams at Ballad Health also use patient care plans to help coordinate care. The 21-hospital system, headquartered in Johnson City, Tenn., was formed in February after the merger of Mountain States Health Alliance and Wellmont Health System. As a participant in Medicare’s Oncology Care Model, a specialty payment model, Ballad Health is required to have care plans for chemotherapy patients that cover treatment goals, psycho-social health needs and other provisions.  

Sue Lindenbusch, vice president of oncology services for Ballad Health, stresses that patients actively participate in developing these plans. “Part of this is about sitting down with the patient and asking: ‘What’s important to you? What do you want for the rest of your life?’” she says.

All members of the cancer team continuously reference and update the care plan, ensuring that everyone is focused on the same goals. “These are multidisciplinary treatment plans that include everybody in the discussion,” says Susan Mole, director of oncology at Ballad Health’s Johnston Memorial Hospital, Russell County Medical Center and Smyth County Community Hospital. “For example, a breast cancer patient may have surgery, radiation, chemotherapy, and then be on oral medications. Our goal is to move the patient gracefully through that sequence.”

2. Data analytics

One benefit of participating in Medicare payment models such as OCM is getting access to Medicare claims data on the services that patients seek outside the health system, which is critical to managing total spending for a population. “This allows us to look at care on a much broader basis,” Mole says.

While there is gold to be found in claims data, however, it takes mining. “It really is a data dump, quite an unwieldy database,” Mole says.

To put the data in a readable, actionable format, Ballad Health partnered with a vendor. Now the Ballad Health team can drill down into Medicare Part D drug claims to identify which patients are not filling prescriptions for oral chemotherapy drugs. Evidence shows that adherence to these drugs improves health outcomes, but noncompliance is common. “We are changing the way we educate patients and looking for ways to break through any obstacles,” Mole says. “There may be financial challenges or, if a medication doesn’t suit a patient, we may consider another medication in the same class.”

As a patient-centered medical home, Providence (Ore.) Medical Group places a big emphasis on prevention and chronic care management. To help care teams track whether patients receive recommended screenings and other care interventions, the organization has developed disease-management dashboards, deploying a module available in the organization’s electronic health record.

“Having this sort of dashboarding capability is fundamental to doing population health,” says Doug Koekkoek, M.D., chief executive at PMG, which is part of Providence Health & Services, an integrated delivery system headquartered in Renton, Wash. “It allows you to look at your diabetics, your patients on anticoagulants or your pediatric immunizations and see who needs certain interventions.”

PMG is in Medicare’s Comprehensive Primary Care Plus Model, an Advanced APM for medical homes [for details on the medical home model, see the sidebar below]. One of the APM’s goals is to encourage physician practices to prevent unnecessary hospitalizations and other utilization. Toward this end, another PMG dashboard compares utilization patterns across different clinics or providers in the group practice. Dedicated meetings, called utilization huddles, are spent discussing opportunities for reducing unnecessary specialist referrals, imaging and other services.  

Koekkoek believes that curtailing utilization is key to the value equation. “I often see hospital execs focused on unit costs, or how they can trim staff and overhead and lower acquisition prices for supplies. That unit-cost production mentality is going to be inadequate for solving health care’s affordability crisis. We have to do less, not just make our unit cost less.”

3. Financial-risk management

“The ability of providers to succeed under these types of arrangements is heavily tied to their understanding of financial risk and how to manage it,” Pelizzari says.

While some health systems have experience with risk-based payment contracts, others enter these arrangements with blinders on, Pelizzari says. “They might believe, ‘If I manage care better, I will succeed and get paid extra.’”

But the financial reality is more complicated and requires expertise in various insurance approaches, including how spending targets are set and how payments are adjusted for uncontrollable factors such as a high percentage of very sick patients in a population.

For instance, an APM spending target may be based on a provider’s historical spend for a patient population or on the average spend among a peer group of providers. These different ways of setting the benchmark may predispose providers to financial losses or gains. In general, high-cost providers perform better against benchmarks based on their own historical spend. In contrast, it’s easier for low-cost providers to outperform higher-cost peers than to further decrease their already low costs.   

Pelizzari advises hospitals to get their feet wet with financial risk management by participating in less risky APMs, such as those with upside risk only — or bundled payment arrangements focused on subsets of patients (e.g., joint replacement patients) — before taking on downside risk for larger patient populations.   

4. Care management

Another major investment needed for population health is care management, which involves providing extra assistance to high-risk patients. This process begins with another type of data analytics: segmenting a population by health risk. Predictive analytics tools sort through EHR and claims data to identify those patients most likely to need costly health care services in the near future. 

“Those patients who are the sickest and use the most resources account for between 30 and 50 percent of costs,” Pogue says. “So, you want to help these patients avoid high-cost centers like the emergency room.”

The BJC ACO focuses on two care management functions: helping patients with chronic illnesses avoid complications; and connecting with patients right after a hospital discharge. “If we can keep patients healthy and well when they’re in their homes, then that’s better for the patient, and we spend less to care for them,” Pogue says.

BJC HealthCare has invested in a care management team of registered nurses, social workers and health coaches. The nurse case managers oversee the care of patients with complex, chronic diseases, while social workers address socio-economic barriers, such as a lack of transportation to provider appointments. Health coaches work one on one with patients to carry out discharge instructions or make healthy lifestyle changes.

Yet the BJC ACO, which manages the care of more than 40,000 patients, struggles to keep up with the demand for care management. “It is very expensive to hire a huge team of care managers to continually call and check on patients,” Pogue says.  

To address this challenge, the BJC ACO adopted a phone/text messaging solution. The software program automatically calls or texts patients who have agreed to use the service. Patients are asked two to three questions based on their condition, such as: “Are you feeling any worse today than yesterday?” “Are you short of breath?” “Do you have chest pain?”

The technology then reads the patients’ responses and alerts case managers whenever a patient reports a problem. “It allows people to be monitored at home without expensive monitoring equipment,” says Pogue. “And it helps our care management team focus their time on the patients who need them the most.”  

5. Team-based care

The adoption of a team-based model of care has been the most visible change since PMG transitioned to a medical home model, Koekkoek says. “Gone are the days of one doctor, one nurse working alone in a silo.”

At PMG, teams of two physicians, one advanced practice clinician (either a nurse practitioner or physician assistant) and nurses work together to manage care for a panel of patients. These teams are assisted by team coordinators, case managers, clinical pharmacists and behavioral health providers.

The physical layout of clinics also has been redesigned to make it easier for everyone to consult and coordinate care. Office walls have been torn down or moved to create bullpens, or centralized work areas for team members. 

“The transformation has been pretty dramatic,” Koekkoek says. “Before, some of our doctors were practicing alone together. They were in the same building, but they didn’t really see each other as partners. Now, they’re working together. They’re saying, ‘What would you do with this condition?’ ‘Can you show me how you do that shoulder injection?’ The camaraderie has really spilled over into professional engagement and satisfaction. Our team model doesn’t take away all the pressures of medicine, but it is making the practice of medicine more enjoyable.”  

PMG is also increasing patient access to team members via alternative care approaches, including virtual visits over Skype and the opening of local retail clinics. “Not every encounter has to be an office visit,” Koekkoek says. “We are managing patients with low-acuity urgent needs, like sinus infections or sprained ankles, either at our storefront settings or virtually. Our patients love this because it’s so convenient.”

Committed leadership team  

While moving toward risk-based population health management requires a lot of hands-on work and development, it also requires patience and commitment from senior leaders. “One of the most important capabilities that an organization needs is the will to take on this change,” Van Trease says. “It requires leaders to invest in something for which it is difficult to see an initial return.”

While it can take years to accrue savings or additional volumes, the payback for patients is more readily identifiable. “This is very patient-centered,” Koekkoek says about his organization’s involvement in the CPC+ medical home model. “It’s an ideal framework for us to deliver on our promise to our patients while at the same time lowering health care spending. That’s why it’s easy to get behind this work.”

Maggie Van Dyke is a contributing writer to Trustee.

Medicare Advanced Alternative Payment Models

Medicare has identified 11 Advanced Alternative Payment Models, which can be divided into three types of arrangements.

Accountable Care Organization models: While the details of the ACO models listed vary, they all involve two-sided financial risk. If Medicare spending exceeds a predetermined target, the ACOs must cover a portion of the extra expenditures (i.e., downside risk). In exchange, the ACOs get a 5 percent incentive payment and an opportunity for shared savings (i.e., upside risk). 

  • Medicare Shared Savings Program ACO, Track 2.
  • MSSP ACO, Track 3.
  • Medicare ACO Track 1+ Model.
  • Next Generation ACO.
  • Vermont Medicare ACO Initiative.  

Episode payment models: Also known as bundled payments, episode payment models involve taking on risk for the Medicare spend of beneficiaries who have a certain disease (e.g., cancer) or receive certain procedures (e.g., joint replacements). Like the ACO models, these models involve two-sided risk. Because the population is smaller, however, the financial risk is smaller, too. 

  • Bundled Payments for Care Improvement Advanced Model.  
  • Comprehensive Care for Joint Replacement Model, Track 1-certified electronic health record technology.
  • Oncology Care Model, two-sided risk.
  • Comprehensive End-stage Renal Disease Model, large dialysis organization.
  • Comprehensive ESRD Model, non-LDO, two-sided risk.

Medical home model: A medical home is a team-based, patient-centered approach to care that focuses on improving care coordination and access as well as quality and safety. While the medical home model does not involve downside risk per se, it encourages providers to pay attention to spending. There are two tracks of the medical home model. Under both tracks, medical homes receive a per member per month care management fee in addition to being paid on a fee-for-service basis. In the more advanced Track 2 version, however, a portion of the fee-for-service payment is capitated, or a fixed amount.

  • Comprehensive Primary Care Plus Model, Tracks 1 and 2

— Maggie Van Dyke

Trustee takeaways: Questions to consider about value-based payment

“It’s important for trustees not to think of Advanced Alternative Payment Models strictly as some type of government hoop to jump through,” says Christopher Stanley, M.D., director of health care practice at Navigant. “It’s important to place these into the larger tectonic shift (toward value) underway in the health care industry.”  

Stanley recommends that hospital trustees and senior leaders consider the following questions when discussing Advanced APMs and other value-based payment arrangements:  

  • What are the capabilities we need to be successful in these programs, and how can we build or buy these competencies?
  • Do we have the right people or do we need to bring in new or additional talent?
  • What’s the right time for us to enter an Advanced APM or other risk-based payment arrangement? When do we need to start preparing?
  • Should we first participate in less financially risky APMs, such as gain-share models without downside risk, as a way to learn about population health management before entering an Advanced APM?
  • Over the next five to 10 years, will we see a decrease in utilization of certain services and an increase in other services? How do we need to rightsize our delivery system to successfully meet the needs of this changing health care marketplace? What services do we need to build, buy or affiliate with?
  • How might we need to reorganize our organization, not only structurally but also to incentivize the three legs of value: improving the health status of patient populations, optimizing the patient experience and lowering the total cost of care?

— Maggie Van Dyke