Care and payment models: The right fit

Developing health care delivery and payment models to achieve the Triple Aim will be challenging.

Changes in care delivery may include new partnerships among payers, providers, government and the community and across the continuum; greater use of technology to empower clinicians and patients with increased access to information; and a relentless focus on high reliability and safety. Hospitals and health care systems will have to develop care delivery systems focused on the whole person while improving the health of the communities they serve.

All this must be done in the context of a payment and financing system that rewards high-quality outcomes and individual and population health.

Multiple approaches

Transformational change that is occurring in the health care system focuses on value, meeting the patient’s needs while promoting good health. Many hospitals and health care systems are moving to a value-based care system focused on the Triple Aim — improving the patient experience of care (including quality and satisfaction), improving the health of populations and reducing the per capita cost of health care.

Because market dynamics, geography, diverse populations and community needs all shape how hospitals design a care system and adopt payment models, there is more than one approach to transformation. Critical to success, though, is that hospital and health care system leaders select clinical and payment models that work best for their organizations and communities.

This excerpt from an American Hospital Association report, “Care and Payment Models to Achieve the Triple Aim,” produced jointly by the 2015 AHA Committee on Research and 2015 AHA Committee on Performance Improvement, addresses how hospital and health care system leaders can develop new care delivery systems and innovative new payment methods that best meet the needs of their organizations and communities.

Care principles

The 2015 AHA Committee on Performance Improvement identified seven principles for developing a care delivery system to achieve the Triple Aim. Hospitals and health care systems are situated in different markets and have different community needs, and the principles are adaptable to each market while providing a consistent foundation for improved care delivery.

Redesigning care delivery requires hospitals and health care systems to disrupt their conventional thinking and reimagine care from the patient’s perspective. New care delivery systems will have to be woven into the fabric of local communities and the lives of patients and families.

Though the principles outlined here begin to move hospitals and health care systems forward in this changing environment, additional forces are at play, changing and disrupting our current vision of the delivery system. With the rise of consumerism, retail and digitalization, a new stage of health care may be emerging — where individuals have more control over their health care choices based on information and transparency and have greater financial incentives to choose more appropriate care for their needs.

This evolution will not occur evenly. Some patients will continue to receive the majority of their care in health care facilities, while others will utilize community settings and retail outlets. Other individuals will embrace technology, directing care themselves through constant streaming of their personal health data by monitoring devices and convenient web- and video-based encounters, and become quantified, informed purchasers of their health care. The movement toward the quantified self, where technology is used to gather data on daily life, allows individuals to track the information they value for their health and health care.

Developing an ideal care delivery system model is not practical, as each health care market is unique. Instead, identifying foundational strategies on which to build new care delivery systems would be a more pragmatic approach to assisting hospitals and health care systems as they confront the rapidly changing future. This approach allows hospitals and health care systems to be adaptable and flexible in using care delivery models to meet patient and community needs.

Here are the outlines of the Committee on Performance Improvement's seven foundational principles:

Principle 1: Design the care delivery system with the whole person at the center.

System design must start with the whole person, putting each person’s needs and ease of access to care before the needs and convenience of the system and its clinicians. When that person is the patient, the design must also consider the needs of families and caregivers. In addition, the system must be prepared to address patients’ cultural needs and ensure cultural-competency training throughout the health care organization. Clinicians must understand patient and consumer behavior and motivation and adapt or partner with others to meet those needs.

Principle 2: Empower people and the care delivery system itself with information, technology and transparency to promote health.

For people to be truly accountable for their own health, they need to be empowered, which means receiving complete information, supported with technology and communicated transparently. Technology should be used to support patients and communities in complying with healthy lifestyles and medical treatments. Technology can also be employed to remove patient barriers, overcome delivery system design flaws and make it easier for patients to achieve their desired results.

Beyond patient engagement, studies have begun to focus on “activation” to understand patient involvement in their care. A recent Health Affairs article, “When Patient Activation Levels Change, Health Outcomes and Costs Change, Too,” suggests that an activated patient “has the motivation, knowledge, skill and confidence to take on the role of managing their health and health care” and that those patients maintain healthy behaviors and have better outcomes. The article cautions that while technology can help facilitate activation, good communication between providers and patients is critical to driving full engagement and activation.

Principle 3: Build care management and coordination systems.

To be effective, care management and coordination systems must be built across the entire health care system and community. As hospitals and care systems move toward population health management and work to align primary and preventive care resources, a robust infrastructure will be essential for success. Hospitals and health care systems will need to establish and nurture strong linkages to social service agencies to ensure better care management and coordination across the continuum, particularly to address community health needs.

Principle 4: Integrate behavioral health and social determinants of health with physical health.

For care delivery systems to improve the overall health and well-being of each patient, behavioral health and social determinants of health must be integrated with physical health. The design of the health care system must include resources and services to provide support for behavioral health and address the social determinants of health, particularly in diagnosis, treatment and prevention:

To achieve a true patient-centered care model, integrating treatment plans developed by behavioral health clinicians, social services and other clinical staff is essential. Developing a comprehensive care plan can create a sense of well-being necessary for achieving health.
Access to behavioral health care must be integrated into the community, in concert with providing all other care.
Clinicians who understand and embrace the whole-person care model must take responsibility for all health outcomes — and carry out and adjust care not only for the individual patient but also for the entire patient population for which they are accountable.
Protocols and shared workflows need to be established for nearly all processes of integrated care and implemented consistently. Primary care physicians need to receive training on screening patients for behavioral health issues.
Extending the care delivery system by increasing community partnerships allows the system to address the social determinants of health and care needs in the community.

Principle 5: Develop collaborative leadership.

A new care delivery system should include collaborative leadership structures with clinicians and administrators, along with a focus on leadership diversity. Creating collaborative leadership structures establishes shared goals and values that develop trust and reflect patient needs agreed upon by all leaders. Collaborative leadership clearly identifies roles and aligns responsibilities to optimize efficiency and engage patients in their care. Additionally, a multidisciplinary, collaborative structure is needed for discussing and making joint decisions. Clinical insights must be integrated throughout the continuum of care management.

Principle 6: Integrate care delivery into the community.

To effectively provide comprehensive health care, hospitals and health care systems must be integrated into other aspects of community life. Collaboration with other vital community services and resources is essential to achieve optimal health outcomes. Connecting to existing community organizations and groups will create an enhanced delivery system capable of addressing the multiple factors that influence health and define health outcomes.

Integration of care delivery into the community involves reaching out to a wide audience of community agencies that provide a range of needed services. These services can be directly health-related but also include social and community services such as housing, safety, education and nutrition. The AHA report “Redefining the H” outlines three actions that hospitals and health care systems should take:

Appropriately allocate resources and define a shared responsibility for improving community health.
Bring insight, perspective and support from the community into the hospital boardroom as hospital leaders consider paths for transformation.
Enter into strategic partnerships for improving community health and health outcomes.

Principle 7: Create safe and highly reliable health care organizations.

The principles of high reliability should be incorporated into any health care redesign. By creating a culture of high reliability, hospitals and health care systems can better predict and manage risk and prevent potential catastrophic failure.

Payment models

The 2015 AHA Committee on Research discussed several new payment models that have emerged as the health care field transforms to a value-based care system. All of these models derive from one of three fundamental payment approaches:

Service-based payment, which is based on the fee-for-service mechanism.
Bundled-based payment, which aggregates different services and providers, such as hospitals, physicians and post-acute providers bundling costs for hip replacements.
Population-based payment, which seeks to aggregate total care and costs across the continuum, such as an accountable care organization for a defined population.

Additionally, risk adjustments and incentives that drive care quality and efficiency include:

Patient safety and experience.
Teaching status.
Socioeconomic adjustment of the population served.
Support for transitioning to a new model.

Hospitals and health care systems must evaluate which model to pursue while understanding that a variety of models may be implemented across the care continuum. While service-based, bundled-based and population-based payment models all are options, critical to any model are the incentives related to value, teaching, socioeconomic status and transition support. Depending on hospital type and community needs, organizational leaders can pursue a mix of payment models.

The size of the population served is an important factor in determining the payment model. For example, smaller populations are not suited for greater risk-sharing payments such as in a population-based payment model.

The inclusion of quality, safety and efficiency incentives means all models will serve as a fee-for-value payment model. Bundled, population-based and service-based payments can be deployed by hospitals and health care systems to meet the Triple Aim. Integrated incentives that focus on quality lead to successful payment models.

Payment framework

As a hospital or health care system moves from service-based to population-based payment, there is increased financial risk, increased integration of services and additional infrastructure needed to integrate care delivery. Currently, many hospitals and health care systems will use a mixture of payment models to support their new care delivery systems.

Payment frameworks can take many different forms in terms of how hospitals and health care systems are paid. For example, in Maryland, providers are paid in a fee-for-service model, although payments are capped. These types of payment systems differ from an overall payment model because of how the hospital is reimbursed.

Each emerging payment model has challenges and opportunities for hospitals. These challenges and opportunities directly impact which payment models are the best fit for the hospital.

Service-based payment models are based on fee-for-service and are primarily intended for small hospitals. Lack of sufficient patient or population volume is the biggest challenge in moving beyond a fee-for-service payment mechanism. The challenges with this model are the difficulties in containing costs and in enabling a population health focus. However, incentives for quality can significantly impact the delivery model.

Small hospitals may be able to form alliances so they can increase their population size and take on bundled- or population-based payment models. Innovative partnerships among smaller health care organizations — through affiliations, joint ventures, mergers and other vehicles — may provide the scale needed by smaller hospitals to adequately manage financial and clinical risk.

Bundled-based payment models may serve as a glide path to larger financial bundles, but these models require sufficient volume for specific conditions or diseases. Bundles also encourage coordination with other providers. Bundled payments can utilize a fee-for-service or capitation payment mechanism.

Population-based payment models require a substantial patient population, substantial infrastructure to manage care and the ability to provide a continuum of services through partnership or owned services. Population-based models can utilize fee-for-service or capitated payments and provide the greatest incentive for a population health and cost management focus.

Hospitals

Because of the large variety of hospitals, different payment models fit certain types of hospitals. Some hospitals may not significantly move along the explained payment continuum, but there will be adjustments and incentives for all payment models. Smaller and rural hospitals will have greater difficulty moving along the payment continuum. Therefore, some form of fee-for-service or bundled payment is more likely. Larger hospitals will be able to transition further along the payment continuum due to greater volume and resources.

Small and rural hospitals may be able to participate in more population-based payment models through different collaborations. They may be able to partner — in an affiliation, joint venture or merger, for example — with other like organizations or with larger health systems that may be more invested in population-based payment models, such as accountable care organizations. These collaborations provide small and rural hospitals with the infrastructure and volume to effectively manage financial and clinical risk that is not feasible with a small population.

Short-term and long-term policies should be implemented to assist hospitals and health care systems in implementing new payment models. These policies are targeted at stress points that can impede the movement from volume-based to value-based care. Stress points include obtaining available data; supporting the infrastructure and bridge between payment models; and getting better tools and methods, such as risk adjustment, that more accurately reflect the intended design of the payment models.

Excerpted from “Care and Payment Models to Achieve the Triple Aim” by the American Hospital Association Committee on Research and AHA Committee on Performance Improvement. To read the full report and access related resources, visit www.aha.org/research/cor/care-payment/index.shtml.

Making your move

Here are some actions health care systems can take as they move toward new payment and delivery models:

Short-term policy recommendations

Develop time-limited, bridge payment models to assist hospitals transitioning to value-based payment mechanisms. Hospitals and care systems will need assistance as they move between payment models that may have differing incentives.
Increase access to actionable information related to care, payment and cost. Ensuring open access to information from public and private payers will allow health care organizations to make more informed decisions regarding their care delivery.
Dedicate funding that supports critical access hospitals and small/rural hospitals. These types of hospitals will need additional support due to funding and infrastructure limitations.
Consider upfront infrastructure development costs. Aligning new care delivery services to adjust to different payment mechanisms and community needs will require infrastructure assistance.
Establish better, more streamlined quality measures. Metrics such as those outlined in the National Academy of Medicine’s (Institute of Medicine’s) Vital Signs could be used for quality measures applied throughout the U.S. health care system.
Provide additional incentives for joining accountable care organizations and bundled payment pilots. Incentivizing hospitals and health care systems to join these transformational payment models could accelerate a move toward population health for U.S. hospitals.

Long-term policy recommendations

Ensure appropriate blending of different payment models. Hospitals and health care systems will need more guidance on how to properly blend different payment models.
Set better payment rates for bundled payments and global budgets. As more hospitals move to bundled- and population-based payment models, it will require setting better payment rates that are reflective of historical performance, not historical performance minus a discount. Additionally, new clinical delivery models and evidence-based practices will be needed. Payment models will become more complex and thus require more investment in ensuring accuracy of payments.
Establish better risk adjustments for payment models. More precise and detailed risk adjustments will be needed as focus on value in health care becomes more in-depth.
Identify payment policies for high-cost/high-risk utilizers. Because a high-cost segment of the patient population will always exist, hospitals and health care systems will need additional clarification on how reimbursements are dispersed.
Offer incentives for healthy patients. Providing incentives for hospitals and health care systems to keep healthy patients healthy will lead to long-term positive health outcomes.