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Health Care

Changing The Way Providers Are Paid

By Terry Reilly, posted Nov 2, 2018
NHRMC Community Paramedic Jim Mistovich checks the vital signs of patient Lawrence Cole, 84, who was recently hospitalized with pneumonia. (photo by Michael Cline Spencer)
Do more work, make more money. Not a bad approach, ex­cept in the changing world of health care. For decades, the health care industry has motivated doctors and hospitals to order more tests, do more procedures and manage more patients to make more money. It’s called the fee-for-service model.
 
With U.S. health care costs consuming 18 per­cent of the country’s gross domestic product in 2016, a new approach was needed and fast. Countries similar to the U.S. averaged only 11.5 percent, according to a Journal of American Medi­cal Association 2018 report.
 
The U.S. spent 8 percent on administrative costs, $1,443 per capita on drugs and $218,000 on average for salaries for generalist physicians. Nations similar to the U.S. spent only 1-3 percent on administration; drug costs ranged from $466 to $939 per person; and generalist physicians’ pay ranged from $86,000 to $154,000.
 
The U.S. health care delivery system is almost twice as expensive as other developed countries. And the average life expectancy in the U.S. is last among comparable countries, according to a 2017 Kaiser Family Foundation analysis.
 
To attempt to turn things around, the U.S. is moving away from the fee-for-ser­vice model that pays based on the amount of health care services delivered.  
 
A value-based health care approach that pays providers for the health outcomes delivered is the emerging future.  
 
“Under value-based care agreements, providers are rewarded for helping patients improve their health, reduce the effects and incidence of chronic disease, and live healthier lives in an evidence-based way,” according to a recent article in The New England Journal of Medicine.
 
Medicare and Medic­aid also are driving the transition to a value-based approach.  
 
Wilmington-based Com­munity Care of the Lower Cape Fear (CCLCF) covers five local counties and is an affiliate of Community Care of North Carolina (CCNC). Patient admission rates are consistently 40-50 percent lower than non-CCNC Medicaid patients. CCNC has realized a four-year savings of nearly $1 billion for North Carolina using value-based princi­ples, officials report.
 
New Hanover Regional Medical Center has part­nered with Community Care of the Lower Cape Fear’s paramedics and care managers.  
 
Care is administered at home, keeping patients out of the hospital and lower­ing care costs.
 
“Paramedics can provide more hands-on clinical support that prevent hos­pitalizations and emergen­cy room visits as well as educate patients about their treatment plans,” said Lydia Newman, NHRMC’s ex­ecutive director of clinical integration. “Community Care of Lower Cape Fear care managers also engage patients in strategies for  self-managing their illness to prevent complications.”  
 
The Medicare Shared Savings Program (MSSP) is the largest val­ue-based payment model in the U.S. that includes over 500 Accountable Care Organizations (ACOs) with more than 350,000 providers caring for 10.5 million Medicare beneficia­ries in 2018.  
 
Under current MSSP rules, new ACOs are eligible to share savings with Medicare by achieving quality and spending goals.  
 
The opportunity is huge.  
 
In 2016, the government’s health care program included 34.8 million Medicare beneficiaries (Parts A and/ or B) and 75.1 million Medicaid recipients.  
 
NHRMC has participated in the Medicare Shared Savings Program since early 2016 and may participate in a Medicaid managed care solution in 2019.  
 
“We are considering applying to participate in Medicare bundled payment programs for certain proce­dures. We also have a few contracts that reward us based on improving patient quality scores,” Newman said.  
 
“Unsustainable costs, stake­holders’ push for value and federal government support for new pay­ment approaches” are driving the unavoidable move to a value-based approach, according to a 2015 report from Deloitte LLP. “The premise of value-based payments is to align physician and hospital bonuses and penalties with cost, quality and out­comes measures.”
 
But what is value-based health care?  
 
It’s a wide-ranging definition that has spawned a spectrum of value-based reimbursement arrange­ments. Financial incentives shift from pay for volume of work to payments based on quality and total cost of care results.  
 
Those incentives can include pay-for-performance in which pro­viders are tied to quality metrics for better clinical outcomes or bundled payments that give fixed amounts to providers based on clinical standards of care.  
 
To migrate to a value-based ap­proach, many providers have turned to ACOs.  
 
Locally, Wilmington Health was the first area health care provider to set up an ACO, Physicians Health­care Collaborative in 2013 and today consults with providers in other regions set up their ACOs.  
 
Like NHMRC, Wilmington Health plans to apply to participate in a Medicare managed care solution   in 2019, according to Kelly Schaudt, Wilmington Health’s chief operating officer of Physicians Healthcare Col­laborative. “Next year we may be in a two-sided risk model with Medicare. In addition, we are seeing more op­portunities to partner with payers on quality initiatives involving Medicare Advantage.”  
 
Schaudt said that value-based pay­ment with commercial payers should arrive soon, but payers are working on the right mix of incentives.
 
 “We don’t have bundled programs with payers, but we are implementing systematic approaches for patients with chronic conditions. We are working on seamless transitions and ensuring that they receive appropriate care,” Schaudt said.  
 
Nurse practitioners from Wilm­ington Health also visit high-risk patients at home after discharge to ensure quality measures are met.  
 
“We’re making sure we address any care gaps and patients receive timely care by seeing firsthand what the environment is for our patients,” Schaudt said.
 
NHRMC also created an ACO called Physician Quality Partners (PQP).  
 
“It’s a partnership between the hospital, our physician group practic­es and Intracoastal Internal Medi­cine, a local independent practice,” Newman said. “The hospital also employs a team of transitional care nurses to call the patients who are not managed by our practices post-hos­pital discharge to ensure that they understand their treatment plans.”  
 
Across the U.S., value-based success stories are being reported but not without problems.  
 
“Payers are finding the positive impact of value-based care as they scale these models – particularly episodes of care – and that’s starting to bend the cost curve in a significant way,” Carolyn Wukitch, senior vice president at Change Healthcare, said about a research report the health care technology company commis­sioned. “However, the demand to innovate at the pace of change is challenging payers. They lack satis­factory analytics and automation to better engage providers, operational­ize their models and assess effective­ness overall.”  
 
NHRMC’s move to value-based care is limited since the organization is “still engaged in fee-for-service payments with multiple payers,” Newman said. “There is very little flexibility to be reimbursed for new service delivery models. We are still rewarded mostly for the volume of traditional care delivered within our offices and hospital.”   
 
But value-care approaches are producing results nationwide.
 
A 2018 survey of 120 payers by Opinion Research Corp. for Change Healthcare found that value-based approaches were saving 5.6 percent on average along with 80 percent of payers reporting care quality im­provement.  
 
NHRMC reports improved care coordination, decreased hospitaliza­tion rates and readmission rates as a result of proactive patient follow-up.  
 
Novant Health, with facilities in Brunswick County, also is moving away from the fee-for-service model.  
 
“A health care system where quality, cost and patient experience becomes the economic driver more closely aligns with our mission to im­prove the health of our communities, one person at a time. We are eager to transition more towards value-based payment models,” said Hank Capps, senior vice president and chief operating officer of Novant Health Physician Network.   
 
Capps anticipates connecting with patients through non-traditional methods including e-visits, video vis­its and care management programs.  
 
Novant is focusing on preventive care, especially for patients with high-risk chronic conditions. One example is Novant’s dedicated service line that has achieved blood sugar control for patients that ranks in the top decile nationally.   Novant has implemented ana­lytical tools to help employees and dependents who are at high risk for hospital readmission.   
 
Readmission rates have plunged from 13.6 percent to 3.3 percent be­tween 2015 and 2018, Capps said.    
 
“For us at Novant Health, the question isn’t whether or not we will fully transition to value-based care, but when,” he said.  
 
Novant joins a national trend of change in health care payment plans. Two years ago, a survey of 465 payers and hospitals revealed that both are more than 50 percent toward imple­menting full value-based reimburse­ment, according to McKesson Corp.   
 
But the road to a full value-care approach still has potholes.  
 
Last year, the Centers for Medi­care & Medicaid Services canceled a promising bundled payment program in which payments for all services   provided in a care episode are linked. The payment model was for acute myocardial infarction care and   coronary artery bypass graft surgery.   The American Medical Association said that the “cancellation was a step in the wrong direction for pursuing a health care system that focuses on value and not volume.”       
 
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