Fee-For-Service to Value-Based Care: The Future is Now

Don-MichaelsBy Don Michaels, Ph.D., Senior Vice President, Hayes Management Consulting
Twitter: @HayesManagement

The U.S. Department of Health and Human Services (HHS) has a stated goal of shifting 85% of Medicare fee-for-service reimbursement into value-based models by 2016. Private payers will no doubt follow close behind. Meeting this aggressive goal is causing angst among healthcare providers with much conjecture about what it means for their organizations going forward.

The future, however, isn’t as bleak as it may seem. Several forward-looking organizations have leapt into the breach and embraced the change. Although there have been bumps along the way, a few have successfully made the transition and offer both a preview into life in the new reimbursement model world and examples of what you need to do as a provider organization to be successful.

Here are three examples.

Early adopter value-based reimbursement model

Operating in the San Diego market where nearly nine of ten people are seen in one of four large health systems (Sharp, Scripps, UCSD and Kaiser), it’s no surprise that Sharp was one of the early adopters of a value-based reimbursement model. Working with Anthem Blue Cross of California, Sharp in conjunction with two medical groups – one owned and one community based – with more than 1,000 physicians and more than 20,000 enrolled patients, participated in a value-based payment program in 2013.

Sharp was part of the collaborative effort focused on coordinating the care of 200,000 patients with multiple chronic conditions. The proactive program reached out to patients to get them to manage areas like diet, exercise, follow up appointments, and medication adherence. The goal was to reduce cost while increasing their quality of care.

This past June, Anthem announced savings of nearly $8 million during the yearlong period. Participating physicians were paid extra money up front to devote more time to patients with multiple conditions. According to Anthem, the program resulted in a 7.3% drop in hospital admissions. Sharp reported that the additional care coordination helped their two groups lower the amount spent on related health services by 2%. While they said the savings didn’t cover the increased costs in the first year, they’re confident that will change in years two and three.[1]

Early ACO adopter

Marshfield clinic in Wisconsin was an early adopter of the Accountable Care Organization (ACO), participating in the initial pilot program for shared savings that operated from 2005 to 2010. Participants in the program had to achieve set quality levels based on efficiency and quality for patients in a number of chronic care categories that grew over time. They started with 10 diabetes measures in year one, added 17 coronary and heart failure measures in year two, and five hypertension and preventive care measures in year three for a total of 32.

The weight of the measures changed over time moving from 70% efficiency and 30% quality in year one to a 50-50 split in years three to five.

Some of the steps Marshfield took to meet the assigned goals included:

  • Increasing clinician efficiency by making computers more available and applications more user-friendly.
  • Adding a nurse triage phone line at more sites
  • Expanding a program that used a single set of protocols to ensure coagulants were given to the right patients
  • Starting a cholesterol control clinic
  • Developing treatment guidelines for physicians on all major conditions
  • Setting up regional teams of physician and nurses to deal with patients and solicit feedback on process improvements[2]

Marshfield was one of the highest achievers in the program and was one of only two organizations of the initial 10 participants to earn shared savings in the first three years. The total three-year savings was just over $23 million but grew to $56 million through years four and five. In that five-year period, Marshfield saved Medicare $118 million.

Marshfield achieved nearly 82% of quality targets in the first year of the demo and hit over 98% in the fifth year.[3] They have since gone on to form an ACO.

Pioneer ACO

A part of the Atrius Pioneer ACO until 2014, Reliant (formerly known as Fallon Clinic) has more than 300 providers in Worcester, Massachusetts. They stress that having comprehensive information is crucial to success in a value-based model. The key is an effective EHR with patient engagement tools, health information exchanges, clinical decision support, and data analytics and reporting tools.

Over 90% of Medicare fee-for-service costs relate to patients with chronic conditions, and two of every ten Medicare patients discharged from hospitals are readmitted within 30 days. These are key focus areas when the goal is improving care and reducing costs. Reliant strives to minimize hospital admission for both care and financial reasons.

Reliant uses their extensive database to identify patients who are likely to require hospitalization over the next six months. They also look at patients with frequent emergency room visits, those with recurrent 30-day hospital readmissions, and recently discharged patients. Using this data allows them to focus their teams of physicians, nurses, and case managers on the appropriate patients, limiting their risk. This focus not only improves care, but also proactively reduces costs. [4]

The effort is paying off. According to 2013 CMS results, Atrius and Reliant were among the highest achievers in both quality and patient experience scores. They ranked above the 90th percentile in both the Diabetes Composite Measure and in depression screening.

In addition, Atrius saved Medicare $3 million compared to its target and saved $8 million against expected costs for patients who were enrolled in Medicare Advantage.[5]

Transition support

The transition to value-based care poses challenges for many organizations. However the examples of Sharp, Marshfield, and Reliant prove it can be done and the rewards both in improved care and financial benefits can be significant.

One way to ease the pain of the transition is to engage an experienced partner who can help overcome some of the challenges. A consultant well versed in the process can help you navigate the complexities during the transition by leveraging the experience of going through it with other healthcare organizations.

It’s really no longer a question of “if” but “when” the transition to value-based care will happen. Preparing for the change now gives you the best chance of success later.

[1] Anthem succeeds in bid to cut costs, by Paul Sisson, The San Diego Union-Tribune, June 1, 2015.

[2] Insights from Successful Model for ACOs: Marshfield Clinic’s Role in the Medicare Physician Group Practice Demonstration, by Leigh Page, August 31, 2010.

[3] Marshfield Clinic: Demonstrating the Potential of Accountable Care, by Sara Klein, Douglas McCarthy, and Alexander Cohen, Case Studies of Accountable Care Systems, The Commonwealth Fund, October 2014.

[4] Defining Accountable Care in the Age of ACOs, by Greg Slabodkin, HealthData Management.

[5] Atrius Health Succeeds in Improving Care, Lowering Costs for Medicare Beneficiaries, New Release, September 16, 2014.

This article was originally published on Hayes Management Consulting and is republished here with permission.