By Rose Hoban
For more than a decade, the pages of health policy journals have been filled with research and commentary describing how health care providers in the U.S. need to move away from simply getting paid for doing more patient procedures. Instead, the push has been toward eliminating unnecessary care and focusing on care that helps patients get better, all while providers take on more financial risk.
On Tuesday, leaders of North Carolina’s largest insurer and five of the state’s largest health care systems announced they’re staking larger chunks of their businesses on this so-called “value-based” way of doing business.
Blue Cross and Blue Shield of North Carolina head Patrick Conway announced that his company has agreed on long-term contracts to move about half of their payments to the five health care systems to value-based care by 2020.
The hospitals will be “moving away from a model of care that incentivizes and rewards for activity to a model that actually incentivizes and rewards us to partner with people in the community to keep them well and healthy and out of the hospital,” said Terry Akin, head of Greensboro-based Cone Health.
Along with Akin, the heads of Chapel Hill-based UNC Healthcare, Raleigh’s WakeMed Health & Hospitals, the Durham-based Duke Health system and Winston-Salem-based Wake Forest Baptist Health joined Conway at his company headquarters in Durham to share the announcement.
Change comes slow
“We’ve been talking about this for a long time,” said Pam Silberman, a professor of health policy at UNC Chapel Hill’s Gillings School of Global Public Health.
She referred to decades-long efforts to curb runaway health care costs, which add up to more per person for health care than any other Western country. But it’s been challenging to bring down the cost of care under a fee-for-service system, where doctors and hospitals get paid every time they do a test, a procedure or admit a patient to the hospital.
“Our current system … incentivizes doctors to provide care regardless of whether or not it improved things for the patient,” Silberman said. “That provides the wrong incentive, incentivizes too much care and sometimes can hurt patients.”
Conway noted some research has estimated that anywhere from 20 to 40 percent of money spent in the U.S. health care system pays for unnecessary care.
In the 1990s health maintenance organizations, or HMOs, worked to bring down overall health care costs, but they did it primarily by limiting or denying care, infuriating both patients and providers. Facing consumer backlash, by the early 2000s, most HMOs had reverted back to fee-for-service to pay doctors and hospitals.
The Affordable Care Act allowed for so-called accountable care organizations, or ACOs, which are similar to HMOs in that they use overall payments to providers to reduce the cost of care. But ACOs are scrutinized not just by how much they spend or save, but also using quality measurements which are intended to insure that patients get what they need.
Since passage of federal health reform, hospital systems in North Carolina have developed successful ACOs to care for Medicare patients, such as Cone Health and WakeMed. More recently, UNC Healthcare developed a value-based plan for the system’s employees. According to CEO Wesley Burks, more than 170,000 UNC patients are now paid for by a value-based payment arrangement.[sponsor]
One defining feature of value-based care is that both insurer and health care provider take on financial risk, and if money is saved by preventing expensive hospitalizations, everyone shares the savings. That includes patients, who would conceivably pay lower insurance premiums.
“Hospitals in a value-based system want to keep people out of the hospital,” Silberman explained. “If you can provide the same quality of services and have good outcomes while providing care into the community, you can save money.”
One foot on the dock
Even when they want to provide more value-based care, health care systems have had trouble making the switch because too much of their work is still paid for under a fee-for-service system. That’s why Tuesday’s announcement was hailed as a step forward.
WakeMed CEO Don Gintzig compared the transition from getting paid under a fee-for-service system to getting paid for value to standing with one foot on a dock and another on a boat. It’s an analogy Silberman used as well.
“Now we’re looking at … payments being aligned,” Gintzig said.
Conway said that in all, the five health care systems make up about a quarter of his company’s payments, his goal is to have about half of the payments to those organizations being in a value-based system within five years. He said Blue Cross is working to create similar agreements with other health systems such as Vidant and Atrium as their annual contracts come due.
The move aligns with what’s happening in the state’s Medicaid program, which recently received a waiver from the federal Centers for Medicare and Medicaid Services to implement features of value-based care as the system transforms to managed care later this year.
He also said the agreements included the ability to use electronic health records and payment claims data to track the care patients receive, whether from a primary care doctor, an urgent care in the local mall or an emergency room, and share that information from one hospital to another. In Conway’s prior job at CMS, where he focused on creating ways to incentivize value-based care, he helped build a similar system that examined claims data.
“For smaller practices we’re working on giving them data dashboards,” he said. “The major point is you want to give them the data points that they need so they know if you have a diabetic patient that got hospitalized somewhere else they’re aware of that and can help coordinate care for that patient.”
Proof of concept
Cone Health’s Akin said that his organization began moving aggressively into value-based care about eight years ago. Their ACO, the Triad Healthcare Network, has been able to save Medicare millions annually, allowing them to receive bonuses from federal payers.
“Our participation in the Medicare Shared Savings program and, more recently, Next Gen has been a tremendous opportunity for us to develop capabilities, knowledge and experience, that otherwise we wouldn’t have,” Akin said. “I think that will serve us well in the next evolution of value-based care.”
He also said that health care systems’ participation in these payment arrangements will help to make the case for Medicaid expansion, which he said is key to reducing health care disparities in the state.
“I think that’s got to be part of what the long-term goal is here, to demonstrate that we can manage these populations at an affordable cost,” he said.
Currently, Akin said, more than half of his current medical business has a “significant risk, value-based component.”
“You know, I’m glad to see Blue Cross catching up,” he said with a laugh.