How to Educate Employers on Value-Based Care Reimbursement

August 11, 2016 - Value-based care reimbursement is becoming a mainstay of the healthcare industry as hospitals, physician practices, and health insurance companies continue to incorporate alternative payment models. Many payers and providers have pursued bundled payment models while others have invested time and resources into operating an accountable care organization.

The Centers for Medicare & Medicaid Services (CMS) currently operates 30 percent of their Medicare payments within alternative payment models focused on value-based care reimbursement. CMS plans to transition 50 percent of their Medicare reimbursement toward value-based care within the next two years.

Commercial payers have followed the lead of CMS and moved toward value-based care reimbursement. However, employers are still not familiar with many of the objectives within value-based care.

HealthPayerintelligence.com spoke with David Lansky, President and CEO at Pacific Business Group on Health, to learn more about a particular strategy - called the Purchaser Value Network - meant to assist employers with better understanding value-based reimbursement.

“The essential idea here is that CMS, in particular, and a number of states are moving ahead relatively quickly with various value-based payment arrangements and we think it’s important that those initiatives have the benefit of what the private purchasers have been doing in their own arrangements,” Lansky said. “It’s also important that the private purchasers are aware of and able to align their efforts with those of the public sector.”

“In broad strokes, we’re trying to accelerate adoption of new payment models by getting the private purchaser community better informed and more engaged,” clarified Lansky.

Lansky mentioned another important point by outlining the need for consumers, employers, and health payers to communicate more effectively and engage to ensure the healthcare industry can more quickly move away from fee-for-service payment arrangements and adopt value-based care.

When asked how the Purchaser Value Network is helping employers better align with value-based care payments and transition from fee-for-service, Lansky replied, “Often what we hear from the payers is that they need to hear from their customers, which is the purchaser. Purchasers needs to communicate what’s important to them in terms of payment alignment and payment changes. That helps the payers engage with their own provider network and begin to explore these new contracting models.”

“The way we do that is by getting the employers better educated about what these  models would look like. Then we encourage them to sit down with their plan and let the plan know what kinds of payment models they would like to see,” Lansky continued. “We can do that with a fair amount of detail by providing draft contract language, performance measures, or definitions of episodes.”

“In order to come up with those contract terms, we rely on  the work that others have already done. Right now, because the HHS Payment Learning in Action Network has been actively producing recommendations for bundled payments and for population-based payments, we are using some of their work as a starting point for what the purchasers and the plans should be talking about,” he stated.

Many employers and consumers today are searching for new health plan designs that are able to keep premiums low and out-of-pocket costs at an affordable price. For instance, the costs of prescription drugs can be prohibitively high for many patients and families.

When asked how employers and consumers can find new value-based care health plan designs and reduce prescription drug costs for themselves, Lansky answered, “We think it’s important to have the accountability for total care cost and for health outcomes. That responsibility should be borne by the providers of care.”

“We would like to see these contracts whether for an episode or a condition or a whole population, we would like to see total cost and health outcomes be the means of holding providers accountable,” he continued. “When we look at new arrangements or new contracts, we look to see if those kinds of measures are available and what the terms are  of the contracts, which provide incentive for managing total cost and managing outcomes.”

“The second thing we would argue for is that the incentives carry all the way down to the provider. It’s not enough to have an incentive at an enterprise level or with a health plan, but that the provider contracts have to reflect those incentives as well,” Lansky explained.

Healthcare payers are often searching for new methods that could cut their spending, especially since the Affordable Care Act has impacted the risk pools payers manage and brought higher costs for many insurers.

Additionally, many payers are attempting to move away from fee-for-service payment, which is based on the quantity of care, and adopt value-based care reimbursement models, which rely on the quality of care. Lansky provided advice for payers to cut their spending and transition away from fee-for-service.

“I think it’s essentially the same - it’s the focus on the providers and on enabling the providers to be successful in managing the total cost and managing the outcomes,” he explained. “A lot of that means improving the flow of information to providers so that they’re able to manage those two objectives.”

“I would also say they should move more boldly and more quickly to respond to the changing environment,” he concluded. “The continued use of fee-for-service payment and contracting is going to continue to slow down the redesign of healthcare that we’re looking for. Ultimately, this is about encouraging providers to redesign the way they deliver care and that’s very hard to do if you stay in a fee-for-service payment model.”

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