How Value-Based Care Payment Models Could Reduce Costs

November 23, 2015 - Did you know that 8 million people gained private insurance through the health insurance exchange and 3 million young adults gained coverage since the Affordable Care Act was passed? In recent years, the health insurance market and the medical industry have undergone significant reforms. The Patient Protection and Affordable Care Act has brought forward significant healthcare reimbursement transformations, new models of healthcare delivery, and greater insurance coverage for American citizens.

Jeremy Earl, Associate at McDermott Will & Emory, and Ankur Goel, partner at McDermott Will & Emory, spoke with HealthPayerIntelligence.com about some of the ongoing healthcare reforms around the country and explained their impact on medical care reimbursement.

“I work in the managed care subgroup within the health industry practice group at McDermott,” Jeremy Earl explained. “I’m based in our Washington D.C. office and focus most of my practice on providing regulatory counsel regarding the Affordable Care Act and preparing alternative reimbursement contracts for providers and insurers for shared savings, shared risk, and bundled payment methodologies.”

HealthPayerIntelligence.com: How has the Affordable Care Act really improved access to care and the quality of care?

Ankur Goel: “There has been an expansion in coverage and I think when we talk about access, the expansion of coverage through Medicaid as well as the exchanges, these are the biggest impacts.”

“There are still people who are uninsured. People who are uninsured typically get less healthcare. That expansion that has occurred has had an impact on expanding access.”

Jeremy Earl: “I think there are several components to improved access. The Affordable Care Act has by any measure improved access to health insurance coverage whether that be through the Exchanges themselves or the Medicaid program.”

“In that sense, it’s hard to deny that it has been successful in allowing more people to be covered. We’re at the lowest percentage of uninsured adults since the 1960s. Now we’re below 10 percent.  The other issue that is relevant to access to care are provider networks themselves and how broad they are. I don’t know that the Affordable Care Act has set provider network access as its goal. We have seen with the exchanges more of the narrow and tiered networks have become more prevalent.  This has created a significant issue for federal and state regulators who are trying to balance access and cost. Insofar as the Affordable Care Act has led to plans rethinking broad networks in the context of the individual market, the Act has affected provider network access.””

“In terms of improving the quality of care, that’s probably a trickier analysis and tougher to measure. I do think providers are focusing more on making sure they improve quality, but it’s difficult to know whether that’s influenced by the Affordable Care Act.”

“The Medicare penalties for hospital readmissions and other efforts from CMS [Centers for Medicare & Medicaid Services] to alter its payment methodologies, particularly through the work of the Center for Medicare and Medicaid Innovation, has made providers more accountable for the quality of care they provide.  CMS’s authority to implement these payment reforms is from the Affordable Care Act, so it definitely has played a part in the shift to paying providers for value.”

“This shift, which is a significant development, is also driven by the commercial sector and the expansion into value-based reimbursement and movement away from fee-for-service. I see that all the time in my practice where insurers are looking to align themselves with providers based on cost-effectiveness and also providers who have demonstrated consistent quality.”

“Particularly, in Medicare Advantage, where the CMS Star Ratings are starting to have a significant revenue impact on a plan’s monthly capitation amounts. It’s becoming more and more important for plans to align themselves with providers who can help them achieve the four and five star ratings that are almost necessary to be successful.”

“In terms of access to coverage, I think it’s been successful. The other issue that there may be for access to care are provider networks themselves and how broad they are. I don’t know that the Affordable Care Act has set it as its goal access in terms of broader provider networks. We have seen with the exchanges more of the narrow and tiered networks have become more prevalent.”

“Part of that is meant to save costs and allow lower premiums to be offered on the exchanges where consumers are extremely cost sensitive. I think the Affordable Care Act has led to plans for rethinking broad networks in the context of the individual market.”

HealthPayerIntelligence.com: Has the Affordable Care Act made a dent in reducing excessive spending and redundant testing throughout the healthcare industry?

Jeremy Earl: “From my perspective, I’m a big believer in the shift away from fee-for-service payments. Today, you get a critical mass of providers who are being compensated on whether the care they provide is cost-effective and high-quality versus just providing more care.”

“To me, that’s the most effective way to get at the problem – you eliminate financial incentives to provide excess and unneeded services. To the extent that you want to give the Affordable Care Act credit for that shift, the biggest thing is the Center for Medicare and Medicaid Innovation.”

“The bundled payment demonstration project on a voluntary basis has been extremely popular with a lot of providers and now they’re rolling it out to be mandatory. That’s just one example of the program put in place by the Affordable Care Act transforming how providers are paid.”

“The Medicare Shared Savings Program for ACOs is really been CMS’s most high-profile attempt to disrupt traditional fee-for-service payments, but it has run into rather significant pushback from the provider community for the way it has been implemented. Notwithstanding some initial struggles, I do think the future of where CMS wants to go is the Medicare Shared Savings Program but I don’t think it’s yet achieved the level of participation from providers to really bend the cost curve and to really end the traditional mindset around fee-for-service.”

“Private health plans have been moving more towards these payment models and requiring their network providers accept some accountability for cost effectiveness and quality of care. That, more than the traditional Medicare changes, is really moving the needle on eliminating unnecessary spending.”

HealthPayerIntelligence.com: What are the biggest advantages that providers will be able to gain from Accountable Care Organizations over the next few years?

Jeremy Earl: “It’s the experience that they’ll gain from participating in that program. It’ll will also give them a platform by which they can then contract with payers and try to align themselves with payers on similar shared savings and shared risk type of arrangements in the commercial and Medicare Advantage markets.”

“Everybody understands that this is the way provider reimbursement is headed. If you want to be ahead of the curve and gain experience with these new payment models, I think participation in the Medicare Shared Savings Program is a good way to do that.”

“I don’t necessarily know that from a revenue standpoint whether it’s become a significant driver of provider revenue at this point, but I do think the bigger revenue opportunity is in the contracts with private payers where providers can utilize the ACO infrastructure to manage either a Medicare advantage or a commercial population.”

HealthPayerIntelligence.com: What are some ways providers and payers are working together to ensure better patient care and population health?

Ankur Goel: “I think we’re seeing models where payment and quality are tied together. I think that is aligning incentives around quality and payment. Decisions aren’t necessarily being imposed by payers. There are instances where there are negotiated, cooperative arrangements. That I think is very important in the evolution of the payment system. That’s the main thing I would point to.”

“We’re seeing increased monitoring of outcomes and this has a technology component that delves into outcomes and using that information in managing patient care as well as in payment models. That’s one component that we’re seeing quite a bit of – the use of technology.”

“As data becomes more available, that is something that could be utilized by providers and payers in collaboration to try to improve the process and improve the outcomes.”

Jeremy Earl: “One of the biggest focuses of private payers is managing high-risk populations – populations with co-morbidities and chronic conditions that use a lot of health resources and are ultimate drivers of additional costs in the healthcare system.”

“What I’ve seen is payers and providers having a renewed focus on the best way to holistically manage the health of high-risk populations. In many cases, this takes the form of the insurer providing care coordinators and even embedding clinical staff onsite with the providers.”

“It also takes the form of plans compensating providers through per member – per month care coordination fees and other types of compensation that incentive providers to perform this type of population health management. In the past it may not have been in the provider’s best interest to really try to manage the health of a defined population due to lack of reimbursement.”

“Inherently, moving providers towards a shared savings or shared risk compensation model incentivizes population health management because the provider knows they are financially responsible for a defined population.  To the extent there are any cost savings from avoiding hospital or ER readmissions, for example, the provider will see additional revenue from avoiding that type of care. This shifts the mindset that providers have from a revenue standpoint. It will allow them to be successful and is now in their best interest from both a clinical standpoint and financially.”

HealthPayerIntelligence.com: Which healthcare reforms from the last few years do you think are the most effective at reducing healthcare spending?

Ankur Goel: “I think broadly the changes in payment models such as bundled payments and quality-based payments will have the biggest impact on spending over time throughout the long-term.”

Jeremy Earl: “It’s sort of the same theme. I would say it’s probably the Center for Medicare and Medicaid Innovation that’s the most promising. Particularly, now we’ve seen what they’ve done with bundled payments and the chronic care joint program that they’ve rolled out mandatorily nationally.”

“To the extent that the CMMI starts making these alternative payment models mandatory, they have a much better shot to almost force providers to buy into this and really speed up the process and adoption and transition away from fee-for-service.”

“To me, that is the most promising of the healthcare reforms in terms of bending the cost curve.”

“One major goal of the law was to expand access to insurance coverage and improve the quality of the coverage that people had by eliminating annual limits and establishing out-of-pocket maximums. Things like that are important, but they aren’t necessarily going to drive costs down and will actually lead to a slight increase in premiums as coverage becomes more comprehensive. The flip side of this is that some of these payment reforms do have real promise to ultimately lower costs and drive the healthcare system away from providing more and more services but ultimately keeping people healthy and keeping them out of the hospital.”