Helping Payers Implement Value-Based Hospital Reimbursement

June 11, 2018 - Hospitals generate some of the largest revenues and create exceptionally high costs for payers, which combine open the possibility for value-based hospital reimbursement programs to control spending.       

In March 2018, hospital prices grew by 3.3 percent and were some of the most significant drivers of increases in total healthcare costs, according to the Health Care Price Index from Altarum. A separate analysis from Fair Health estimates that hospital evaluation and management services cost rose by nearly 28 percent since 2012.

With hospital costs rising across the healthcare industry, payers may need to develop payment models, or innovative payment alternatives, to manage hospital spending without lowering the quality of beneficiary care.

Ben Lunsford, Vice President of Value-Based Strategies at Humana, suggests that hospitals are just one area where payers can focus on addressing patient outcomes and use value-based reimbursement to make healthcare more cost effective.

“We felt like hospitals have a role in impacting overall patient health and patient outcomes, so that sort of gives a general sense of where we've aligned and focused the HIP,” he said.           

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"It wasn't that we were going out trying to solve any particular issue in the hospital space, but recognizing that hospitals also currently are focusing on all of the things that are in the program today across all of their many different lines of business and their many different payers,” he added.

Earlier this year, Lunsford and his team launched Humana’s Hospital Incentive Program (HIP), which provides performance-based reimbursement in three areas of focus.

HIP rewards providers based on high-performance related to patient experience, patient safety, and patient outcomes. Provider performance in these categories are determined by several measures that address healthcare-associated infection rates, care coordination, palliative care, and additional patient outcomes.

Humana is taking HIP to an extensive scale even though the program launched at the start of 2018. Hospitals with a Humana contract to treat privately-insured beneficiaries can participate in the program’s opening phase.

“HIP is a brand-new program and it's national in scope. We haven't had a desire to pilot it in certain areas and decided to go nationally with it,” Lunsford stated. “The goal of it, again, is to promote higher quality and more coordinated care for our commercial membership — at least for this first year, HIP is for our commercial membership only.”

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Payers developing quality reimbursement programs for hospitals should first adopt best practices from industry leaders that have either developed or successfully implemented performance-driven healthcare programs.

However, payers will need to familiarize themselves with quality measures familiar to hospitals and easy for them to adhere to. Using industry-accepting measures is likely to spur value-based reimbursement adoption, Lunsford emphasized, since hospitals have working knowledge of these measures.

“When you choose measures that are in the hospitals' wheelhouse in terms of being able to impact, that's where organizations gain overall acceptance from hospitals for programs like this,” he added.

Additionally, quality-based reimbursement programs should help support organization-wide goals such as improving beneficiary care quality and making care more cost-effective. Payers should build payment models or similar reimbursement structures that are flexible enough to extend into other populations or business opportunities.

“The goals in launching this particular program are similar to the goals of all of our existing value-based care program models, whether that's primary care, specialty care, or something else” Lunsford said. “The hospital incentive program is just a natural extension of our existing value-based models, but the goal of all of them is to provide higher quality, more coordinated care for our members, whether that's commercial, Medicare, or other populations.”

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An initial foray into value-based hospital reimbursement requires payers to collaborate with leaders in healthcare performance measurement. Partnering with quality performance leaders can assist payers in quickly onboarding hospital providers into similar incentive programs.

HIP incorporates some CMS metrics used to measure patient experience and patient safety obtained using CMS’s hospital compare information.

Leveraging the federal agency’s designs for quality measurement can help other payers establish a baseline related to providers’ ability to manage patient interactions related to patient engagement and customer service aspects of healthcare.

Lunsford additionally adapted CMS quality standards to establish metrics for healthcare associated infections (HAIs) that are commonly found in hospital systems.

HIP tracks HAIs for performance-based reimbursement including central line associated bloodstream infections, catheter associated urinary tract infections, and methicillin-resistant staphylococcus aureus infections. HIP providers receive higher financial rewards based on their HAI standardized infections ratios, which are risk-adjusted summary measures that compare the observed number of infections to the predicted number of infections.

Lunsford and his team also worked with the Joint Commission on develop the clinical measures related to patient outcomes. Hospitals that want to participate in the HIP need either an ICD-10 certification from the Joint Commission or care coordination certifications based on Humana’s core set of care coordination standards.

HIP uses measures such as 30-day risk adjusted hospital readmissions and length of stay to evaluate patient outcomes. Developing outcome measures for commercially insured groups requires both clinical and quality experts to weigh in on effective indicators of positive patient outcomes.

“Measure development was not done in a silo,” Lunsford said. “Partnering with the Joint Commission and our clinical guidance organization here at Humana helped establish the importance of some of those measures in the program,” he added.

Lunsford believes that any value-based reimbursement model needs to fully address the triple aim of healthcare and expects the HIP to deliver on those major tenants. Humana could expand the program in the near future pending further evaluations of the HIP.

“Whether that's from a measure perspective or from a line of business perspective we're certainly open to that and we'll continue to evaluate the opportunities there,” he said.

“The programs have to deliver in those areas to add value, and so that would be my overarching piece of advice — that they are well-founded in the cornerstones that represent the triple aim and the overall improvement in patient quality, overall improvement in patient outcomes, and the overall lower cost of the delivery of healthcare,” Lunsford concluded.