Private Payers Follow CMS Lead, Adopt Value-Based Care Payment

October 17, 2016 - Commercial payers are following the lead of the Centers for Medicare & Medicaid Services (CMS) when it comes to adopting value-based care payment protocols. More private payers have implemented various value-based CMS programs such as accountable care organizations, care coordination strategies, and bundled payments.

The healthcare industry as a whole has found medical spending increasing significantly over the last several decades. This challenge partially stems from fee-for-service payments, which incentivize providers to offer more healthcare services. An excess of services often leads to wasteful spending and unnecessary, redundant medical testing. Instead of relying on a volume-based payment system, value-based care payment strategies incentivize providers for higher quality of care instead of sheer quantity.

The obstacles of increased healthcare spending and fee-for-service reimbursement led CMS to seek new ways to improve payment within the Medicare and Medicaid programs.

Value-based care payment was born. This incorporated episodic bundled payment models along with the Medicare Shared Savings Program and its subsequent accountable care organizations. In fact, CMS has set a goal of bringing 50 percent of Medicare reimbursement toward value-based alternative payment models by the end of 2018.

Private health payers have also began positioning themselves in the value-based care world. For example, the national payer Aetna has been investing in accountable care organizations and is prepared to participate for as long as it takes, said Amy Oldenburg, Vice President of Network and Product Strategy Accountable Care Solutions at Aetna.

“True transformation is a long-term endeavor. We know that it takes at least three years for motivated ACOs to make changes necessary to impact real savings and quality improvements,” Oldenburg told HealthPayerIntelligence.com. “CMS, which is leading the most aggressive push toward accountable care, acknowledges that the longer an ACO is in operation, the greater the savings they generate. We are seeing the same savings trend, and like CMS, we intend to stay the course.”

“We believe transforming health care will help reduce waste, improve quality, improve member/patient satisfaction, and improve overall employee health and productivity. So we see this as well worth the commitment and investment of time and resources to get there. Through our approach to move providers and hospitals toward full, product-based risk-sharing ACOs and  helping them transform the way they do business, we know we can help build a healthier world.”

Much like CMS, Aetna has also set goals for achieving a majority of their healthcare spending to be in the form of a value-based care reimbursement contract.

“The industry has embraced value based contracting with CMS leading the path.  The majority of carriers have publicly stated current VBC penetration, defined as percentage of spend in value based contracts, as well as targets by specified time periods. Aetna has targeted 75 percent of our spend to be in a value based contract by 2020,” Oldenburg explained.

Another health insurance company that has invested heavily in accountable care organizations and gained significant cost savings is Blue Shield of California. This health payer and its accountable care organization gained $325 million in cost savings from 2010 to 2015.

A major goal of value-based care payment and accountable care organizations is the strive to improve care coordination between multiple medical facilities. Health payers have also followed the CMS lead in improving care coordination.

For instance, Empire BlueCross BlueShield has taken part in following care coordination measures established by The Joint Commission. Empire BlueCross BlueShield and other Blue Cross Blue Shield health plans across 13 states are providing financial incentives to their hospital networks for reaching Integrated Care Certification from The Joint Commission.

Along with care coordination and risk-based shared savings, more health payers are also contracting through bundled payment programs. Humana, for instance, has partnered with providers to incorporate bundled payments with hip and knee replacement surgeries much like the CMS Comprehensive Care for Joint Replacement Model.

“I would really start with an overall piece of advice around looking at retrospective versus prospective payments for bundles,” Chip Howard, Vice President of Payment Innovation at Humana, told HealthPayerIntelligence.com about how payers should implement bundled payments. “Retrospective is essentially fee-for-service where providers are getting paid as usual, but at the end of a performance period, the cost of the bundle is reconciled versus the cost target and savings are evaluated and shared.”

“The prospective model is the upfront payment to the provider responsible for the bundle: the fixed rate that is intended to pay for all bundled services. I won’t advocate for one method or the other, but I do think from the payer perspective, there are some things to think about with prospective bundling around changing infrastructure and claims systems to be able to accommodate the upfront payment versus the traditional fee-for-service world,” Howard concluded.

The health insurer Cigna has also worked to implement value-based care payment strategies including episodic bundled payments for hip and knee surgery as well as maternity care, explained Mark Slitt, Public Relations Representative for Cigna.

“Cigna’s transition to value-based care began in 2008 when we launched our first patient-centered medical home pilot with Dartmouth-Hitchcock in New Hampshire,” Slitt told HealthpayerIntelligence.com.

Cigna is committed to value-based alternative payment models in a similar fashion to CMS. The payer has taken on the same goal as CMS to ensure half of their healthcare spending is in alternative payment models by 2018.

“That initiative, along with similar initiatives launched over the next several years, evolved into what we now call Cigna Collaborative Care,” Slitt explained. “Cigna Collaborative Care now includes value-based arrangements with 160 primary care physician groups, as well as more than 70 value-based arrangements with specialty practices in the fields of obstetrics/gynecology, orthopedics, gastroenterology, general surgery and cancer care. Cigna Collaborative Care is the foundation of Cigna’s commitment to CMS to have 50 percent of our payments in alternative payment models and 90 percent of payments in value-based arrangements by 2018.”

“We recently announced several new Cigna Collaborative Care arrangements for cancer treatment. Other specialty initiatives include episodes-of-care arrangements for maternity care, hip and knee surgery, gallbladder surgery and colonoscopy, as well as pay-for-performance maternity care arrangements. Cigna also plans to launch episodes-of-care programs for cancer care and heart surgery,” continued Slitt.

“The company also has value-based collaborative arrangements with 101 hospital systems comprising more than 370 hospitals,” he concluded.

Health insurance companies have followed the lead of CMS and taken on value-based care payment programs over the last several years to reduce wasteful healthcare spending.

Dig Deeper:

What Are the Benefits of Accountable Care Organizations?

How to Overcome the Challenges of Bundled Payment Models