Adoption of Value-Based Reimbursement Among Private Insurers

As the federal government moves toward adopting and expanding value-based payment models, private market providers and payers are striving to smoothly transition to the new models, furthering the transformation of thought and practice of how health care is delivered. Successful implementation of value-based care models requires building strong, goal-aligned, payer-provider partnerships, with restructured organizational infrastructure, processes, and technological systems.

With health care costs accounting for almost 18% of the United States gross domestic product and rising, the debate over the best way to broaden access to and advancing quality of care while curbing this unsustainable cost remains front and center of concerns among policymakers, payers, providers, and patients. 

In current political rhetoric, between the push to dismantle the Affordable Care Act and conversations surrounding Medicare for All, efforts continue in Washington, DC to get health care costs under control. One approach tipping the needle is the move away from the traditional fee-for-service reimbursement model to value-based payment models that incentivize payers, providers, and health care systems to improve outcomes while lowering the cost
of care through shared savings and risks. The Centers for Medicare & Medicaid Services has taken a number of steps in this direction
over the years, among which has been to establish the Medicare Shares Savings Program through which accountable care organizations (ACOs) are reimbursed through value-based payment structures, and more recently, via the Medicare Access and CHIP Reauthorization Act of 2015, which incentivizes providers of Medicare beneficiaries to participate in alternative payment models and transition away from fee-for-service reimbursement. 

A recent survey of health care executives published in March 2019 by Change Healthcare, Inc, found nearly 40% of respondents thought it would be 3 to 5 years before the market comprised a significant amount of value-based relationships that include both upside and downside shared-risk.

Another survey, that specifically looked at payers, found that widespread adoption of value-based reimbursement has a long way to go. Commissioned by HealthEdge, a health care IT company, the survey of 150 health insurance executives was conducted to understand payer experiences with value-based reimbursement including the challenges and barriers to implementation and strategies for success. Harry Merkin, vice president of marketing at HealthEdge, highlighted that survey respondents did not expect much growth in the adoption of value-based reimbursement in the next 2 years.

“One thing that came out [of the survey] that was most compelling was the fact that the payers were not predicting that many more of their contracts would be value based,” he said. “This was concerning because it means payers don’t see a way forward. They want to do it, they know it is the right thing to do, they are trying different models, but it is almost as if they can’t get over the hump.”

Challenges to Adoption  

Among the barriers of adopting value-based models is provider and patient engagement. Sixty percent of the health insurance leaders surveyed listed this as the number one challenge.

Mr Merkin described this challenge as two-fold. First, it requires that payers and providers talk to one another to align their objectives around the shared commitment of controlling cost while keeping people healthy. Second, the need to come up with contractual arrangements that achieve this in a way that is mutually beneficial to both payer and provider. 

Speaking on behalf of providers, Chet Speed, JD, LLM, chief policy officer, American Medical Group Association (AMGA), a trade association representing multispecialty medical groups and integrated systems of care, emphasized the importance of building stronger relationships with payers to succeed in transitioning to value-based care. “Members have told us that if value-based care is going to work, there needs to be an adult conversation between the provider community and payer community,” he said, noting that both parties need to work toward value-based care, as fee-for-service is unsustainable.

As for negotiating contractual arrangements, Scott Hines, MD, quality officer, Crystal Run Healthcare, a physician-owned multispecialty group with 415 providers in New York state and AMGA member, said that if payers “structure a value-based contract correctly, the incentives between a payer and provider should align because the shared goal is to provide the highest quality of care at a lower price.”

One way to construct such an aligned contract, according to Mr Merkin—citing results of the HealthEdge survey—is to address the internal changes required by a payer and provider to shift away from the fee-for-service model. These include the need to invest in infrastructure and new technologies, such as the need to come up with data-sharing capabilities around things like quality and performance metrics.

“For payers to ask providers to enter into value-based agreements, they have to be able to provide data that helps the providers know how they are doing,” said Mr Merkin. “One of the things that we have discovered through our surveys is that payers say they need modern technology to push new models forward.”

Clare Pierce-Wrobel, senior director, Health Care Transformation Task Force (HCTTF), a nonprofit founded in 2014 to help providers and payers switch to value-based reimbursement, highlighted the challenge of developing different types of infrastructure to pursue value-based care. “If you’re paying for quality, you need to reliably track and measure that data,” she said. “You’re essentially adjusting the claims reimbursement system to implement the new methodology for new types of payment models.”

What payers and providers seem to agree on is that the shift to value-based care and reimbursement is the way to cost containment. How to pragmatically transition, via what type of model and mechanisms, and how to accomplish all this in a financially sustainable way, all need to be ironed out. 

Movement Forward

Despite challenges, payers and providers are moving forward. At the end of 2017, 47% of the HCTTF members had their business in value-based arrangements, which showed a steady increase from 30% in 2015 and 41% in 2016. And, according to Ms Pierce-Wrobel, members aspire to move 75% of their businesses to value-based payment by 2020.

Saying that members are still in the testing and learning phase of value-based arrangements, Ms Pierce-Wrobel underscored the continued interest members have in transitioning into these types of arrangements as they begin to see outcomes data showing cost reductions associated with value-based reimbursement (Sidebar).

For example, Ms Pierce-Wrobel cited data from Blue Cross Blue Shield that showed that value-based arrangements in a network of ACOs and patient-centered medical homes led to a 32% reduction in costs in the last half of 2018. Cigna also reported that 50% of their business was in alternative payment models with $600 million in savings over the course of 5 years (including both private and public plans).

Dave Mika, vice president, Enterprise Core System Operations, Independent Health, a not-for-profit health plan serving 375,000 members with 1080 associates, said his group has had success in shifting to value-based arrangements by focusing on building strong relationships with its provider community.

“We don’t ever develop a model or put forward a reimbursement structure without buy-in from the provider community, whether it is hospitals, specialist physicians, or primary care physicians,” said Mr Mika.

In 2018, Independent Health had 98% of eligible primary care practice physicians in a value-based model–full capitation contracts. According to Mr Mika, the contracts negotiated in 2018 did not require the providers to put any of their reimbursement at risk. “Rather, we wanted to work with them to show them their practice patterns and how their practice patterns stood up against those of their peers,” he said.

This last point underscores what Mr Mika thinks has helped Independent Health succeed in establishing value-based arrangements with its provider community—educating providers on the merits of value-based models and how to succeed in this changing reimbursement landscape.

To further its goal, Independent Health developed a company called Evolve Practice Partners designed specifically to engage and educate physician practices on how to succeed in value-based arrangements both with private payers as well as public payers. 

Although only limited hard evidence is yet available on outcomes, Mr Mika said that anecdotal data shows significant movement in some targeted areas toward closure in gaps of care with the adoption in 2018 of the value-based capitation reimbursement by many of the primary care physicians in IndependentHealth’s network. “There are numerous measures we are tracking [such as adherence to medication use, high blood pressure control, comprehensive diabetes care, and breast cancer screening] and we’re seeing much stronger closure in gaps of care,” he said. “So we know that providers are getting patients some of the prescribed services that we like to see.” 

Mr Mika said that the biggest challenge of getting providers on board with capitation reimbursement contracts has been their concern with this type of reimbursement from a financial perspective. “We try to address to them that…if they are delivering the quality outcomes that these programs are designed to produce, they should be able to work more effectively and efficiently and therefore see higher patient traffic.”