Physicians Leisurely Racing Toward Value-Based Reimbursement

Thursday, March 17, 2016 | Larry Sobal

If you’re wondering about the title, yes I am being facetious. But seriously, remember all that talk about the transition from volume to value? If your answer is no, then congratulations on either being fully engrossed in really important stuff or going to meetings where there is a rule against using buzzwords and other overused health industry jargon.

The vast majority of those I talk with at heart programs and health systems around the U.S. continue to express a curious apprehension about reimbursement moving away from fee-for-service. Many of you have expressed that is has not become much of a reality in your part of the country. That is especially true if you are tracking similarly to the study published last week in Health Affairs, which noted that 95% of all provider visits used fee-for-service payment methods (in 2013). The article also shared that the percentage of payments in capitated reimbursement arrangements dropped from 6.6% in 2007 to 5.3% in 2013.

Of course I understand we are in 2016 now and value-based payments may have surged dramatically since 2013. However, MedAxiom has members in 46 states, and I think that gives us a pretty representative sample; the truth is that many of our physician members profess little awareness that their respective markets have implemented what might be considered value-based reimbursement. Admittedly, part of the challenge is that there is no clear definition for what value—let alone value-based reimbursement—actually is (see my December 17, 2015 blog for more on that subject).

Does this imply that despite the Affordable Care Act’s intent to employ innovative (i.e. value) payment mechanisms for more efficiently delivered care, and transition away from fee-for-service, has been unsuccessful? Quite possibly, although I suspect that CMS would strongly disagree.

In fact, the department for Health and Human Services (HHS) released a statement just two weeks ago (March 3rd) that, thanks to tools provided by the Affordable Care Act, an estimated 30 percent of Medicare payments are now tied to Alternative Payment Models (APMs) that reward the quality of care over quantity of services provided to beneficiaries. The release explained that APMs are ways for Medicare to reimburse providers based on the health of the patient and quality of care, rather than the number of services provided. Examples include accountable care organizations (ACOs), advanced primary care medical homes, and new models that bundle payments for episodes of care.

The health care industry is moving frenetically on a reimbursement journey to an unforeseen destination with an unclear timeline and uncertain consequences.

In January 2015, HHS announced clear goals and a timeline for shifting Medicare reimbursements from quantity to quality, setting a goal of 30 percent of Medicare payments through alternative payment models by the end of 2016. With the January 2016 announcement of 121 new ACOs, as well as greater provider participation in other models, HHS estimates that it has achieved that goal well ahead of schedule.

Furthermore, if you listen to UnitedHealthcare, Humana, Cigna, Aetna and other payers talk about transitioning reimbursement from volume to value, most articulate that they have aggressive targets of moving the percentage of reimbursements away from fee-for-service in the near term.

So what’s really going on? I think there are two things to pay attention to. First, even if you are an independent physician who is in an ACO or an employed physician whose health system is in one of the Medicare APMs, odds are you are individually still being paid on some derivative of fee-for-service, with a high likelihood that Work RVU’s continue to drive most of your individual compensation. This is because many organizations have not yet determined how to successfully align physician compensation with organizational reimbursement.

Second, the APMs themselves are proving hard to earn and may, in fact, lead to losses. Consider this: in 2014, only 92, or roughly 28%, of 333 ACOs in the CMS Shared Savings Program managed to earn any bonuses. This mirrored 2013 success (or lack thereof). Likewise, of an additional 20 more advanced "Pioneer" ACOs in 2014, only 11 were able to cash in on financial incentives. In addition, Highmark, a Blue Cross and Blue Shield affiliate that operates in Pennsylvania, West Virginia, and Delaware, said it lost $221 million on its health plans in ACA marketplaces, or exchanges, in 2014. It expects to lose another $500 million in 2015. As a result, last month Highmark announced it would cut provider rates on average in Pennsylvania by 4.5%, effective April 1, to keep these plans viable.

Plus, a MedPage Today blog earlier this week, Value-Based Care Is Ripping Into Health System Profits, highlighted that reimbursement shifts are taking longer than expected and that the initial investment in value-based infrastructure, combined with a reduction in revenues from removing unnecessary procedures and images, all are having a detrimental effect on profits. So it’s possible that value-based reimbursement models are not yet proving to be an attractive replacement for fee-for-service, at least when it comes to your bottom line. If that’s the case, you can see why some organizations may not be so excited to move quickly away from their historical fee-for-service environment. But we all know that waiting too long may also have negative implications.

Finally, if you are one of the 13,818 physician groups who are eligible for CMS’s Value-Based Payment Modifier Program, less than one percent of you will receive bonuses, and 5,418 medical groups will incur a two percent Medicare reimbursement reduction simply for not submitting their data.

Collectively, there is not a lot of evidence that value-based reimbursement, in whatever form it takes, has dramatically benefited physicians to this point.

I think we can mostly agree that there are various types of reimbursement experiments and transitions taking place. The health care industry is moving frenetically on a reimbursement journey to an unforeseen destination with an unclear timeline and uncertain consequences. Sounds a lot like herding cats.

Leave me a comment on what is going on in your market and your perspective on whether you are strolling or running toward value-based reimbursement.

 

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Larry Sobal is Executive Vice President of Business Development at MedAxiom. He has a 35-year background as a senior executive in medical group leadership, hospital leadership and insurance. As part of his current role, Larry consults, writes and presents on topics relevant to transforming physician practices and health systems.

 

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