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Value-based Care

Value-based payments: The case for moving away from fee-for-service as COVID-19 strains hospitals’ revenue

Adam Boehler, Susan Dentzer and Andy Slavitt discuss how taking on risk now can both bolster profitability and improve the health system for everyone.

Tom Sullivan | June 10, 2020

Key Takeaway:
*Organizations that have already taken on risk are not being as impacted during the pandemic and financial crisis
*With declining revenue not expected to return to 100 percent in the near-term, CEOs may find the organization is in a better situation taking on risk than remaining fully in fee-for-service
*It’s true that a major shift to risk is not for CEOs who anticipate a post-pandemic return to full revenue
*Value-base care ultimately will be better for clinicians and patients

Introduction 

COVID-19 has altered the health care landscape drastically in a very short period. Promising trends that had been discussed for years with frustratingly slow progress suddenly accelerated in the pandemic response. Telehealth, HIPAA and state licensure relaxations, the use of consumer apps for communicating with patients and, even more broadly, establishing remote workforces are all currently viewed as having potential to outlast the pandemic.  

Add value-based care to that list.  

That’s the takeaway from the Health Evolution virtual Executive Briefing this week wherein Susan DentzerSenior Policy Fellow for the Robert J. Margolis Center for Health Policy at Duke University, hosted a discussion with Andy Slavitt, Chairman, United States of Care and Adam Boehler, CEO, U.S. International Development Finance Corporation. 

Boehler previously served as Director of the Centers for Medicare and Medicaid Innovation at CMS and Slavitt was acting Administrator at CMS.  

A theme manifested during the webcast that CEOs planning strategies for a post-pandemic future with declining revenue might, at the very least, consider how taking on more risk in a value-based world can be a driver of sustainability, if not profitability.  

The following tenets of a case for transitioning to value-based care are:    

  • Providers with some risk are less impacted by COVID 
  • The upfront investment is not a significant hurdle  
  • The transition to value is not for every CEO  
  • Value-based payments will be better for the clinicians and patients 

Providers with some risk are less impacted by COVID-19 
Consider: To prepare for COVID-19, providers reduced elective surgeries, in the case of Hospital for Special Surgery as much as 85 percent, diagnostic testing across the country is down 60 percent and 54.5 percent fewer patients sought care in a hospital setting as of May’s end.  

But not all providers are struggling financially.  

“One area that has not been negatively impacted financially in the health care system throughout all this has been risk-based organizations,” Boehler said. “Anybody taking real risks.” 

While it remains unclear whether, or even if, the current declining revenues will return to 100 percent for elective surgeries and emergency department visits, the biggest inhibitor to transitioning is fear of the unknown.  

“Better an unknown,” Boehler said, “than a guaranteed negative.”  

Indeed, Slavitt encouraged CEOs to recognize that maintaining a fee-for-service heavy operating model, while understandable, amounts to simply returning to a system that doesn’t work well and won’t last long-term. Those organizations should expect to take a massive revenue cut in the not-so-distant future.  

The upfront investment is not a significant hurdle  
Another notion hindering value-based care is what Boehler described as a “bit of a myth,” that the transition requires a large investment in technology and expertise.  

“I’ll share a secret from my experience running a large value-based group,” Boehler added. “There isn’t that much investment.”  

Instead, the biggest obstacle is a culture shift while having a foot in both worlds, Boehler continued, so simultaneously earning money by increasing volume and while decreasing volume.  

Boehler added that eliminating the incentive to increase overall volumes can shift everything, including among high-quality low utilization providers. And the technology that is used for discharge planning based on certain criteria is not a big expense.  

“Maybe eventually you reach a point of diminishing returns where you need heavy technology but not at the beginning,” Boehler said. 

The transition to value is not for every CEO  
COVID-19 has put tremendous strain on so many health care enterprises, from solo primary care physicians to large multi-state systems, that are now planning how to claw their way back out with state economies re-opening.  

“Persuading a lot of people right now that taking on risk is a good thing … that’s an uphill battle,” Dentzer said. “How do we instill greater confidence that moving forward on value-based payments really is the way to go?”  

Boehler answered that direct contracting was on the CMS models that had a positive response and organizations were applying in February and March, until COVID-19 essentially forced everyone to move those to the back burner. The initial response to the Next generation ACO Model, meanwhile, was 2-3 times what he expected.  

“Now that the floor just dropped, if I’m the CEO of a health system, do I believe that FFS revenue is going to come back like before?” Boehler asked. “If that answer is yes, then stick with what you have. But if the answer is no, and elective care will be down 10-20 percent, value-based care is a way to move to a baseline that’s above and beyond where you were.”  

Value-based payments will be better for clinicians and patients  
Slavitt added that value-based care is among the aspects of the U.S. health care system with the opportunity to emerge from COVID-19 stronger than when it entered the pandemic.  

“We ought to pledge to come out of this as a health care system better than we entered it,” Slavitt said. 

He pointed to four critical issues: equity, prevention, delivering care where it’s needed and building resiliency into the health care system.  

Slavitt acknowledged that value-based programs are not perfect and will need some adjusting, but having the ability to wrap services around patients and their needs and the way they live is simply not doable very well under fee-for-service medicine.  

On the clinician front, creating incentives for taking care of the sick or populations equips physicians with the freedom to practice medicine the way they prefer to, Slavitt noted, rather than having every day dictated to them in four minute increments. Instead, they can make the best decisions based on the patient population and available resources.  

“None of this can happen if we don’t have a system driven by value-based payments,” Slavitt said.   

Conclusion  
What health care CEOs, and everyone else for that matter, want now is for health care as a system to learn from the pandemic, maintain as appropriate the substantive and rapid changes COVID-19 inspired and, ultimately, forge a more resilient and patient-centered system with clinicians performing at the top of their license and ability for the future.   

Optimistically, COVID-19 could prove to be the impetus that accelerates the transition to value-based care, as it appears to have done for telemedicine, if only because organizations that don’t move in that direction face challenges of negative revenue that are particularly difficult when operating on small margins.  

“I hope positive things about value-based care are coming out of it,” Boehler said. Slavitt: “Why not use the moment to do this?  

 

Register for an on demand recording of this executive briefing

About the Author

Tom Sullivan, EVP & Editor-in-Chief of Digital Content

Tom Sullivan brings more than two decades in editing and journalism experience to Health Evolution. Sullivan most recently served as Editor-in-Chief at HIMSS, leading Healthcare IT News, Health Finance, MobiHealthNews. Prior to HIMSS Media, Sullivan was News Editor of IDG’s InfoWorld, directing a dozen reporters’ coverage for the weekly print publication and daily website.