After three decades of CEOs, policymakers and thought leaders discussing how to transform the industry from being reliant on fee for service payments into value-based models, with limited pockets of success, the COVID-19 pandemic has presented an opportunity to accelerate new models of care delivery that are widely-needed.
“People really are and should be questioning how well fee for service has worked and how it has created more disparities, especially in the pandemic,” said Mark McClellan, Director, Duke-Margolis Center for Health Policy & Robert J. Margolis, MD, Professor of Business, Medicine and Policy, and a Health Evolution Forum Leadership Fellow. “We’re seeing disparities emerging between organizations that actually have made this shift to a focus on value, both in care delivery and in the aligned payment supports that go along with it, and the organizations that haven’t.”
To address that as well as pre- and post-pandemic issues, the Health Evolution Forum, consisting of nearly 200 provider, payer and life sciences CEOs, has preliminarily identified the following areas of focus that are critical to advancing new models of care delivery:
- Leveraging value-based payments to increase health care value and resilience
- Reinventing primary care and preventative care models
- Advancing innovative home-based chronic care models
This piece, the first in a three-part series, examines value-based payments. Subsequent articles will delve into reinventing primary care and advancing home-based chronic care models.
Fee for service is inhibiting innovative care models
Among the reasons that fee-for-service has lasted this long is that it has simply been too simple for CEOs not to pull that lever for revenue. What’s more, many of the large enterprises are led by people who began their careers in fee for service environments and may be reluctant to change.
“Whether clinicians, hospitals or delivery systems, as well as payers, everyone has been doing too well up until the pandemic that they didn’t want to make the necessary changes. The culture resisted it,” said Lee Sacks, MD, former CMO, Advocate Aurora Health, and a Forum Senior Fellow. “This is an inflection point because everybody ran into serious financial issues and is looking at how to do business differently going forward.”
Fee for service, however, is inhibiting innovative new models of care delivery. And without payment incentives structured to support transformation in the broader health care system it will be very difficult drive real change.
“It’s not easy for a traditional fee for service organization to actually partake in risk-based arrangements and execute against them,” said Gaurov Dayal, MD, President, New Markets and Chief Growth Officer, ChenMed, and a Forum Fellow. “There are a lot of buried dead bodies in the wake of that.”
In a preliminary survey, Forum participants identified the following barriers in deriving more revenue from value-based arrangements:
- Difficulty entering and managing different VBP contracts across various partner entities: 76%
- Changing the culture from FFS to a VBP mindset: 52%
- Significant infrastructure or data redesign required: 40%
- Lack of clarity on how to implement VBP models: 20%
- Insufficient funds to invest in the transition to VBP models: 16%
Despite the challenges, examples of organizations that have thrived under new models do exist.
“ChenMed, Oak Street and Iora are disrupting fee for service successfully,” Sacks added. “And we’re going to see more of that.”
What we know thus far
In order to get more substantial impact, a real shift in revenues beyond shared savings and into partially bundled or fully capitated models is the way to achieve success.
“CMS has now implemented 40-odd models that they’ve implemented at CMMI over the past decade,” McClellan said. “In general, I think the models that achieved more of an impact on outcomes and spending are those that aimed for bigger and more systematic shifts away from fee for service – not just narrow or incremental shifts.”
McClellan added that CMS is looking to support future models that shift away from fee for service, whether that means a modified version of specialized oncology care, more significant iteration of longitudinal care or episodic-based payments.
“CMS hasn’t worked out all the details, and the agency is asking health care providers to do even more in terms of reforming care than they had to do for the previous voluntary models,” McClellan explained. “There’s a real need for assistance in aligning what works in payment reform from a policy standpoint.”
In August, the Health Evolution Forum ratified Work Groups to address each of the three critical action areas outlined above. CEOs and other participants will identify best practices already being used successfully in the industry and then disseminate them across the industry.
Forum Fellows and leaders, in turn, are committed to both employing those practices and advocating that their peers do as well.
“The times we’re living in have given people pause about depending on fee for service. They’ve revealed that the way we’re delivering care now just isn’t doing it for many of the kinds of services that people need,” McClellan said. “As we go forward and there’s some discussion about continuing with telehealth waivers or site of service waivers, it’s even clear that it’s very hard to do that effectively while staying in a fee for service environment, especially in a tough economy when we really need to be taking steps to get costs down.”