As COVID-19 unfolded across the nation, the risk for health systems with an entirely fee-for-service reimbursement system was exposed. As elective procedures were halted, fee-for-service-based health systems relied on internal cost management and government subsidies as their primary source of financial stability. Now nine months into the pandemic, it is increasingly clear that COVID-19 may just be the disruptive force that causes those health systems to move decisively toward a reimbursement structure more aligned with value.
So, during the summer, we interviewed 450 Vizient® member hospitals to learn more about how their experiences with COVID-19 will reshape future value-based care models. Among the findings, which were issued in a recent white paper, was that 83% of health systems interviewed believe the shift to value-based care will accelerate as a result of the pandemic. Here are five value-based care strategies that should be top of mind going into 2021.
Redefine perspectives on risk; diversify payers, partners and arrangements
Alternative payment models will continue and will likely accelerate. Not every organization needs to take on full risk, as in a Kaiser Permanente-type integrated care and coverage model, but the evolution of the overall payment structure is a necessity. Pursuing a diversified portfolio of risk-based products encourages value-based behavior and protects providers from volatile swings in volume.
Expect more population-based payments and/or capitation from governmental payers. The Center for Medicare & Medicaid Innovation is exploring these options in several of its new models (Direct Contracting and Primary Care First). Prospective revenue-based alternative payment models beyond those in traditional Medicare (commercial, Medicare Advantage, Medicaid managed care organizations) pursued through other payer-provider partnerships will continue to evolve, particularly in the Medicaid space where we have seen much attention.
As a result of coverage churn associated with the pandemic and preparing for a potential Biden-led public option, commercially insured patients will be in even higher demand, driving organizations toward direct-to-employer arrangements more than we have seen historically.
Health systems should renew their value-based care planning to incorporate diversification of payment models and further refine their payer strategies at a time when payers are better positioned, and in many cases, more open to these conversations.
Optimize internal costs
Regardless of the payment model, managing your internal costs now will help to position your organization for success. It isn’t easy and many health systems may lag behind in making this a priority due to focusing on other areas or a lack of data to assess performance. However, for organizations that are not among the better performers, now is the time to make changes.
Start by fully understanding your costs and how they compare to other organizations. Know where there is margin and what is subsidized (or cross-subsidized), sometimes making tough decisions on future service offerings and investments. Engage physicians and other team members around improving and more effectively managing internal costs and clinical variation.
Evolve systems of care
Between patients isolating at home and the mandated pause of elective procedures, the pandemic dictated numerous changes to the care delivery system. This included increasing delivery of services at home and other ambulatory opportunities, decreasing unnecessary emergency department utilization and providing coordinated, team-based care. This type of site-of-care dispersion will continue to happen. The pandemic has created an environment in which innovation and acceleration of care delivery redesign is not only supported, but essential.
The successful implementation of historically underutilized options for care such as virtual health care and skilled nursing at home has advanced health delivery systems by years in a matter of months, shifting the organizational mindset from “can it actually work?” to “this is a feasible care option.” Health systems should determine where innovations such as these can be most effectively deployed to provide the best outcomes for patients and providers alike. An ambulatory and low acuity site of care strategy should be prioritized.
As reimbursements continue to shift away from volume and toward value, these efforts will be integral to financial success. Reframing strategic discussions to include questions such as “how many patient lives do we need to manage given our current footprint?” is an important step and makes the patient population the focus of the strategy. Careful modeling of the financial impact of site-of-care shifts against projected alternative payment model performance and methodologies allows health systems to clearly understand financial implications and provides opportunities to prioritize value-based care.
Keep community partnerships, health equity and public health at the forefront
Much as COVID-19 has changed the role of health systems, it also has exposed the health care disparities across different geographic regions and demographics. In order to address this public health imperative and succeed in a value-based environment, health systems will need to view its public health role in a different light.
Health equity cannot be ignored. Your community resources should become a large part of the system of care. Break down the silos between social determinants of health and medical care delivery. Establish and maintain better connectivity to your community partners and incorporate community health improvement activities into the overall strategy.
Stable, prospective revenue streams such as those available via certain value-based arrangements can help systems obtain a return on their investments in social programs and partnerships.
Prioritize physician alignment
As COVID-19 pushes health systems toward value-based care, success will require engaged, aligned, and properly incentivized physicians. Whether you optimize employed physicians or partner with independent physicians, it is critical to implement alignment models that establish more enduring partnerships.
Consolidation and provider hesitation have allowed for new competitors in the form of private equity firms, physician enablers, and even payers, which now have greater financial means than before. The time is now for health systems that are leading clinically integrated networks, accountable care organizations, bundled payment models, and similar efforts to find a formula for success that will improve the stickiness of these models with physicians and other providers.
Fully understanding the implications of COVID-19 on our nation’s health care system will take time, but the experience so far has shifted the balance of power to those holding medical risk. Although fee-for-service will likely remain while the system evolves, shifting accountabilities and innovative actions are bringing much-needed momentum to our path to value. The future of value-based care will be tied to the willingness of payers to propel us further and the boldness of providers who will accept and manage risk in new ways.
About the authors:
Drawing upon over 20 years of experience in health care management and strategy, Tawnya Bosko, PhD, DHA, collaborates with health systems and payers to develop innovative and detailed plans for strategic partnerships and the transition to value-based delivery models. She has advised clients on strategies for development of clinically integrated networks, implementation of shared savings, bundled payments, capitation and other alternative payment models; as well as the supporting delivery system redesign strategies to enable organizations to succeed in these models.
As a Sg2 Principal, Kristin Oberfeld specializes in collaborating with health care providers to develop and implement strategies designed to successfully transition into value-based care. She has extensive experience in numerous project areas including physician alignment, partnerships between payers and providers, alternative payment models across multiple payer segments, the development of value-based delivery networks, and innovative gainsharing and incentive payment design. She is a continuous innovator of value-based care success, a mentor to consultants, and an industry presenter.