Is Your Organization Ready for Value-Based Payment?

In the opening presentation of the National Association of Managed Care Physicians’ Spring Managed Care Forum 2014 in Orlando, entitled “Are You Ready for Value-Based Payment,” Christopher Kalkhof, FACHE, and Amol Navathe, MD, discussed their work assisting healthcare organizations to optimally strive for sustainable business models that will prevent margin erosion during a time when the population of healthcare consumers is increasingly aging and using more resources associated with chronic disease and end-of-life treatments.

Of course this is all happening as administrators attempt to adjust to the Affordable Care Act (ACA), the stated goal of which is to achieve optimal care at minimal costs. Thus, there is an even greater need to develop business models that achieve sustainable margins.

In discussing what future payer contracts might look like, Mr Kalkhof presented a spectrum of examples ranging from the least sophisticated fee-for-service (FFS) contract to collaborations and finally to a fully integrated system of care. Most importantly, revenue is tied to up-front risk-sharing agreements.

To date, the FFS approach has been the most popular. However, this is too highly dependent on volume and population management, explained Mr Kalkhof, and FFS does not appear to be a financially sustainable option for most healthcare organizations.

So Mr Kalkhof’s and Dr Navathe’s clients want metrics. Payers are increasingly demanding them; not asking. Given this challenge, Mr Kalkhof elaborated on risk-based models that focus on the long-term goals of increasing savings and protecting margins while continuously monitoring metrics.

Risk-based cost-sharing models were used to identify which variables needed tweaking. Highlighted variables included utilization rate volume, unit cost, payer payments, and shared savings.

Ultimately, the end goal is the simultaneous transformation of the clinic and the business, according to Dr Navathe. This kind of transformation absolutely requires an outside team that has experience from the perspective of both the business manager and the clinician if they are to successfully achieve alignment.

Mr Kalkhof and Dr Navathe said they are frequently asked by organizations why they should move away from the FFS model; to which the response is, “How are you going to be successful in meeting your contracts?” Other slightly more open-minded healthcare organizations have responded by initiating small clinical changes.

Three exemplary factors affecting cost savings were presented. First, it is critical to achieve hospital alignment with all physicians. Second, in the clinical setting—big savings have been seen in the joint replacement sector, for example, when special focus was placed on pre- and post-op risk management. Lastly, helping patients get care in the proper setting (ie, outpatient, emergency department, urgent care, etc) can create great cost savings as well.

Another useful type of analysis they developed focused specifically on biologicals, which tend to be much more expensive than the average pharmacotherapy. Now, they can help organizations proactively plan how they will implement these expensive drugs.

Mr Kalkhof and Dr Navathe also use various algorithms to identify deviation from evidence-based guidelines and standard clinical assessments. The data they obtain are presented to the physicians and together, they attempt to seek procedural alignment amongst the group of physicians.

According to Dr Navathe, the major risk categories are in product pricing, execution risks, and infrastructure risks. They pride themselves particularly on minimizing the execution risks. Much of the bottom-line risk minimization is achieved through obtaining data to help identify areas that need the most attention.

Physician readiness alignment assessment clarifies the next step. The major factors that are essential to leveraging success generally include IT systems, quality metrics, physician alignment, care coordination, finance underwriting, contract networking, and patient engagement. Proper patient engagement in particular significantly impacts on chronic disease management and end-of-life treatment.

At the end of the session, an audience member pointed out that these efforts have been undertaken many times before; and they asked how this time would be different. According to Dr Navathe, the difference is that many past attempts focused solely on obtaining the data, and that’s where the efforts stopped. Mr Kalkhof and Dr Navathe have taken the next step and widened the focus to include integration of all of the cogs in the healthcare system.