Top Challenges 2021: #8 Transitioning to value-based care models

Medical Economics Journal, Medical Economics January 2021, Volume 98, Issue 01

In late 2020, Medical Economics® asked our physician audience what they thought would be the most challenging issues they will face this year. This is what they told us.

Among its other effects, the COVID-19 pandemic has highlighted the growing importance of value-based payment models for primary care practices. Especially in the early stages of the crisis, when patient visits plummeted, value-based contracts provided a financial lifeline to practices that had them.

“Why enter into these contracts? First and foremost, it’s financial stability,” Tim Irvine, M.D., a physician at IKP Family Medicine in The Woodlands, Texas, told attendees of the Medical Group Management Association’s 2020 Medical Practice Excellence conference in October.

IKP has about 6,000 patients under capitated or pay-for performance models. “The monthly capitation checks from these contracts are a dependable revenue stream that evens out the ups and downs of the revenue cycle,” he said.

Value-based contracts can also help practices obtain resources for improving patient outcomes, according to former CMS administrator Mark McClellan, M.D., PhD. Addressing the National Association of Accountable Care Organizations 2020 fall conference, McClellan cited a CMS study showing that the further along in transitioning to value-based care a practice was at the start of the pandemic, the better its response in areas such as obtaining personal protective equipment and the ability to identify patients at high risk for complications if they contracted COVID-19.

But transitioning from traditional fee-for-service medicine to payment models based on outcomes and/or that include financial risk is a lot easier said than done. That’s especially true for small independent practices, many of which may not have the resources to operate successfully under value-based contracts.

“Effectively implementing a value-based model requires more than simply changing the payment methodology,” Norman Chenven, M.D., vice chairman for the Council of Accountable Physician Practices, wrote in a 2019 blog post for Physicians Practice. “Successful transformation requires realignment of providers in order to design and deliver proactive care and prevention.”

Moreover, even before the pandemic struck, practices were under escalating pressure from the federal government to adopt value-based contracts that include some downside risk, i.e., absorbing some of the losses if its care costs exceed targeted amounts or it doesn’t meet its quality goals. In 2018 CMS announced its Pathways to Success program which, among other features, limited how long accountable care organizations (ACO) could remain in a Medicare Shared Savings Program (MSSP) without taking on financial risk.

Following the program’s implementation in 2019, the number of MSSP participants fell nearly 8%, according to a report from the Medicare Payment Advisory Commission, an indication of the inability, or reluctance, of many ACOs to take on downside risk.

Even so, uncertainty over the long-term viability of fee-for-service medicine will likely cause more practices to participate in value-based contracts going forward. The challenge then becomes how to transition successfully between the two models. Writing in Physicians Practice, Joe Nicholson, D.O., chief medical officer of the consulting firm CareAllies, advises practices to start small and gradually increase the percentage of their revenue tied to risk-based contracts.

He further suggests focusing first on existing targets for clinical improvements, such as mammogram screenings or HbA1c testing for patients with diabetes. “Build on those programs to close any final gaps and then address more complex needs,” he advises.

An important benefit of some risk-based contracts, Nicholson adds, is providing incentives to address social determinants of health (SDoH), such as food insecurity or access to transportation, which have a significant impact on patient outcomes. Thus, practices should investigate a payer’s policies regarding SDoH before entering into a contract with them.

Nicholson also advises practices to ask:

  • Does the payer’s quality or population health reporting provide insights into nontraditional care gaps, such as behavioral health?
  • Which payers have similar requirements for quality reporting, so that the practice can simplify testing and scale risk-based arrangements?
  • Does the payer’s approach to utilization management empower the practice to make decisions about its service and treatment offerings?

“At their core, risk-based models should inspire the flexibility to deliver care in the manner most effective for patients’ overall health,” Nicholson writes.