Partnering For Value: The Managed Care Perspective on Moving to Value-based Financing

Presented at Askesis’ 13th Annual User Group Conference by Dr. Matthew Hurford- VP, Community Care Medical Affairs-Community Care Behavioral Health

Value based contracting is a strategy to promote quality and value by linking payment to outcomes which contrasts with fee-for-service, that incentives volume of care.

Costs are unsustainable with the current fee-for-service model.  Value based contracting is a means for improving the quality of care by the sharing of risks and incentives between contractors and providers, as they pertain to specific outcomes.  If providers meet the outcome thresholds, they can earn bonus payments above and beyond contracted rates.

Medicare is leading the charge and targeting 85% of their payments be linked to quality in 2016, including 30% from alternative payment models.  Those rates increase to 90% and 50% by 2018.

Examples of Value Based payment models reviewed included:

  • P4P – Pay for Performance
        - Payment tied to specific metrics
        - Low risk to the Provider, but there is often a lag in payment, the incentives aren’t adequate, and 
          the financial relationship is one-side
  • Bundled payments or case rates
        - One-time payment for an episode of care
        - Includes outcome measures for measuring quality, and the goal is to keep lengths of stay in
          check to help prevent over utilization
        - More risk for the provider and there is the risk of shorter lengths of stay once the payment has
          been earned
  • Capitation
        - Payment for an entire population
        - Highest risk for the provider because they assume responsibility and risk for the healthcare
           needs of said population
        - This model is complex across the board -  clinically, administratively, and analytically

Dr. Hurford strongly feels that both providers and payors want the same goal, quality patient care.  Providers want to demonstrate quality in the care they provide, and payors want to pay for value.  Each has a vast amount of information and data, but no individual party can demonstrate the populations they serve/pay for are improving.  By working as partners and sharing information, the data can demonstrate value for both sides.

Dr. Hurford reviewed the ACT P4P Initiative pilot program, which had a goal of reducing inpatient mental health utilization (IPMH) among ACT patients.  This was a collaborative effort between providers and payors in Allegheny County, PA.  Providers were able to earn up to 110% of current contract dollars:  80% on services provided, an additional 20% for meeting the IPMH goal, and an additional 10% for meeting long term IPMH cost reduction goals. 

Each of the two participating providers were able to earn the full 20% withhold and the 10% bonus in the both years of the program.  In addition, by the second year of the pilot, the providers were able to reduce costs 76% and 72% from the baseline measure.  In addition, the annual average inpatient mental health days were reduced from 16.2 to 6.8 days.

Dr. Hurford stressed that collaboration is key, as well as setting attainable goals, while recognizing the anxiety such changes may bring to organizations.  It was suggested that providers should look for or create opportunities to collaborate, as well as asses their strengths and determine how to demonstrate that their patients are improving.