Healthcare leaders are working diligently toward value-based readiness despite the challenge of building competency for a new model before it is financially viable.
This article first appeared in the July/August 2016 issue of HealthLeaders magazine.
After years of experimentation and study, the transition from fee-for-service to value-based care is finally gaining momentum, with large numbers of providers working diligently toward achieving its implementation. In fact, survey results from the 2016 HealthLeaders Media Value-Based Readiness Survey indicate that 94% of respondents are on a path to value-based care of one form or another, pointing to nearly universal acceptance of the mission.
On the other hand, while nearly every provider is engaged in this activity to a degree, not all providers are evolving at the same pace, and there is variability between organizations in terms of the level of commitment to value-based care activities. For example, approximately one-third (35%) of respondents say they are engaged in early efforts/pilot programs, another third (35%) say they are on a value-based direction, and 24% say they are somewhere in between. Only 6% say they are not currently pursuing value-based care.
Previous HealthLeaders Media research (2016 HealthLeaders Media Industry Survey) indicates that healthcare organizations' move to value-based care is progressing at a slow pace mainly because of inadequate payer incentives and uncertainty about the revenue stream—at 23% and 15%, respectively—but the picture is becoming clearer in this regard, and increasingly providers are making the leap and investing in their organizations in preparation for its arrival. However, while no one wants to be behind the competency curve when it arrives, it can be expensive to build competency for a new model before it is financially viable, which is why providers remain cautious.
Preparing for value-based care. Respondents fall into two relatively equal camps when it comes to their organizations' level of strength in preparing for value-based care, although they are stronger in some areas than others. For example, their outlook is slightly stronger for overall preparation for value-based care delivery changes, with 55% saying that their level of strength is very strong or somewhat strong, and 46% saying it is very weak or somewhat weak. Likewise, respondents indicate that their overall preparation for value-based financial changes is also divided, with 51% saying that their level of strength is very strong or somewhat strong, and 49% saying it is very weak or some what weak.
Only the response for overall preparation of a value-based infrastructure has less than 50% reporting a positive level of strength, with 44% saying that their level of strength is very strong or somewhat strong, and 57% saying it is very weak or somewhat weak. Note that it's not surprising that preparing for a value-based infrastructure is the area respondents feel their organization is lagging—investment costs can be substantial.
Barbara A. Walters, DO, is executive vice president and chief population health officer at Trinity Health, a Livonia, Michigan–based not-for-profit with facilities in 21 states, and the lead advisor for this Intelligence Report. She says that value-based infrastructure change is more difficult for some systems because it requires capital expenditures possibly without the full support of value-based revenues, and that progress on clinical and financial competencies are further along because they are less capital-intensive.
"At Trinity Health, we're a little bit stronger clinically because of this. The most difficult part is the capital investment for infrastructure. Things are coming together on the clinical side of the industry faster, and people are having the conversations that they need to have."
Financial and care delivery competencies. Healthcare organizations are working to develop value-based competencies across a number of areas, with finance and care delivery being among the most important. This makes sense given that the essence of the new model is providing high-quality care at more affordable costs than the fee-for-service model.
Respondents say that the top financial area of value-based care that their organization has committed to developing or has developed a competency is value-based performance metrics (73%), followed by collaborative relationships with payers (65%), and aligning employed physicians/providers (65%). Aligning independent physicians/providers (39%) receives the second-lowest response as, at least initially, providers are more focused on developing fundamental metrics and risk-based relationships with payers and employed physicians.
"Alignment is easier to do if you have a wholly employed group, and generally these are the groups that are going down this road first," says Walters. "If you employ everyone in your network and you're a multi-specialty employed group or an integrated delivery system, you don't really need to bother with the independents."
Another area that is critical to making the transition from fee-for-service to value-based care is developing competencies around care delivery. Respondents indicate that the top care delivery areas of value-based care their organization has committed to developing or has developed a competency is care coordination/guiding patients to appropriate care (80%), encouraging patients to be engaged in their own care (70%), and clinical integration (68%).
Interestingly, longitudinal patient care (31%) falls at the bottom of the list of responses, which likely reflects the early stage at which most providers currently reside in the transition to value-based care. However, longitudinal patient care is expected to play an increasingly important role as providers enhance their value-based competencies and start managing patient care over longer periods of time and multiple care episodes.
Care processes and systems. According to respondents, existing care processes and systems are still in the early stages of value-based development, which is consistent with other findings in the survey. For example, slightly more than half of respondents (52%) say that they are in the beginning stages of evolving their processes and systems to support their care teams and practices in coordination, communication, and patient outreach efforts. And while only 3% say that their care processes and systems are fully mature, a fairly large percentage (33%) say that these are evolving to a mature state. Only 11% say that they are still evaluating required changes.
Communication is an important element of engaging patients in their care, one of the key tenets of the value-based model. Perhaps not surprisingly, respondents say in-office visits are the most effective communication method for supporting patients in achieving self-management to improve value-based outcomes, with 87% saying this is strongly effective or moderately effective. Responses for patient portal (61%) and email/secure messaging (60%) complete the list for the top three strongly effective or moderately effective methods.
Interestingly, the list of communication methods that respondents say are not effective is led by wearables (35%), televisits (30%), and social media (25%). While most respondents do characterize these methods as either strongly, moderately, or slightly effective, the high negatives are likely because wearables are mostly used by healthy people to stay fit (although healthcare-specific applications are beginning to emerge), and televisits and social media use as healthcare communication platforms are still evolving and interest in their usage may be generational.
Walters says that social media in particular has vast potential as a patient communication platform, and that its use is becoming more widespread among all generations. "One of the most effective population health tools today is social media, and it has been for the last 15 years. And it is absolutely composed of baby boomers, and one of the best examples of that is a group called PatientsLikeMe. I think that it is incredibly powerful and effective."
PatientsLikeMe is a for-profit health information sharing website. The platform allows patients to partner in real time with doctors, researchers, and companies to improve the understanding of their disease and accelerate the development of new treatments.
IT competency. IT is expected to play a critical role in the effective delivery of value-based care, and developing competency in this area is a strategic priority for most providers.
Within IT, respondents indicate that EHR elements lead the list of areas their organization is committed to developing or has developed a competency for value-based care. The top three responses are enhancing provider efficiency through EHR usability (73%) and EHR interoperability (73%) in a tie, and EHR standardization among care partners (65%). Interestingly, prescriptive analytics (42%) receives the lowest response, but this will likely change over time as providers continue to develop analytics skills and invest in IT staff to leverage this important tool.
The good news for respondents is that the IT areas where they indicate they are developing value-based competencies are also areas of organizational strength. For example, 55% of respondents say that their EHR standardization among care partners is very strong or somewhat strong, and 55% say this for EHR interoperability. Completing the top three for very strong and somewhat strong responses is more rigorous data accuracy standards than required by fee-for-service (51%).
IT areas that respondents say are very weak or somewhat weak are prescriptive analytics (67%), staff actuarial skills for financial risk assessment (64%), and integrating data sets from various sources, including payers (61%). Clearly, more work needs to be done in these challenging areas.
Walters says integrating data sets from different sources is part of an IT challenge that exists for both payers and providers, some of which is exacerbated by the coexistence of both fee-for-service and value-based care models.
Payment models. Given that the transition from fee-for-service to value-based care is in the early stages, most providers as a necessity operate in an environment where both models are present. While this can be inefficient and cause some difficulties for providers, it does offer an opportunity from a research standpoint to compare the models side-by-side in actual healthcare situations.
Respondents in our survey say that the fee-for-service with no value-based component payment model is the least effective model in terms of cost and quality improvements; nearly half (46%) of respondents say that it offers neither improved outcomes nor lower costs. This result is more than double the response of any other payment model on the list, and it also has the highest participation rate by respondents—only 4% say they have no involvement with this program. At the other end of the spectrum, Medicare Shared Savings Program with upside rewards and downside risks (9%) receives the lowest response for yielding neither improved outcomes nor lower costs; still, only 20% report improved outcomes either with or without lower costs, and only 10% indicate lower costs, indicating that the model has yet to demonstrate exceptional value.
Medicare Shared Savings Program with upside rewards only (17%) has the highest response for improved outcomes and lower costs, although its response is only marginally higher than the other payment models, both fee-for-service and value-based. Interestingly, the top three responses for improved outcomes, no cost reduction are all fee-for-service based: fee-for-service with upside rewards, such as performance awards (26%), fee-for-service with no value-based component (20%), and fee-for-service with downside risk, such as reimbursement penalties (17%).
When asked to rank the possibility of the various models evolving to become their organizations' principal value-based payment model, respondents say that fee-for-service with upside rewards, such as performance awards (23%) is the top-ranked payment model, followed closely by shared risk, such as ACO (20%), and bundled payment program(s) (19%). The payment models receiving the lowest responses are partial capitation (4%) and full capitation (5%), indicating respondents' low expectations for these value-based models.
Value-based model growth. While the transition to value-based care is in the early stages of its adoption, the outlook for growth in the share of patients in value-based programs is robust. For example, just 17% of respondents say that at least 50% of their patients are currently in value-based programs, but in three years' time, that more than triples to 64%.
Respondent expectations for growth in the percentage of patients in value-based programs is significant: the under 25% share segment is expected to decline by 51 points, and is the only segment predicted to fall; the 25%–49% segment increases 5 points; the 50%–74% segment increases 25 points; and the 75%–100% segment increases 22 points. These are dramatic changes in share, particularly when you consider they are for a three-year time period.
Similarly, respondent expectations for net patient revenue growth from value-based programs is also bullish. Respondents say that their net patient revenue percentage is currently 20% value-based and 80% fee-for-service, and they say these will go to 50% each in three years. The results indicate that value-based models will soon reach parity with fee-for-service.
At Trinity Health, Walters says that its targets are even more aggressive. The current expectation is that 75% of net patient revenue will be value-based in 2020. She says there are numerous factors for all providers to consider as they make the value-based journey.
"You need a willing provider group and you need a willing payer partner. And then you have to agree on what value-based care is in a financial sense. Does it mean the same thing to both parties?" According to Walters, some questions to ask include: Will providers get paid for meeting certain quality measures for certain subsets of patients? Does it mean meeting targets that include a medical expense target as well as some quality measures? And if you meet the target, do you get a bonus? Do you share in that bonus? How much do you share in the bonus? Which patients are covered?
Perhaps one of the greatest challenges of preparing for value-based care is simply the sheer number of permutations that the model offers. Every organization will have to sort through the various combinations of upside and downside risk, bundled payments, and capitation, and ultimately decide what works best for them and their patients.
Jonathan Bees is a research analyst for HealthLeaders.