Featured in Health Business Daily, May 2, 2017

Report: Insurers Remain Ahead of Providers in Value-Based Payment

Reprinted from HEALTH PLAN WEEK, the most reliable source of objective business, financial and regulatory news of the health insurance industry. Subscribe today!

June 13, 2016Volume 26Issue 21

Payers are ahead of providers when it comes to implementing value-based reimbursement (VBR) as they are on average better positioned to offer the incentives that fuel the shifting of payment structures from traditional fee-for-service, according to a new McKesson report, “Journey to Value: The State of Value-Based Reimbursement in 2016.”

The consultants culled their results from a national survey of some 465 payers and hospitals. McKesson commissioned the report in conjunction with Princeton, N.J.-based research agency ORC International.

The move to value, which is being led on many fronts like through CMS’s Bundled Payment for Care Improvement (BPCI) and the Comprehensive Care for Joint Replacement (CJR) programs (HPW 12/21/15, p. 1), “has hit a tipping point,” according to Andrei Gonzales, M.D., director VBR initiatives, McKesson Health Solutions.

“In our study two years ago we saw that the models were coming along and the thought then was that they were coming along,” he tells HPW in an exclusive interview. “But the growth to now shows that this is a payment model and a method that has taken hold and progressing.”

Health Plan Week

Bundles Are Favorite New Model

Gonzales says other key takeaways from McKesson’s new findings include that bundled payment is the fastest growing model in the VBR universe. “And then the third major observation is that the complexity of these models is still challenging for payers and providers, and they are looking at ways to invest and upgrade their capabilities to be able to support the growth and progression that we are seeing in their activity,” he adds.

According to the results, payers reported they are now 58% along the continuum towards making their payment systems based fully on VBR, a 10% increase since 2014 when McKesson last conducted such a survey. Hospitals are close, but remain at only 50% along the value continuum, up 4% in the past two years. Further, the report said among all payment models within health insurers, 59% would be a mix of capitation, pay-for-performance and episodes in five years, with bundled payment leading.

“Health plans project bundled payment will grow 6% over five years, edging ahead of capitation and shared risk growth. And while both hospitals and payers project bundled payment will account for 17% of medical payment in five years, only half of payers and just 40% of providers say they’re ready to implement bundles. And only a quarter have the tools in place to automate these complex models,” the report said.

Gonzales says it is not surprising that bundled payment is the preferred model right now, but in some ways designing and implementing a bundle is not that easy. “I would say the aspect that makes bundles a little more challenging is the complexity of it. And it does require some additional capabilities for both payers and providers to manage them effectively. The aspect to it that is not very surprising is that this is one model CMS through Medicare is really pushing strongly with programs like the CJR model and the BCPI.”

A full 25% of the lower joint replacements that Medicare pays for are expected to be included in the CJR model, he explains. “So as we see commercial health insurance plans kind of follow CMS, to me that is an indication that CMS sees bundles as a viable model and that they are going to continue to emphasize it. And the rest of the industry tends to take note and kind of figure out how to work with that reality,” Gonzales says.

On the issue of why payers are ahead of providers right now on moving to VBR, he says that “makes a lot of sense in terms of driving the incentives and really being responsible for ultimately how a member sees their overall health care spend and insurance. But providers are really starting to indicate that they are beginning to look at health care in this way, too, through programs to coordinate care to actually deliver on some of the value of bundled payments and shared risk models and patient-centered medical homes.”

Health Plan Execs Chart a VBR Course

As for the bottom-line value of health insurers moving to VBR, there is no clear-cut answer yet on what it all means. “In terms of a dollar figure, that is a pretty tough question to answer at this point,” Gonzales says. “You see different estimates in the industry and through different research that up to 30% of the money we spend in the U.S. on health care is waste. This could be unnecessary procedures, or administrative tasks that are not required like chasing denials that are ultimately paid. Things like that.”

Regardless of specific saving levels, at the top echelon of health insurer management, VBR is accepted as the way to go, with leading voices like Aetna Inc. CEO Mark Bertolini an example of this top-down thinking on the issue, he stresses. “Health plans are seeing the value and understand how they can get the most out of a member’s premium and be more competitive in attracting members to their plans, by showing how they are working with higher-quality doctors and really incenting doctors to deliver the best care at overall lowest cost.”

For providers, the trick is adapting to what appears to be a major shift in how consumers are cared for. “But they see more of a challenge in the need to change their business model to start to focus on maybe different areas of care, like outpatient care vs. inpatient care for a hospital, which is clearly one of the main things we are looking at here,” Gonzales says.

The McKesson white paper is available at http://MHSvbrstudy.com.

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