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May 2015

Implementing Value-Based Payment Reform: Learning From the Field of Practice Report Blasts Health Care Billing Methods as Antiquated, Frustrating CMS Innovator: New Models are Changing Healthcare

Published by Montdor Medical Media, LLC Co-Publisher and Managing Editors Iris and Michael Goldberg Contributing Writers

Douglas Conrad Virgil Dickson Beth Fitzgerald Henry Powderly Russ Alan Prince Layout and Design - B&L Printing, Co. Inc. New Jersey Physician is published monthly by Montdor Medical Media, LLC., PO Box 257 Livingston NJ 07039 Tel: 973.994.0068 Fax: 973.994.2063 For Information on Advertising in New Jersey Physician, please contact Iris Goldberg at 973.994.0068 or at igoldberg@NJPhysician.org Send Press Releases and all other information related to this publication to igoldberg@NJPhysician.org Although every precaution is taken to ensure accuracy of published materials, New Jersey Physician cannot be held responsible for opinions expressed or facts supplied by its authors. All rights reserved, Reproduction in whole or in part without written permission is prohibited. No part of this publication may be reproduced or transmitted in any form or by any means without the written permission from Montdor Medical Media. Copyright 2010. Subscription rates: $48.00 per year $6.95 per issue Advertising rates on request New Jersey Physician magazine is an independent publication for the medical community of our state and is

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C O N T E N T S

Implementing Value-Based Payment Reform: Learning From the Field of Practice

CONTENTS

Report Blasts Health Care Billing Methods as Antiquated, Frustrating

CMS Innovator: New Models are Changing Healthcare

The Four Essential Elements of a Connected Care Telemedicine Practice

Private Medicaid Plans Face Sweeping New Regulations Under CMS Proposal

4 Affiliated Practice

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May 2015 5

Cover Story

Implementing Value-Based Payment Reform: Learning From the Field of Practice By Douglas Conrad

or the last four years, our team at the University of Washington (UW) has been evaluating seven value-based payment reform programs in six states for the Robert Wood Johnson Foundation (RWJF). We found that although the foundational work of value-based payment is proceeding apace for the most part, what’s missing is the sense of urgency required to move payers and providers toward patient-centered global payment based on value. Clusters of innovation are emerging across the country, and these experiments are generating valuable insights into the design and implementation of value-based payment — both what works and what doesn’t. We recently published an article in the Milbank Quarterly that presents our research assessing these pilot programs in Washington, Oregon, Pennsylvania, Maine, New Hampshire, and Massachusetts, all of which sought to move away from fee-for-service (FFS) payment to value-based payment that rewards improved processes of care, better health outcomes, and reduced cost. Some are still at it. Some failed. In this post we address some of the reasons why. Our findings complement those of Suzanne Delbanco, whose yearlong series has provided Health Affairs Blog readers with a thorough tour of the payment reform landscape.

Payment Reform The seven RWJF-sponsored projects share a fundamental approach to payment reform: each is founded on a multi-stakeholder coalition, typically including employers, insurers, provider organizations, and consumer organizations. Collectively, the value-based payment models span a broad array: global payment, per-member-per-month care management, recalibrated fee-for-service, shared savings, reference pricing (equal pay for equal effectiveness), and “real-time” pay-for-performance (P4P). The projects generally engage in care delivery re-design—in the form of patient-centered medical home models and use of nurse care managers in care coordination—prior to implementing value-based payment. New Hampshire, Maine, Washington, and Oregon represent clear examples of this “delivery system reform first” strategy. In projects where value-based payment is gaining traction, several factors are facilitating that progress: • Strong leadership from an experienced, honest, trusted convening organization that can effectively broker competing interests: For example, the Pittsburgh for Regional Health Initiative (PRHI) in Pittsburgh is fashioning a virtual accountable care network (ACN) of seven hospitals — exploring bundled payment as an incentive for improved care management of chronic conditions and reduced readmissions. The first participating hospital, emphasizing care coordination, demonstrated a 44 percent reduction in 30-day readmissions for patients with chronic obstructive pulmonary disease, which has motivated the creation of a primary care resource center by converting excess hospital capacity into a patient-centered medical home. PRHI has received a $10.4 million Health Care Innovation Award from the Center for Medicare and Medicaid Innovation for its ACN, and is stimulating a sense of urgency for payment reform by broadening the ACN to more hospitals and bringing significant resources to the table. • Concentrated and sustained market pressure from organized purchasers: The “state as first mover,” in Washington, New Hampshire, Oregon, and Maine are prominent examples. For instance, in Washington State, the Health Care Authority and major employers in the Washington Health Alliance were the key drivers behind the Washington Multi-Payer Patient Centered Medical Home Reimbursement Pilot, which experienced a significant decline in potentially avoidable emergency room visits and hospitalizations from the baseline period (pre-Pilot) in 2007-2009 to the demonstration period (May 2011-December 2013).

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• Publicly accessible claims-based and electronic health record-based data infrastructure, e.g., an all-payer claims data base (APCD) and health information exchange (HIE) can create measurement capacity. That measurement capacity offers a platform for assessing price, quality, cost, and outcomes in a valid and reliable manner: New Hampshire has maintained an APCD that serves as the backbone for the nation’s most ambitious and comprehensive price transparency initiative. This price transparency effort is changing the market dynamics in New Hampshire and encouraging tougher negotiations on price between insurers and provider organizations. Increased transparency helps to build a sense of urgency on price levels that can set the table for payment reform.

• Competing priorities among diverse stakeholders often result in participants diverting their efforts to more pressing, internal organizational initiatives: This divergence of interest led the major insurer in the New Hampshire project to shift its payment reform toward the carrier’s national strategy rather than the coalition’s common financial model. This led the coalition to focus exclusively on common value measurement and Accountable Care Organization (ACO) development, rather than a multi-payer, value-based payment model. In reality, only a subset of the value-based payment models were implemented within the time frame of our evaluation. In New Hampshire the originally envisioned, multi-payer financial model has not been implemented, but a common value (economic and clinical) measurement model has been developed and adopted in several regional accountable care organizations (ACOs).

• Health insurance and provider organization market dynamics, coupled with regulatory oversight, that join together to favor price competition: For example, Blue Cross Blue Shield of Massachusetts is now in the fourth year of the Al- Similarly, in Maine the focus is on measuring total cost of ternative Quality Contract (AQC). This global payment ar- care, supporting regional ACO development, and addressrangement (not an RWJF-sponsored project) has demon- ing unwarranted small area variation. MaineCare, the state’s Medicaid program, is implementstrated net savings after program ing different tiers of risk-sharing to administrative costs and quality Collective agreement among accommodate the varying capacity incentive bonuses. The AQC illustrates the potential of a global pay- multiple payers and provider of provider organizations. ment model in an environment of organizations on payment Lessons Learned historic collaboration of payers and provider organizations and active method is extremely difficult and We have derived four key lessons regulation. generally elusive, largely because from our research for policymakOn the other side of the reform of competing economic interests. ers and practitioners seeking to “coin,” certain barriers to value- However, this consensus is implement serious and sustainable value-based payment: based payment have hampered essential to secure broad multiprogress:

payer participation and to send Value-Driven Payment

• Lack of sustained engagement of major purchasers, e.g., self- uniform signals to providers within Organized health care purchasers—especially large self-insured insured employers, union groups a common payment structure. employers and public purchasers and consumer groups: It is com(e.g., state employees, Medicaid mon for large employers—and, programs)—must demand that health plans and providers to a lesser extent, consumer organizations—to be actively move away from volume-driven to value-driven payment. involved in early design of payment reform, but implementaThose parties must foreclose a return to the FFS status tion is frequently dominated by the participating health plans quo. This change can be prompted by competition among and provider organizations. Without a strong, purchaserproviders and health plans—led by a “first-moving” public driven countervailing force, value-based payment reform ofpurchaser, a private health insurer with a substantial market ten reverts to a “least common denominator,” low-risk model, share, or by major provider organizations that lead by exas observed in Washington state’s shared savings strategy. ample through accountable care organization development Self-insured groups also face specific challenges in implewith large public and private purchasers. menting capitation and bundled payment, in light of members’ and leaders’ oft-stated preference for ensuring that The Oregon Health Leadership Council exemplifies the services received are commensurate with premiums paid. purposeful, robust coalition of purchasers, plans, providers Major purchasers that can stay involved through implemen- and contributors that can result in successful implementatation could help facilitate more robust reforms. tion and results—in that case, utilizing a primary care-based • Administrative obstacles: In Boston, the inability to implement consistent claims adjudication processes across multiple health plans that would pay an identical reference price for alternative treatment regimens for low-risk prostate cancer led to the termination of the Paying Equally for Equal Effectiveness project.

complex care model for high-risk patients with primary care per-member-per-month payment and shared savings.

Consensus Standards By their very nature, multi-stakeholder, public-private coalitions of providers, employers, health plans and others are — cont’d

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best positioned to develop consensus standards for measuring quality, outcomes and cost; those efforts should be their focus. Examples of such coalitions include the Washington Health Alliance (formerly the Puget Sound Health Alliance) and the Maine Health Management Coalition Foundation. Those coalitions also generally build their common measure sets on foundational work and peer review by HEDIS, NQF and AHRQ, which speeds the process of reaching agreement on metrics.

New Hampshire offers the best example of pricing and quality transparency. Since 2007 HealthCost has displayed provider-specific, insurer-specific median prices (actual allowed payments, as well as billed charges) for about 30 frequent, mostly outpatient procedures on its public access web portal. These prices are accompanied by some quality and benefit design information—the latter being critically important for consumers and purchasers seeking to make value-based decisions.

Collective agreement among multiple payers and provider organizations on payment method is extremely difficult and generally elusive, largely because of competing economic interests. However, this consensus is essential to secure broad multi-payer participation and to send uniform signals to providers within a common payment structure.

While actual consumer use of HealthCost remains somewhat limited, many observers credit New Hampshire price transparency for highlighting wide variation in prices and helping to motivate changes in health plan benefit design (e.g., tiered copayments for choosing higher-value care settings, incremental growth in high-deductible plans). Moreover, transparency appears to have altered market dynamics in New Hampshire—for example, in significantly influencing the final rate settlement between Anthem Blue Cross and Exeter (New Hampshire’s most expensive hospital).

Anti-Trust Vigilance and Regulation As provider organizations consolidate to enhance efficiencies and increase their pricing power relative to payers, strong anti-trust vigilance and appropriate regulation are critical to ensure health plan and payer competition in the public interest. Such regulation should examine not only structural measures of competition (i.e., market share), but also careful evaluation of potential barriers to entry by new innovators and strategies to artificially raise the costs of their rivals—an attempt at market foreclosure. Antitrust enforcement must strike a balance: On one hand it should not stifle potentially pro-competitive vertical integration between a major insurer and provider organization—as in the affiliation agreement between Highmark Blue Cross and Blue Shield and West Allegheny Health System in southwestern Pennsylvania. On the other hand, enforcement has a responsibility to aggressively monitor integration of hospitals and physician groups that could lead to higher prices and reduced access for consumers.

Public Transparency Public transparency of health plans’ prices and provider organizations’ quality metrics is a key ingredient in the menu of public policy options. Moving health insurance toward valuebased benefit design, with relevant incentives for consumers to include both price and quality in their choice of provider, is a critical element in supporting transparency.

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Rather than continue to wait for the smoldering coals to ignite, public and private purchasers must make a commitment to actively illuminate the path from FFS to value-based payment. To infuse a sense of urgency for value-based payment reform, private and public purchasers must overcome an array of impediments: the cost of changing FFS billing and payment transactions to a person-centered payment and incentive system, delivery systems not yet capable of assuming financial and clinical responsibility for population health, and the lack of active engagement by patients and their representatives in changing the status quo. However, the evidence from our research in the field reveals that purchaser-led, multi-stakeholder coalitions have important advantages that could overcome this inertia. The “buck” really does stop with the employers and public purchasers, and their employees and beneficiaries. If the health literacy and cost consciousness of employees and taxpayers are advanced by their sponsors and purchasers, a sense of urgency will emerge. Purchasers and multi-stakeholder coalitions possess the sophistication, the managerial talent, and the incentive to implement value-based payment. The key is for those players to exercise the will to do so. Only then will there truly be no turning back, and players in the health care system will be forced to make the leap to the new world.

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May 2015 9

Report Blasts Health Care Billing Methods as Antiquated, Frustrating By Beth Fitzgerald

he U.S. health care industry’s billing and payment system is a “horse-and-buggy in a world contemplating driverless cars,” according to a new report from the accounting and consulting firm PricewaterhouseCoopers. Consumers are shouldering higher costs and they are frustrated by a system that still largely relies on paper and telephone calls for billing and payment, according to the report, “Money Matters: Billing and Payment for a New Health Economy.” PwC said the $2.9 trillion health care sector needs to transform the way it does business, and create “a more transparent, seamless, convenient way to bill and collect money from its customers.” The study found commercial health insurers on average receive only about 15 percent of payments electronically — compared with 43 percent for the rest of the U.S. business world. “Businesses that make this shift — offering convenient, seamless, quality, reliable and transparent billing and payment — will be rewarded in the new health economy,” said Kelly Barnes, PwC’s U.S. health industries leader. “They will retain more customers and attract new ones.” PwC’s Health Research Institute commissioned a survey of 1,000 U.S. adults and analyzed commercial claims from 34 million Americans in the Truven 2012 commercial claims database.

Key findings include: • Patients and affluent consumers are most dissatisfied with the health care billing and payment system. For example, one in two Americans in poor or fair health — the greatest utilizers of the system — rated hospitals poorly on price transparency and affordability. • Cost-conscious millennials are more likely than the general population to judge health care organizations based on their billing practices. They also are more likely to challenge medical bills, search for better deals and make value-based decisions. • Consumers and new entrants are beginning to circumvent the claims-based health care payment system, especially when seeking primary care and chronic disease management. 10 Affiliated Practice

• Four in five adults with commercial insurance paid less than $1,000 in out-of-pocket expenses in a year, according to an HRI analysis. Approximately half had medical claims of less than $1,000. And yet, as deductibles rise, more patients will find paying their share of their medical bills difficult. Medical bills continue to be a major cause of consumer bankruptcy. The report said heavy regulation of both the financial services and health care industries adds complexity and risk to innovation. It identified strategies to incorporate key principles patients want: convenience; transparency; affordability; reliability; seamlessness; and quality. These strategies include: • Accelerate the migration to digital. Commercial health insurers conduct just 15 percent of payments and 27 percent of payment remittance advice electronically. The rest of U.S. businesses average 43 percent for payment. This remains one of the system’s most critical bottlenecks. • Partner with a sidestepper. The growth of high-deductible plans means more consumers will pay for care outof-pocket and many find the claims process confusing and expensive. Providers and insurers should consider partnering with nontraditional companies offering services that sidestep claims. • Embrace simplicity. Many consumers do not understand their insurance benefits and are confused by their medical bills. Online payment sites, mobile apps and aggregated billing are all steps toward a simplified consumer experience. • Multiply payment options. As many as two out of three bankruptcies involve illness, injury, significant uncovered medical bills or a combination of these factors and the fallout from them. Offering choices for payment, making payment easy and helping consumers plan for costs can reduce bad debt and days in accounts receivable. “Health care companies must consider shifting from a business-to-business to business-to-consumer billing and payment approach,” said Paul D’Alessandro, PwC principal and customer leader, health industries. “Technology will play a significant role in creating ways to consolidate billing and payments, and mobile apps, online portals and other innovations should become more commonplace in the immediate future. For longer term solutions, the system should be redesigned to remove complexity and support a seamless customer experience.”

CMS Innovator: New Models are Changing Healthcare Providers need to take action on alternative payment models and population health or fall behind. By Henry Powderly

nnovation is driving a significant amount of change in the healthcare industry, said Patrick Conway, deputy administrator for Innovation and Quality and Chief Medical Officer at the Centers for Medicare and Medicaid services. The onus is on providers to take action or fall behind, Conway said Tuesday during a HIMSS15 discussion on the results of CMS innovation program. “We are shifting the culture of how people think about healthcare investments, in a good way,” Conway said. According to Conway, CMS programs that focus on alternative payment models such as accountable care organizations, which currently serve eight million people, and population health, are moving a fragmented system tied to fee-for-service into a future in which costs are controlled and care is improved. “We’re trying to use a number of levers to get there,” Conway said. These include programs such as meaningful use and the Medicare Shared Savings accountable care model. For example, Conway said the Pioneer ACO model realized more that $384 million in savings in the second year, while comprehensive primary care initiatives are leading physician practices to operate in new ways. Even safety measures dictated by CMS have seen good results, Conway said. The industry has seen a 17-percent reduction in patient harm events from 2010 to 2013, saving $12 billion. Other innovation is happening at the state level too. In Minnesota, providers are making major investments in community health by setting up accountable health communities, something Conway said is leading the CMS to think about communitylevel ACO models. Meanwhile, Maryland is having a lot of success in testing population-based payments for hospitals, he said, and other states are interested in following them. “In the next five years they’re going to have more than 80 percent of their payments to hospitals be population-based payments,” he said. “That means the way they are financially successful is they keep people healthy and out of the hospital.” CMS has already said it wants to ramp up the percentage of payments that are value-based over the next few years. Specifically, it wants 50-percent of Medicare payments tied to value by 2018. Ultimately, all providers should be chasing the kind of innovation CMS is testing, either by engaging in accountable care, investing in quality infrastructure, focusing on data and performance transparency and pursuing improved health outcomes. “If we find better ways to deliver care, pay providers and distribute info we can spend our dollars more wisely and have healthier communities, a healthier economy and a healthier country,” he said.

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The Four Essential Elements of a Connected Care Telemedicine Practice By Russ Alan Prince

elemedicine is the future of healthcare. It has already been widely embraced by the ultra-wealthy wanting to be able to access high-quality medical care whenever it’s required in the form of concierge connected care practices. What’s more telling is that this same high level of healthcare-on-demand via telemedicine will soon be available to everyone. Along the way, some telemedicine connected care practices will stand out while other ones will end up fading away. According to Daniel Carlin, M.D., founder and CEO of WorldClinic, an elite telemedicine concierge practice, there are four essential elements for these practices to be very successful. Those elements are: • The telemedicine practice must use mHealth (mobile heath) devices that are easy to use for the patients (one touch) and provide useful information for the physicians. Unfortunately, there are many mHealth devices that can do wonderful things but will never be adopted because of high user (patient) complexity. • A platform that integrates telemedicine calls/episodes/data into a secure electronic medical record system and is reviewed by the physician and care team. Optimally, the platform should also include a wellness checklist with follow up capabilities. This is in contrast to Dial-a-Doc model that service simple episodic urgent care phone calls but, through lack of sustained case continuity, misses the mark for any complex or chronic problem. • The appropriate care team staffing model must be in place. It is a mistake to rely on technology alone. The physicians must be highly skilled and board certified; WorldClinic, for example, uses seasoned emergency room physicians for the initial call because of their experience and skill in diagnosing and treating a wide range of illness and injury. Then, a care team is on the job to follow up on all incidents as well as make appointments and referrals. All the referrals to specialist come with no strings attached, enabling the best specialists to be called irrespective of any network affiliations. • The telemedicine practice must provide feedback to the patient based on mHealth device data and physician expertise. Included here are personalized medicine based on specific biomarkers, lifestyle and family history, and, in some cases, DNA (genomic testing). This closes the informational/feedback loop on connected care telemedicine. The goal of high-quality telemedicine for everyone will one day be achieved. However, it’s unlikely to be a smooth ride. Innovating practitioners such as Carlin and others are helping to identify the systems and process that will make telemedicine a powerful, cost-effective solution for delivering state-of-the-art medical expertise. 12 Affiliated Practice

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Private Medicaid Plans Face Sweeping New Regulations Under CMS Proposal By Virgil Dickson

he CMS has released a sweeping proposed rule (PDF) intended to modernize the regulation of Medicaid managed-care plans. The Medicaid managed-care population is growing rapidly, but the last regulation governing such plans was issued in 2002. In one provision that generated frustration among health insurers in the hours after the draft was posted, the CMS called for health plans to dedicate a minimum portion of the rates they receive toward medical services, a threshold known as a medical loss ratio. As of 2015, plans doing business with Medicaid and the Children’s Health Insurance Program are the only health plans that aren’t subject to an MLR. The Obama administration is proposing an 85% threshold for Medicaid managed-care plans, the same as the government demands of large group plans in the private market. America’s Health Insurance Plans, the largest trade group representing health insurers, quickly responded that applying an MLR to Medicaid managed care fails to reflect much of what the plans do to hold down costs. “An arbitrary cap on health plans’ administrative costs could undermine many of the critical services—beyond medical care—that make a difference in improving health outcomes for beneficiaries, such as transportation to and from appointments, social services, and more,” interim AHIP CEO Dan Durham said in a statement. The MLR that the CMS has proposed for Medicaid plans is a suggestion rather than an enforceable mandate. Still, many plans will be affected if states follow through on the agency’s suggestion. In a CMS review of 167 managed care plans in 35 states, one in 10 plans had an MLR below 79% and one in four had one below 83%. Medicaid managed-care enrollment has soared by 48% to 46 million beneficiaries over the past four years, according to consulting firm Avalere Health. By the end of this year, Avalere estimates that 73% of Medicaid beneficiaries will receive services through managed-care plans. “A lot has changed in terms of best practices and the delivery of important health services in the managed care field over the last decade,” acting CMS Administrator Andy Slavitt said in a statement. “This proposal will better align regulations and best practices to other health insurance programs, including the private market and Medicare Advantage plans, to strengthen federal and state efforts at providing quality, coordinated care to millions of Americans with Medicaid or CHIP insurance coverage.” The rule would impose new standards to ensure beneficiaries have adequate provider networks. For example, plans typically require that enrollees can reach a primary care physician within a certain time or distance. The CMS wants states to extend such time-and-distance standards to OB/GYNs, behavioral health specialists and dentists. And given the large number of children enrolled in Medicaid, the CMS also is proposing that states’ rules for provider networks specifically reflect pediatric primary, specialty, and dental providers. “Network adequacy is often assessed without regard to practice age limitations which can mask critical shortages and increase the need for out-of-network authorizations and coordination,” the agency says in the regulation. States would be allowed some leeway, however, to vary those standards in different geographic areas to account for the number of providers practicing in a particular area. The rule also would require greater transparency in how states determine whether the rates they pay plans are actuarially sound, meaning that the payments are sufficient to cover the services required under the contract.

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States would have to provide the CMS enough detail for the agency to understand the specific data, assumptions and methodologies behind that rate. This will likely trouble the 26 states and the District of Columbia that currently certify ranges instead of specific rates for their managed care programs. As expected, the rule also includes a section on managed Medicaid long-term care. Traditionally, state Medicaid programs have paid long-term-care providers on a fee-for-service basis even as they moved more nondisabled beneficiaries into managed care. But as of 2014, 26 states were using managed long-term care, up from eight in 2004, according to the CMS. The number of beneficiaries in managed long-term care has grown from 105,000 in 2004 to 389,000 in 2012. A key passage, requested by advocates, would allow participants enrolled in Medicaid Long Term Services and Supports, or MLTSS, to switch plans or disenroll and switch to fee-for-service if their provider is not in-network for the managed care plan. The Association of Community-Affiliated Plans, which represents not-for-profit safety net health plans, applauded the scope and spirit of the proposed regulation. “Safety net health plans support the commitment to transparency, accountability and improvement that animates this proposal,” ACAP CEO Margaret Murray said. “So much so that we believe these provisions should be extended to the entirety of the Medicaid system, including fee-for-service and primary care case management arrangements.”

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