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Helping Providers Succeed with Value-based Care

The healthcare industry continues to transition from volume-based to value-based care (VBC), and the pace of this change is expected to increase. VBC promises benefits, such as lower costs and better outcomes for patients as well as increased patient satisfaction rates and care efficiencies for providers. It can also create a reliable revenue stream and help practices acquire resources to improve patient outcomes.

Now more than ever, it’s important to see VBC as an opportunity for better care and practice sustainability. Healthcare leaders have a strategic imperative to ensure providers not only align with, but succeed in the new model. But while payers have been enthusiastic, the path to adoption hasn’t been easy for healthcare organizations and health systems.

The good news? The barriers can be surmounted. To understand and overcome the barriers to VBC adoption, we must look at both operational challenges and regulatory issues.

Understanding and Breaking Down Barriers

Operational Challenges

Creating something of a revolution in reimbursement, VBC turns the traditional model on its head by focusing on the patient, not the encounter, and incentivizing payers and providers based on the quality of care they give, rather than simply tying reimbursement to the number of services provided.

But providers lack tools and coordinated processes to support such a transition. A 2022 survey by the Health Care Payment Learning & Action Network found that barriers included low provider willingness to take on financial risk, lack of ability to operationalize, and low levels of interest and readiness on the part of providers.

There are numerous pain points:

  • Misaligned incentives: One of the biggest pain points for provider groups is a severe misalignment between the provider compensation model and the goals of VBC. A study of physician compensation arrangements published in JAMA Health Forum in 2022 observed, “As health systems and their employment of physicians continue to grow, greater translation of the value-over-volume incentives of payers into physician compensation may be necessary to realize the full potential of value-oriented payment reform.”
  • Lack of data: Accurate documentation can affect a provider’s reimbursement and quality scores, but providers are struggling to accurately document chronic conditions, let alone calculate, monitor, and audit this data and know where to prioritize their efforts. Data on the population, recapture rate, the HCC leakage rate and provider performance is key to ensuring an optimal ROI.
  • Lack of tools: An electronic health record (EHR) can’t do all this work alone. Most tools work on an encounter level, rather than a patient-based level. Providers need more sophisticated data analytics that provide a holistic view that enables them to understand and act.
  • Lack of workflow: Current processes and systems built for fee-for-service payments are not set up for VBC. Providers need to adopt workflows that help them easily identify the sickest patients.
  • Lack of champions & people: Organizations that have successfully adopted VBC often start with a high-level champion who can own and drive the process. This champion can coordinate across the organization, form a team, and set up standards and processes. Organizations also need multidisciplinary participation, including coding and CDI professionals as well as population health and data analytics expertise. But to achieve the goal someone needs to lead the coordinated effort.

Regulatory Challenges

In addition, regulations created for a fee-for-service environment present additional difficulties for a value-based future. To address that, organizations such as the American Hospital Association advocated for changes to regulations such as the Stark Law and Anti-Kickback Statute.

Fortunately, such efforts were successful and regulatory barriers are starting to dissolve. In recent years, CMS and the Department of Health and Human Services Office of Inspector General (OIG) developed exceptions to the Stark Law that allowed for a wide and creative range of compensation arrangements designed to succeed under VBC models.

In the final rule that created the exceptions, CMS and OIG created the term “value-based enterprises” (VBEs), meaning two or more participants collaborating to achieve a value-based purpose for a targeted patient population. The exceptions themselves detail formal requirements around the arrangements that hold the participants accountable and define their value-based purpose(s) and activities. The requirements were defined to create a great degree of flexibility on who could participate, the patient populations that could be served, the services that could be provided, and the structure of provider compensation.

OIG’s commentary indicated the “…provision of data analytics items and services could be structured to satisfy the care coordination arrangements safe harbor.” The safe harbor would facilitate the sharing of data analytics items and services by hospitals to physician practices, while requiring the practice to pay at least 15% of the value of the items and services received. Prior to the VBE exception, such an arrangement would have required the practice to pay 100% of the items and services, which may have represented an insurmountable barrier to adopting the infrastructure needed for VBC.

The Next Steps

As regulatory barriers start to dissolve, healthcare organizations can make a strategic move to invest in tools and infrastructure to encourage physicians to adopt VBC and help them succeed. They should pay particular attention to two areas: revising provider compensation structures and leveraging tools and resources to know where to prioritize efforts.

Revising Provider Compensation Plans

Many groups use production-driven compensation models that pay providers more per additional unit of services performed. Since nearly all VBC reimbursement models tie a portion of payment to the cost of care for beneficiaries, these production-driven compensation models create an unfortunate situation where either additional pay results in worse performance under VBC programs or the provider must forgo additional compensation to attain higher reimbursement from the VBC programs.

As provider organizations adopt VBC, they will need to update their physician compensation models. This will ensure that physicians are incentivized to facilitate the transition. Here are a few places to start:

  • Consider engaging outside help to facilitate the transition in compensation plans
  • Consider a strategy that starts with a specialty or even subgroup within the specialty most exposed to risk-based reimbursement
  • Identify key clinical leaders who will promote the benefits of transition
  • Identify creative incentives, such as giving providers additional time to care for VBC patients
  • Leverage regulatory changes, such as the VBE exceptions

Explore utilizing the VBE exceptions to make the transition a long-term success. By meeting the requirements of the Stark Law’s exception for meaningful downside risk VBE physician compensation arrangements have increased flexibility, such as elimination of the requirement to demonstrate the fair market value and commercial reasonableness of the compensation.

Tools and Resources

By optimizing reimbursement, organizations can ensure they have enough resources to provide the care patients really need—getting us closer to the outcomes we all want. But this requires new tools and resources with visibility to reliable data.

As an initial step, providers need a baseline of their current capabilities as it relates to operating in a VBC environment. Completing an assessment (like this maturity model) that provides an initial benchmark to determine how close an organization is to being “fully optimized” in addressing its risk-adjusted population is highly recommended. The model provides tools for leading discussions and creating a roadmap of next steps.

Once the assessment is complete many providers learn that they lack an application to effectively manage risk-based patients. There are many technology solutions that can help ensure accurate Risk Adjustment Factor (RAF) scores and risk-adjusted populations. The best applications offer a centralized patient-level view that helps identify patients with the greatest impact and can automatically calculate reported and potential RAF scores. The key is finding a solution that enables workflow and produces actionable data.

How to Get Started

For organizations that need help establishing or optimizing a VBC or risk adjustment program, here are some ways to get started.

Understand your patient populations. To succeed in VBC, providers need to understand the risk profile of their patient populations to identify patients with the greatest impact. This means answering questions like: what are the organization’s recapture rates? Where is the organization doing a good job? What are the HCCs that present opportunities? Which providers need to improve their RAF scores?

Master your RAF scores. Understanding RAF scores is key to success. A RAF score is calculated every year for each patient. A high RAF score reflects the patients who need the most care and resources. RAF scores can also be averaged for defined patient populations in a healthcare organization. Healthcare organizations must take steps to ensure they are getting the right reimbursement for high-risk patients.

Just get started. There’s a popular saying: “The secret of getting ahead is getting started.” That’s true for VBC, too. The need to master RAF scores may not be on every healthcare executive’s radar. But it’s not going away; in fact, its impact will increase. Adopting VBC is a marathon, not a sprint, and should be planned for as a multi-year effort. Organizations will see impact quickly, but mastering it will take time. The best time to start is today.

Nancy Koors v2

Nancy Koors is the CEO of UASI. UASI has a 40-year track record of identifying and delivering optimal revenue cycle outcomes. We help health systems address resource gaps, improve reimbursement accuracy and quality, ensure adherence to compliance standards, and optimize performance of risk-based patient populations.  Our consulting, outsourcing, and risk adjustment offerings are customized to the needs of our healthcare provider clients.

Luis is a Partner and Cofounder of InHealth Advisors. InHealth Advisors is experienced in the assessment and development of provider compensation models that are aligned to achieve VBC goals. In addition, InHealth Advisors is a thought leader in the development and implementation of VBEs to help organizations overcome the barriers to effective VBC.