Value-Based Reimbursement on Track to Eclipse Fee-for-Service by 2020, McKesson Report Finds
The movement toward value-based reimbursement in healthcare picked up steam over the past 2 years, and if trends continue, new payment models will bypass fee-for-service by the year 2020, a new report has found.
McKesson Corporation’s white paper, “Journey to Value: The State of Value-Based Reimbursement,” took stock of how well payers and providers are adapting to payment models that reward keeping patients healthy. The follow-up to a 2014 study found that value-based reimbursement has reached a “tipping point,” and there’s no reversing the move away from old payment models.
Certainly much has changed since 2014. Congress scrapped the old Sustainable Growth Rate formula in favor of MACRA, or the Medicare Access and CHIPs Reauthorization Act, which pushes providers at all levels toward value-based payment. HHS Secretary Sylvia Mathews Burwell has said that Medicare has already reached this year’s goal of basing 30% of payments on alternate models, and the goal for 2018 is 50%.
Andrei Gonzales, MD, McKesson’s director of value-based reimbursement initiatives, said the report offers a “realistic view” of where payment reform stands. “We’ve gone through that excitement phase, and now we’re getting into the implementation phase,” he said. “Every stakeholder, regardless of whether they are a payer or provider, realizes this will happen within the next 5 years.”
But there are some speed bumps. The report reveals a readiness gap, and Gonzales’ interview with The American Journal of Managed Care
confirmed that progress is uneven. Small providers in particular are not moving into the new payment world at the same pace as larger groups, he said.
Gonzales said that the study asked payers and providers how far along they are to being “ready” for payment reform. “Smaller payers and smaller providers placed themselves as not as far along that spectrum” he said. “It was pretty significant when you looked at the providers.”
To gather data, McKesson commissioned ORC International to interview senior leaders at 115 payers and 350 providers of various sizes. While responses showed some lack of readiness among the smallest stakeholders, Gonzales said there were some very large payers (covering more than 2 million enrollees) that were less prepared than mid-sized ones (covering 500,000 to 2 million people),
Among the findings:
· As a group, payers say they are 58% along the continuum toward full value-based reimbursement, a 10% increase from 2014. Nearly all payers (97%) and most hospitals (91%) are using some mix of value-based payment alongside fee-for-service.
· Hospitals are 50% along the continuum, up 4% from the last report.
· Of the new payment models, bundled payments are making the most headway; they are projected to grow 6% in the next 5 years. This will put the bundled model ahead of capitated payments and shared risk contracts.
· There’s a gap between where payers and providers are now and where they know they must be. Both hospitals and payers say bundled payments will account for 17% of reimbursement in 5 years, but only half of payers and 40% of providers say they are ready.
· Accountable care organizations (ACOs) have gained ground and are projected to gain more. This study found 63% of hospitals are part of ACOs, and 47% of those who are not say they will join one within 5 years.
Acting CMS Administrator Andy Slavitt
testified last week that MACRA might need to be delayed, because many small practices and rural providers are not ready to comply. The rules for MACRA are set to be finalized in November, leaving only 2 months before the law is to take effect January 1, 2017. CMS has expressed concern that pushing smaller practices—especially rural providers—too quickly could hasten the consolidation that has taken place in healthcare. IF not well-managed, the pace of payment reform could wipe out some smaller players, limiting consumer choice and access. Gonzales said it is “encouraging” that Slavitt is speaking publicly about this issue.
Closing the gap between readiness and reality is best done through incentives that encourage providers to move toward value-based models, Gonzales said. Imposing regulations to punish stragglers tends to invite pushback from doctors, he said. By contrast, the experience with bundled payments shows that with the right incentives, when providers see both the financial and clinical benefits of embracing value-based models, “these models get expanded.”
Indeed, CMS took a pilot for bundling payments for hip and knee replacements and replaced it with a mandate
that took effect April 1, 2016, in 67 markets.
Providers will buy in, Gonzales said, “If you can show why these programs are important, and show providers, ‘Here are some areas where you can improve.’” Ultimately, he said, “providers just want to take better care of their patients.”
Hospitals and health plans are using many tools to embrace value-based care, but these changes are not without consequence. More than half of payers (53%) say they are using tiered networks, and 42% say they are using narrow networks. Overwhelmingly, they report that quality is the key factor in including providers, with 75% saying this is chief criterion. However, payers also report that “patient confusion over the cost structure of these networks is their biggest operational challenge.”
Patient engagement—whether that means being good consumers of healthcare or taking responsibility for their own health—continues to vex providers and payers alike. Gonzales said providers, in particular, report this a “major challenge,” and it’s an area where McKesson plans more research.
“No one has a clear answer,” on the best way to encourage patients to be more dedicated to their own health, he said.
The report was funded by McKesson Corporation. McKesson Health Solutions provides technology, software, and financial tools to help payers, hospitals, physician practices, pharmaceutical companies, and other entities adapt to new payment models.