Transitioning Community Hospitals to Value-Based Care: Lessons From Massachusetts

Christopher J. Louis, PhD, MHA, Sara S. Bachman, PhD, MS; Dylan H. Roby, PhD; Lauren Melby, MBA, MPP; and David L. Rosenbloom, PhD

What are states doing to prepare community hospitals for value-based care models? For more than a decade, many US states have experienced widening of the healthcare price, resource, and performance gaps between academic medical centers (AMCs) and community hospitals. Scholars point to greater service intensity for the treatment of similar patients, graduate medical education costs, and research expenses as the primary drivers of these gaps.1 Health system consolidation further exacerbates this issue as AMCs gain reimbursement negotiation clout through membership in large health systems.2 AMCs and affiliated physician groups have benefitted most from these trends, achieving improved strategic positioning among larger population bases and financial prosperity compared with many of their community hospital counterparts. These competitive advantages were recently used as a vehicle to become early adopters of value-based payment (VBP), a strategy used by purchasers to facilitate cost-effective care delivery and improved quality, emphasizing a shift from fee-for-service to outcomes-based payment. Numerous payment and delivery system paradigms have been implemented since the inception of the Affordable Care Act, including bundled payments, accountable care organizations (ACOs), and integrated care systems that link primary care and behavioral health services, among others. This national trend presents an added challenge for community hospitals in maintaining pace with overall market competitiveness and innovation of AMCs. To combat these trends, some states, such as Massachusetts, have sought the help of policy makers in taking legislative action to promote community hospitals’ efforts to shift to value-based care and alternative payment models (APMs).

Massachusetts has been nationally recognized for its progressive healthcare reform policies, including the 2006 healthcare reform law, Chapter 58, which established the Massachusetts health insurance exchange and offered many residents free or subsidized insurance. These policies helped the state achieve a 2007 uninsured rate of less than 6% among the nonelderly population, the lowest rate in the country.3 In addition to increasing insurance coverage, this reform was associated with lower all-cause mortality.4 Nevertheless, healthcare spending in Massachusetts continued to grow, outpacing the US economy. By 2009, the state had the highest per capita healthcare expenditures ($9278 vs national average of $6815) in the nation.5 Massachusetts also compared poorly to the United States on Medicare readmissions, and approximately half of its emergency department (ED) visits were potentially avoidable.6 The combination of increased prices at large systems and a shift toward utilization of AMCs (vs community hospitals) contributed to rising overall costs.7 As Massachusetts residents increasingly sought inpatient care at branded higher-cost AMCs, community hospital revenue bases and operating margins deteriorated, and these lower-cost hospitals’ ability to engage in strategic initiatives (such as investing in health information technology [IT] and employing physicians) suffered.  

Based on these disparities in care settings, Massachusetts legislators sought further policy-level action to drive change. In 2012, the legislature passed Chapter 224, the state’s landmark cost-containment law, which established a focus on “improving the quality of health care and reducing costs through increased transparency, efficiency and innovation.”8 Chapter 224 sought to promote new health reform strategies to limit healthcare spending growth to potential gross state product, or 3.6% annually, and move away from fee-for-service payments. Strategies within Chapter 224 include: 1) actively monitoring cost growth and markets, 2) the widespread adoption of APMs by public and private payers, 3) a focus on wellness and prevention, and 4) increased price transparency for consumers.8 One of the new entities established by Chapter 224 to implement these strategies is the Health Policy Commission (HPC). An independent state agency, the HPC is governed by an 11-member Board of Commissioners composed of public and private sector leaders appointed by the governor, attorney general, and state auditor. The HPC’s mission is to “advance a more transparent, accountable, and innovative health care system through independent policy leadership and programs” with the goal of “better health and better care at a lower cost across Massachusetts.”9 The HPC fosters a value-based marketplace through independent policy leadership, provider certification programs, and targeted investments.  

Chapter 224 authorized the HPC to administer several investment programs, the largest of which is the Community Hospital Acceleration, Revitalization and Transformation (CHART) investment program. CHART is a phased investment program that reinvests nearly $120 million, initially funded by a 1-time assessment on large Massachusetts health systems and commercial payers, into certain community hospitals to enhance delivery of efficient, effective care and prepare them to achieve success in a value-based environment.10 In this paper, we examine the structure of the CHART investment program, offer insights from the design of CHART Phases 1 and 2, and provide lessons learned that can be redeployed by other states seeking to transform healthcare delivery among their community hospitals.

The CHART Investment Program

To support community hospitals in advancing value-based care readiness, CHART provides a roadmap to develop capacities and capabilities for innovative approaches to care delivery. The goals of the CHART program, as defined in Chapter 224, are to: 1) improve and enhance the ability of community hospitals to serve populations efficiently and effectively, 2) advance the adoption of health IT, 3) accelerate the ability to electronically exchange information with other providers in the community to ensure continuity of care, 4) support infrastructure investments necessary for the transition to APMs, 5) aid in the development of care practices and other operational standards necessary for certification as an ACO, and 6) improve the affordability and quality of care.

To achieve these goals, the HPC structured the CHART program in multiple phases over several years to allow awardees to transition from short-term care delivery improvement initiatives to longer-term preparation for VBP. CHART Phase 1 ($9.2 million, 28 awardees, February 2014 to September 2014) focused on short-term, high-need initiatives to build capacity. CHART Phase 2 ($60 million, 25 awardees, September 2015 to February 2018), a 2-year program with staggered program start dates, aims to support the transformation of community hospitals in their delivery of efficient and effective care. To be considered eligible to receive CHART funding, hospitals must meet specific criteria established as part of Chapter 224. CHART-eligible acute care hospitals are: 1) nonprofit community hospitals, 2) nonteaching hospitals, and 3) relatively low priced.7,11 At the time of CHART Phase 1 procurement, 31 of Massachusetts’ 80 hospitals (3 have closed since 2013) satisfied the eligibility criteria.

CHART Phase 1: Foundational Investments for Transformation. Planning for CHART Phase 1 began in mid-2013, with the request for proposals (RFP) released in October 2013. This initial phase of foundational investments was targeted toward providing support for short-term infrastructure expenditures to facilitate hospital and system transformation. Phase 1 projects were grouped into 3 pathways: 1) rapid-cycle pilots aimed at improving quality or reducing costs, 2) capability and capacity building, and 3) planning for operational improvement geared toward hospital and system transformation.12 As part of the application process, each hospital identified specific process, quality, and financial metrics that would be evaluated at regular intervals throughout Phase 1. Metrics varied based on the context of each project. HPC provided technical assistance (TA) in the form of implementation consultation and clinical expertise to each hospital awardee.

eAppendix Table 1 (eAppendices available at ajmc.com) provides a summary of the CHART Phase 1 hospital awards by funding amount. Approximately $9.2 million was awarded to 28 acute care community hospitals during Phase 1.13 Award amounts ranged from a minimum of $65,000 (Beverly Hospital) to a maximum of $500,000 (Holyoke Medical Center). Hospital projects focused on a range of clinical and operational areas, including hospital utilization and care coordination (n = 18 projects; eg, inpatient and outpatient diabetes care coordination among patients with high utilization), technology enhancements (n = 16; eg, planning for health information exchange connectivity), behavioral health (n = 8; eg, improvements in behavioral health case management in the ED), and patient safety and education or process improvement (n = 7; eg, implementation of a high-risk intervention team that provides patient education, medication management, and discharge planning to patients with complex chronic illnesses). Many hospitals implemented more than 1 project as part of their CHART Phase 1 award. 

CHART Phase 2: Driving System Transformation. Lessons from CHART Phase 1 informed the design and implementation of CHART Phase 2, which sought to build upon the Phase 1 foundation by transforming the healthcare delivery system and calling for a paradigm shift in the community hospitals’ approach to care delivery. The HPC identified 3 outcomes-oriented aims for CHART Phase 2: 1) maximize appropriate hospital use, 2) enhance behavioral health care, and 3) improve processes to reduce waste and improve quality and safety.14 The HPC released the CHART Phase 2 RFP in June 2014 and received 30 (out of a possible 31) prospectuses. Proposals were submitted in September 2014, awards were given the following month, and a robust yearlong iterative and collaborative implementation planning period began. As a result of this process, 25 projects (20 individual hospital projects and 5 multihospital projects) were ultimately approved and funded. CHART Phase 2 initiatives launched on a rolling basis beginning in September 2015, and by February 2016, all 25 awardees had initiated their 24-month Phase 2 projects.  

eAppendix Table 2 provides a summary of each CHART Phase 2 award by hospital, project, primary project aim statement, and funding amount. In all, nearly $60 million was deployed to fund 25 programs, with funding amounts ranging from $900,000 (Baystate Franklin Medical Center, Baystate Noble Hospital, and Baystate Wing Hospital Joint Award) to $8 million (Southcoast Hospitals Group Joint Award).15 Hospital projects ranged in focus, including high-risk care teams using integrated technology, services for behavioral health patients presenting in the ED, and the integration of services across multiple outpatient care settings. CHART Phase 2 program aims primarily focused on reducing 30-day readmission rates (n = 16) and reducing ED utilization (n = 11).16  

CHART Phase 2 incorporated more emphasis on reporting and TA compared with Phase 1. In Phase 2, approximately 30 metrics were collected from each hospital awardee each month. Metrics reflect utilization (eg, readmission rates) and operational efficiency (eg, ED length of stay for behavioral health patients). TA was enhanced in Phase 2 to include at least monthly conversations between HPC program officers and hospital staff. These conversations were used as an ongoing vehicle for providing project updates (eg, staffing changes), identifying project risks, and helping awardees form strategies to overcome barriers. At the beginning of Phase 2, TA was focused on start-up implementation issues (eg, data collection and design, reporting, project organization, etc), but over time became more focused on the dissemination of best practices and learning across sites. Quarterly regional and biannual statewide meetings of hospital awardees led by HPC consultants and staff were held to share best practices and help address similar issues occurring at multiple hospitals. Clinically-trained expert consultants and HPC staff regularly visited each hospital site to discuss progress toward CHART Phase 2 aims and facilitate goal achievement. 

Learning From the Design of CHART Phases 1 and 2

The HPC’s CHART investment program is designed to transform care delivery at Massachusetts community hospitals (and in their surrounding communities), thereby preparing these organizations for VBP. In doing so, Massachusetts has created the largest state-driven combined all-payer (payer-blind) inpatient readmission and ED utilization reduction program in the country. Further, CHART is implemented “at-scale.” Care is delivered to entire target populations, rather than subsets of those populations, through pilot programs. Given the CHART program’s design and scale, thriving partnerships between state health policy makers, the HPC, hospital staff, and community partners are critical to program success. 

Although the CHART investment program is not a one-size-fits-all program, other states can learn from Massachusetts and deploy elements of CHART. Drawing on lessons from CHART Phases 1 and 2, we offer recommendations for states considering how to transform care delivery in their community hospitals to promote VBP:

Use legislation to drive change. Massachusetts policy makers committed to changing the trajectory of healthcare spending through Chapter 224. Through action-oriented statutory language, Massachusetts instituted an annual maximum healthcare spending target, created the HPC to monitor progress against this benchmark and develop associated policies and programs, and levied an assessment on certain providers and insurers to support CHART. 

Ensure appropriate funding levels. Funding levels for specific community hospital grants must be substantial enough to enable innovation. CHART Phase 1 increased capacity and capability through smaller investments; Phase 2 built on that momentum with larger, more broad-ranging transformational investments in specific hospital projects. 

Engage in a collaborative implementation planning process. CHART Phase 2 awardees engaged with the HPC in a robust, iterative, yearlong implementation planning process to develop innovative and transformative projects. Thus, projects were more closely tailored to the local hospital context and specific population needs. This enhanced project quality and adaptability and aligned hospital and state goals.

Develop an ongoing measurement plan that informs program design, implementation, and adaptation. Funders and awardees should collaborate to develop a measurement plan that captures only measures that are salient to understanding program effectiveness and areas for process improvement. In CHART Phase 2, locally-derived data were used to drive program design. Throughout implementation, hospital awardees and HPC staff used key utilization, process, and outcomes data to drive real-time improvement and program adaptation. 

Deploy ongoing flexible technical assistance to awardees throughout planning and implementation stages. In CHART Phase 2, TA occurred through regular meetings with HPC program officers, regional and statewide learning collaboratives, and special sessions with expert consultants. The HPC retained flexibility in the provision of TA, adapting based on cohort-wide and individual awardee needs and performance. 

Involve clinical and nonclinical community partners from the beginning. Through their CHART programs, several hospitals have engaged in coalition building and created multistakeholder collaborative meetings that include community partners in regular hospital team meetings. Engaging key community partners (eg, police departments, skilled nursing facilities, detox centers) in implementation planning may improve the ability of awardees to more rapidly implement and integrate their projects. 

Engage an external evaluator to assess program efficacy. The HPC has engaged an independent evaluator to perform a full-scale, mixed-methods evaluation of CHART Phase 2. Examining the perspectives of key stakeholders as well as broader trends in hospital and state data promotes a comprehensive view about whether specific hospital investments advance community hospitals’ participation in VBP.

DISCUSSION

States seeking to transform low-cost community hospitals toward value-based care must find ways to incentivize participation in activities that reflect these new delivery models. One of the most notable efforts to transform care in states is the State Innovation Models initiative funded by the Center for Medicare and Medicaid Innovation. However, these federally funded projects are not specifically focused on community hospitals and are interested primarily in Medicare and Medicaid patients.17 Other state-driven programs focus on specific issues, such as reducing avoidable healthcare utilization (eg, readmissions). For example, the Texas Medical Center Grant Program in Collaborative Health Policy Research awards $750,000 annually to hospital-based projects aiming to benefit the health of Texans through improving care for at-risk populations and reducing hospital readmissions.18 New York implemented the Value-Based Payment Quality Incentive Program in conjunction with its Delivery System Reform Incentive Payment (DSRIP) program to “transition financially distressed facilities [community hospitals] to VBP, improve their quality of care and as a result, achieve financial sustainability.”19 The design of the New York DSRIP program also includes some components similar to those of CHART Phases 1 and 2, such as project-based initiatives and community partner engagement.20 However, no state-based investment program using nonfederal funds has used such a robust and collaborative design as CHART. Thus, the innovative roadmap created by Massachusetts should be considered by policy makers when determining how best to design the specific path forward given their own state’s context.

Although CHART targets community-based populations, it is also aligned with publicly sponsored reforms, such as Medicaid Section 1115 waivers. Massachusetts’ new 1115 waiver, effective July 2017, authorizes $52.4 billion to be spent over 5 years and includes $1.8 billion in DSRIP investments to support providers in transitioning to ACOs and enhancing behavioral health care and long-term services and support.21 The waiver also enables Massachusetts to implement its MassHealth (Medicaid) ACO program. In order to ensure programs are complementary to each other, the HPC actively works with other state agencies to be supportive of, but not duplicative of, these initiatives.

A broader question that looms for federal and state health policy makers is whether APMs and value-based care delivery models can be sustained at community hospitals in the long term. With challenges like narrower financial margins, reliance on public payers, fewer employed physicians, and older facilities compared with their AMC counterparts, community hospitals face substantial barriers to shifting to and sustaining APMs and accountable care models. These are relevant issues ripe for future research and inquiry. Nonetheless, Massachusetts seems to have acknowledged these challenges and continues to move forward despite the fact that a broader state and federal payment system shift to value-based care has not occurred as quickly as initially anticipated. Moreover, with federal health policy in flux, state-based efforts to innovate within their community hospital systems and transform care delivery for their most vulnerable and highest-need patients may be more important than ever.

Acknowledgments 
The authors would like to acknowledge all the CHART awardees for their commitment to preserving access to healthcare services in their communities.
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