Value-Based Payments: Where Are We Now? Where Are We Going?

In a 1959 speech, then-Senator John F. Kennedy famously said: “When written in Chinese, the word ‘crisis’ is composed of two characters—one represents danger and the other represents opportunity.”

Although Kennedy didn’t quite get the translation right, there is wisdom buried in the notion that crises can often create fertile ground for change. And frankly, there has been no bigger recent crisis than the COVID-19 pandemic, which led many to debate the future of how healthcare should be delivered and paid for.

Of course, opportunities needn’t always lead to a positive change. In many cases, it can lead to the fear of innovation and progress, pushing leaders to retrench toward what is comfortable and familiar rather than pursue bold reforms. This concern became acute in the healthcare industry’s needed shift toward value-based payments. The pandemic led to significant worry that payers and providers would become fearful of putting any dollars at risk, and instead singularly focus on maintaining revenue.

If anything, the pandemic validated the need for value-based payments, as they helped to insulate providers from the dramatic fluctuations in patient volume that contributed to financial uncertainty.

An environmental scan by the Duke-Margolis Center for Health Policy showed that providers leveraging value-based prospective payments during the most pressing period of the pandemic demonstrated greater financial resiliency than those relying solely on fee-for-service (FFS) payments. The healthcare system’s response to COVID-19 also belied any notion that value-based healthcare was too operationally complex to effectively implement. Instead, the pandemic demanded unprecedented collaboration among healthcare stakeholders, including providers, payers, patients, life science companies, and policymakers, to drive high-value patient outcomes.

Although the economic uncertainty that followed the pandemic created new challenges for providers in terms of tightening operating margins, increasing healthcare costs, decreasing profits, and staffing shortages, it emphasized the need for embracing value-based care (VBC) as a means of improving clinical and financial outcomes, to create a win-win for both providers and patients.

Value-Based Payment Models: Have They Produced the Real Value?

Despite a general agreement that VBC is the future of healthcare, there has been evidence that not all value-based payment models prove successful in reducing the cost for providers.

For instance, former Center for Medicare and Medicaid Innovation (CMMI) Director Brad Smith wrote in The New England Journal of Medicine that only five of 54 models were able to cut Medicare costs. “[T]he vast majority of the Centers’ models have not saved money, with several on pace to lose billions of dollars. Similarly, the majority of models do not show significant improvements in quality,” Smith wrote.

The challenges aren’t limited to Medicare-focused models. Research indicates that other value-based methodologies, including accountable care organizations and medical homes, have contributed to physicians spending more time on “administrative, documentation, and reporting tasks,” and inciting further consolidation among physicians and hospitals.

We’ve correctly diagnosed the challenge—that the FFS model incentivizes utilization rather than quality, value, and outcomes—but have not perfected the treatment regimen. A lack of perfection is not a reason to stop our progress toward value-based payment. That would only cause the underlying problem to metastasize, pushing our nation’s already-exorbitant healthcare spend toward ever-higher levels.

Instead, we need to focus on the root causes of why value-based payments have not lived up to expectations and develop collaborative solutions that empower providers and put patients at the center. A good way to start is by addressing the challenges that have impacted the success of value-based payments in Medicaid, which include:

• Lack of coordination between payers, providers, and policymakers: States often leave it to Medicaid managed care organizations (MCOs) to design and implement value-based payments with providers in their networks. This often requires MCOs to meet a certain threshold of payments to providers via value-based contracts. Although this promotes flexibility, it often creates a patchwork quilt of disparate strategies, incentives, and measures that increase the burden on in-network providers.
• One size doesn’t fit all: Although there is a sizable and growing base of publicly available value-based model options, populations vary in specific characteristics. The unique policy and programmatic goals of the state, coupled with different data and technological systems, inhibit the ease of a single VBC model implementation.
• Lack of control: Providers are often expected to meet value-based payment strategies they had no hand in designing nor a common understanding of the metrics or data being used to calculate performance.
• Penalizing through higher-cost, higher-need patients: Value-based models have often not taken into account the complete risk and complexity of the underlying population of beneficiaries. Care contextualization and social drivers matter—and as a result, models often do not adjust payments for the various non-medical barriers to care. This creates a disincentive for providers caring for higher-need patients.

Interestingly, “data” is at the heart of each of these problems.

In order to succeed in solving them, states need a robust data infrastructure capable of integrating the necessary data. This includes claims data from the Medicaid Enterprise System, clinical data from health information exchanges (HIEs) or electronic health records (EHRs), and social determinants of health (SDoH) data from assessments or closed-loop referral systems—to effectively design, deploy, and implement effective value-based payment initiatives. Just as important, states need robust interoperability capabilities that enable providers to identify gaps in value-based payment implementation, measure performance across initiatives, and close the gaps they see.

Accelerating Digital Transformation to Help Providers Succeed with Value-Based Payments

The availability of relevant data would be a game-changer and could leave providers feeling more empowered to successfully meet the goals of value-based payments and ensure a predictable, steady revenue stream. Perhaps most importantly, improved data collection and activation techniques help to achieve the fundamental goals of VBP initiatives: promoting coordinated care, facilitating high-quality outcomes, and improving health equity

Of course, it’s one thing to argue for integrated data infrastructures and enterprise interoperability, and quite another to actually achieve it. Undoubtedly many state Medicaid agencies bear the battle wounds of past attempts to modernize their data infrastructures and promote connectivity across the healthcare ecosystem. And admittedly, many state Medicaid agencies and health systems have long understood the power of data, but have struggled to establish the architecture needed to leverage data to realize the full potential of this model.

The API revolution, which is being ushered in through Fast Healthcare Interoperability Resources (FHIR), is poised to dramatically change the game for states. It promises to promote standardization in how data is exchanged, allowing us to carry our healthcare information wherever we go. Similarly, cloud computing will continue to make data integration and collaboration more technically and economically feasible, allowing states to quickly scale resources and storage without having to build and maintain expensive data storage capabilities.

Innovaccer leverages these revolutions to offer a purpose-built data platform designed to integrate data and systems at scale in order to effectively operationalize value-based payment approaches. The platform allows Medicaid agencies a single solution to aggregate, hydrate, activate, and harmonize both clinical and non-clinical data to support analytics-driven decision-making and enhance interoperability.

Using Innovaccer’s Value-Based Payment solution powered by the Innovaccer Data Activation Platform, the # 1 rated data and analytics platform by KLAS, Medicaid agencies can leverage unified data, analytics, and superior workflows to align provider incentives with member outcomes.

• Unified data: When it comes to driving population health and whole-person care, unified data is critical to developing a value-based model that accounts for demographic, social-economic, and health data. Using this solution, health agencies and systems can unify their population health data across disparate, siloed sources to get a 360-degree view to better align their programs with population needs.
• Analytics: This unified data, when complemented with purpose-built deep analytics, helps create meaningful real-time insights into population health to support several use cases, including overseeing episode performance and getting timely alerts when an episode has been triggered, tracking and adjusting programs over time, and tracking performance across measures tied to payment models, and evaluating risk-adjusted performance relative to peer groups.
• Superior workflows: The solution offers superior workflows that are fully interoperable and can be integrated with provider EHRs to deliver real-time feeds and actionable insights, so they can improve performance and outcomes.

This analytics-driven, unified data model helps health agencies create clinically meaningful measures, gain actionable insights into population health, track episode performance and adjust programs, and support better collaboration across the healthcare ecosystem to advance the transition from volume to value.

Making that leap will require Medicaid agencies to be bold. Their provider partners–who are critical to the success of any value-based payment arrangement–are understandably concerned about past attempts at VBP as well as future economic headwinds. But done right, and done in a way that empowers providers with data, VBP can be a positive force that improves outcomes for patients and revenue certainty for providers. In short, states should see opportunity, not danger in the path ahead.