40% & Counting

By Monica E Oss, Chief Executive Officer

The proportion of U.S. health care reimbursement dollars paid in advanced value-based reimbursement (VBR) models—contracts with shared savings, downside financial risk, and/or population-based payments—just passed 40%. The slow adoption of VBR with financial gain sharing and downside risk sharing—along with the unique challenges to specialty provider organizations in participating in these arrangements—may cause executive teams to think there isn’t much movement. But this development is glacial—slow but changing the landscape along the way.

In addition to the national snapshot of reimbursement patterns, the recent survey by the Health Care Payment Learning & Action Network (see APM Measurement Methodology And Results Report  and The 2020 LAN APM Measurement Effort), also reported that the reimbursement model that health plan executive think will grow the most in the next year were arrangements with both shared savings and downside financial risk. This includes reimbursement with fee-for-service-based shared-risk and procedure-based bundled/episode payments

This trend is reflected in some current market developments. In a recent earnings report, Wyatt Decker, M.D., CEO of Optum Health, said that the company had exceeded their projections for value-based reimbursement. Optum Health has raised its projects of consumers in VBR arrangements from 500,000 new consumers to 600,000 (see Optum Health Has Raised Its Expectations For Value-Based Care Participation. Here’s Why). The increase was attributed to changes in provider reimbursement for dual special needs consumers with high acuity who need care across the continuum and wrap-around services in the home.

In other news, the federal Department of Health and Human Services (HHS) proposed testing models that use value-based payments in Medicare Part B to link payment with a medication’s clinical value (see HHS Proposes Testing Value-Based Payments For Medicare Part B Drugs). This plan also includes testing total-cost-of-care models to assess whether the models result in changes to drug utilization, reductions in total spending, and improvements in beneficiary health outcomes. And in January the Colorado Department of Health Care Policy & Financing (HCPF) launched its first two value-based contracts for the Colorado Medicaid pharmacy program—two Medicaid value-based contracts with drug manufacturer Novartis (see Colorado Medicaid Implements Two Pharmacy Value-Based Contracts With Novartis). Both contracts hold Novartis financially accountable for meeting the clinical outcomes demonstrated in clinical trials.

And in February, the U.S. Centers for Medicare and Medicaid Services (CMS) announced it will increase performance measurements and the use of value-based reimbursement for nursing homes (see CMS Planning New Staffing Requirements & Value-Based Reimbursement Plans For Nursing Homes). This will include an effort to reduce unnecessary medications, staffing, and the inappropriate use of antipsychotic medications, and strengthen the skilled nursing facility (SNF) value-based purchasing (VBP) program with incentive funding to facilities based on quality performance.

Among specialty provider organizations, 45% are participating in some form of VBR. But only 9% have more than 20% of revenue coming from VBR contracts (see The OPEN MINDS 2022 Survey On Value-Based Reimbursement In Specialty And Primary Care).

From our recent discussions with health plan executives, the challenge for specialty provider organizations in participating in robust VBR arrangements is attribution of consumer care coordination and financial management responsibilities. (For more on this, see my articles on the presentations by Dr. Indira Paharia, Chief Operating Officer, Behavioral Health, Centene Corporation, Eric Bailly, LPC, LADC Business Solutions Director, Behavioral Health Clinical Strategy, Anthem, Inc. at The 2022 OPEN MINDS Performance Management Institute—Collaborative Care At Scale – More Important Than Ever and The Choppy Road To Better Value.) My takeaway is that specialty provider organizations have two possible approaches for moving ‘upstream’ in risk arrangements with health plans—specialty service programs or health home/medical homes with primary care.

The question for executive teams of specialty and primary care provider organizations is how to navigate this change in the market and maintain (and grow) revenue. For an answer to that question, I recently spoke with my colleague and OPEN MINDS Senior Associate, Paul Duck. His observation—executive teams need to think less about volume and more about value. “They need to understand the ‘value’ of their services to consumers and payers—and develop models to get paid for that value.”

“Most provider organization executive teams have not adequately prepared their infrastructure for arrangements with downside financial risk—their data systems, their clinical delivery systems, and their culture,” explained Mr. Duck. “While many professionals service consumers with behavioral and cognitive disorders have traditionally had a mindset that therapies are more of an art form than science, the science has grown over the past decade and payers want to reimburse on this emerging new science and the performance it will bring.”

“Executive teams need to retool for the four major market shifts that are top-of-mind for payers—“integrated” care coordination models, ‘hybrid’ service delivery models, and a push for lower costs and value with financial alignment with risk sharing reimbursement.”

To test how prepared your organization is for reimbursement arrangements with risk sharing, check out the got an error message when trying to link to this on PRC OPEN MINDS Value-Based Reimbursement Readiness Assessment. And for more on the changing health and human service reimbursement landscape, check out these resources in The OPEN MINDS Circle Library:

And for even more, join us on June 16 at The 2022 OPEN MINDS Strategy & Innovation Institute for the session, Metrics Matter – Utilizing Quality Measures & Key Outcomes As Performance Drivers, featuring Isamu Pant, Director of Business Intelligence, Aurora Mental Health Center; Dominick DiSalvo, Corporate Director of Clinical Services, KidsPeace; and Tammy Pearson, Senior Associate Director, Marshall Center of Excellence for Recovery, Marshall University.

VBR Marches On – A Trend Driving 2022 Strategy

By Monica E. Oss, Chief Executive Officer

We started the year with the release of new reports on the continued movement away from fee-for-service reimbursement to alternate, value-based reimbursement (VBR) models. Over half of health systems are planning to move to “payvider” market positioning in 2022 (see Nearly 60% Of Health Systems Aim To Become ‘Payviders’ In 2022). These ‘payvider plans’ include many arrangements – provider-sponsored health plans; direct contracting with health plans; joint ventures with health plans; and risk-based contracting. In addition, a new survey found 56% of health plans and pharmacy benefit managers (PBMs) report using outcome-based, non-fee-for-service provider reimbursement. However, when it comes to mental health reimbursement, only 22% reported having outcomes-based contract (OBC) (see 56% Of Payers Had Outcomes-Based Provider Reimbursement In Place As Of September 2021).

This disparity between the use of VBR for reimbursement for behavioral health services and other areas of health care is not new. Our survey, The 2021 OPEN MINDS Performance Management Executive Survey: Where Are We On The Road To Value, reported 53% of specialty provider organizations serving consumers with chronic and complex conditions are participating in VBR, compared to 74% of primary care organizations. And, 12% of specialty provider organizations reported 20% or more of their revenue was tied to VBR, compared to 32% of primary care organizations.

There are several reasons for this disparity. Many specialty provider organization executives report difficulties securing VBR contracts. Health plan executives express concerns about balancing choice and access with value-based contracts for behavioral health. In addition, when it comes to behavioral health reimbursement, health plans have issues with linking behavioral health provider compensation to total cost of care in systems with capitation of primary care services; with data sharing and systems interoperability; and with making necessary system changes.

Executive teams of specialty provider organizations need to get ahead of this curve and develop a strategy to “fit” in established value-based relationships. That will involve understanding the dominant health plans in their market areas – and how they prefer to contract for delivering services to consumers living with behavioral health and cognitive conditions. With that market information, executive teams can decide if new partnerships, a merger, or an investment in a different service delivery and management capacity is the best strategy.

Many executive teams are skeptical of participating in the new alternative payment methodologies because the options are limited. Fee-for-service rates for undifferentiated services have been flat for a number of years (on the decline, on an inflation-adjusted basis). To maintain margins, executive teams need to build a plan for creating “value-added services” that get above-market reimbursement. Or, the other options for margins is VBR.

In 2021, there were some great perspectives on future health plan strategy from our keynote speakers at our institutes and summits. To watch any of those presentations, check out:

For the VBR year in review, check out these 2021 resources in the OPEN MINDS Industry Library:

And for even more, join OPEN MINDS on February 10 for The 2022 OPEN MINDS Performance Management Institute, where OPEN MINDS Chief Marketing Officer, Timothy Snyder and OPEN MINDS Senior Associate, Casey Zanetti, will present the executive seminar Maximizing Revenue, Aligning Internal Growth Strategy & Succeeding In Value-Based Care.

The Opportunities & Challenges Of VBR – Making It Work On The Ground

By Monica E. Oss, Chief Executive Officer

Despite significant movement, behavioral health is trailing the rest of health care domains in value-based reimbursement contracting. Forty-five percent of specialty provider organizations have some value-based reimbursement (VBR)—compared to 72% of primary care organizations (for more, see, The OPEN MINDS 2022 Survey On Value-Based Reimbursement In Specialty And Primary Care). And at the health plan level, 22% of plans report having some form of VBR for mental health services in 2021, compared to 79% in the cardiovascular services and 54% in respiratory services (see 56% Of Payers Had Outcomes-Based Provider Reimbursement In Place As Of September 2021).

This gap is due to a combination of factors. Some are due to the structure of financing and reimbursement in health plans. (For more on key opportunities for specialty provider organization value-based contracting, see Treatment Transformation Ahead and The Sustainability Challenge – Capitalizing On Emerging Market Opportunities In Behavioral Health.) Others are due to issues as diverse as consumer choice and provider organization readiness.

How can executives of provider organizations and health plans work together to make this happen in the behavioral health space? Getting to the answer for that question was central to the recent 2022 OPEN MINDS Health Plan Partnership Summit session, “Looking For Quality Outcomes? It Starts With Innovative Value-Based Contracting,” delivered by Monica Collins, senior director, system transformation, Magellan Behavioral Health of Pennsylvania, and Charlotte Chew, vice president, outpatient operations, Pyramid Healthcare.

In January of 2018, the Pennsylvania Medicaid program implemented new requirements for the value-based purchasing (VBP) initiative for the behavioral health HealthChoices program. The state’s goal was to have an increasing percentage of total medical expenses paid through VBP over a three year period (for more, see Pennsylvania Medicaid Moving To Value-Based Reimbursement For Behavioral Health and Pennsylvania Medicaid Managed Care Contracts). Pennsylvania’s value-based strategies requirements fall along a continuum. There are fee-for-service payments linked to performance (low risk), supplemental payments attached to shared savings and risk (medium risk), bundled payment arrangements (medium risk), and global payments based on quality measures (high risk). Eventually, 30% of total medical cost must be in VBR arrangements by year five (originally set for 2022). Pennsylvania originally set staggered targets, beginning with 5% in year one, and increasing to 10% each year.

While the pandemic has slowed the implementation timeframe, Ms. Chew and Ms. Collins discussed the planned value-based relationship between Magellan and Pyramid Healthcare—and the steps required to make it work. In the model, there are limited shared savings models based on spending targets that encourage coordination of behavioral health care. The model also requires addressing social determinants of health (SDOH) issues.

But challenges to getting this up and running are substantial. There are multiple provider organizations among consumers and across episodes of care, which makes it harder to coordinate care. There also exists a lack of medication assisted treatment (MAT) services available and resources for follow up care. The speakers offered two pieces of advice—develop a collaborative model to solve problems and engage at a ‘grassroots’ level to assure success.

Work together to solve hurdles. Operationalizing value-based models has a number of hurdles to overcome—including attribution, managing care transitions, and having the right staff in place. Much of the time well spent involves connecting consumers through various points of care transitions from inpatient to outpatient community models. It’s also difficult to define what ‘value’ is and what drives outcomes—from reduced emergency room visits, medication adherence, better nutrition, less comorbidities, etc. To maximize effectiveness, the whole care delivery system needs to work together to attribute consumer outcomes back to the providers that serve them (see Specialty Primary Care As A Growth Strategy). Magellan and Pyramid Healthcare recommend having weekly touchpoints to examine data, discuss successes and opportunities, and share information among teams to clinically shape what happens next.

Get to the grassroots level. For both payer and provider organization management teams, this requires a cultural shift, centered around the consumer experience, utilizing peers, and making sure all the right information gets to provider organizations (see Nimble Applies To Information Too). Ms. Chew explained how “much of the work has to happen at a local level in different pockets or pilots, balancing expectations and taking the best parts of certain programs and models and adapting and integrating them into others.” One strategy that Pyramid Healthcare introduced is an alumni program, where consumer peers can continue to be involved and integrated into the community, with certified training, job placement assistance, and linkages to wellness programs.

Specialty provider organization executive teams need to renew their focus on getting in ‘first-position’ with health plans by creating opportunities for financial alignment—and for increasing revenues through achieving superior outcomes. In a health care landscape where fee-for-service reimbursement is not keeping pace with inflation (even before this year of hyper-inflation), this shift is a key to sustainability.

For an assessment of organizational preparedness for value-based reimbursement, take the OPEN MINDS Value-Based Reimbursement Readiness Assessment. For more information on value-based reimbursement strategies and partnerships, checkout these resources in the OPEN MINDS Industry Library:

And for more discussion on value-based payment and strategies, join me for the following executive seminars at The 2022 OPEN MINDS Management and Best Practices Institute in Newport Beach, California on August 30: How To Build Value-Based Payer Partnerships: An OPEN MINDS Executive Seminar On Best Practices In Marketing, Negotiating & Contracting With Health Plans.

Understanding Unit Costs & Why They Matter So Much In Value-Based Reimbursement

By Ken Carr

Many health and human service executives are under the impression that value-based reimbursement (VBR) models alleviate the need for organizations to worry about unit costs and productivity anymore. This is definitely not the case. In fact, managing unit cost is just as critical, if not more, in a value-based payment environment (see Value-Based Reimbursement: The Three Strategy Questions).

VBR models are focused on realigning incentives to provide high quality service while keeping the cost of services down. And now, more than 93% of health plans — including commercial plans, Medicaid, and Medicare — have implemented some type of pay-for-performance reimbursement models (see Trends In Behavioral Health: A Reference Guide On The U.S. Behavioral Health Financing & Delivery System). In addition, the use of episodic or bundled payments for specific acute care episodes is gaining traction, with 59% of plans using this model. While only 40% of commercial health plans use episodic payments, 71% of Medicare and 88% of Medicaid health plans use these payment arrangements for behavioral health. And, the Health Care Payment Learning & Action Network (LAN), a coalition of public and private health care provider organizations and health plans—working to accelerate the adoption of two-sided risk and alternative payment models—estimates that by 2025, 100% of Medicare and 50% of Medicaid and commercial payments will be value-based (see LAN Goal Statement FAQs). But even with all these shifts in payment models, unit costs still are a critical element in the evolving value equation – and controlling unit costs will remain an important strategic issue.

And for those organizations still working with legacy fee-for-service (FFS) reimbursements, our current market is making managing unit costs more vital than ever. A review of Medicare and Medicaid fee-for-service (FFS) payment rates show minor increases in FFS rates – certainly not enough to keep up with operating costs; especially with rising per-consumer costs due to the increase in volume of services, new technology, and the increasing number of consumers with multiple chronic conditions. Plus, many of these additional costs are passed on to consumers as out-of-pocket expenses to individuals are seeing their monthly incomes shrink under the weight of such pressures (see Medicare Raising Consumer Out-of-Pocket Costs for 2022).

The question for most executive teams is how to improve their unit cost management. The key is to “think about manufacturing around a particular price. It’s not just math – a lot of what we’re talking about is understanding the operations and the workflow, because you can’t do all of that without the pieces. There are four keys to best practice management of unit costs:

Service line-specific cost accounting The first component in the process is the ability to understand and measure costs in general (and unit costs in particular) by service line. More “global” measurement and management of costs is not useful as executive teams think more about the financial sustainability of specific services (see VBR & I/DD–The Wave Begins).

Target costing This is a pricing method to reengineer the cost of a service to hit a specific target market rate, or the maximum amount of cost for a service that can be incurred to earn the required profit margin. The key element is the ability to reengineer your costs so your price to the payer or consumer is within their “acceptable” range. After you determine the acceptable rate for the service, you determine what it costs your organization to deliver that unit of services — and if your costs exceed the rate, its time for “backwards engineering” to bring your costs in line. The reality is, there are only so many cost variables that you alter – including wages and benefits of direct care staff, staff productivity, volume of consumers served, administration/overhead, etc. (see How To Develop Your Next Big Thing: The OPEN MINDS Framework For New Service Line Design & Development). But this is a necessary step to be competitive in our value-driven market.

Automated process measurement (and management) systems Performance measurement needs to be automated with multiple systems connected to monitor unit costs in the real time. Electronic health record systems, financial management systems, human resource management systems, and customer relationship management systems all must be integrated and aligned to provide the real-time monitoring and reporting data you need to manage on a daily basis. Automated, up-to-date process measurement will allow you to make data-driven management decisions and take action quickly to address problems (see If You Can’t Keep Score, You Can’t Be In The Game).

Metrics-based business process management Metrics-based management is a model of managing processes, outcomes, and performance that relies on qualitative and quantitative measurement of the current performance, the desired performance, and the objectives and action plans to improve performance. Metrics-based management requires both strategic management to identify your performance goals, and business process management to optimize day-to-day organizational processes (see If You Don’t Measure It, You Won’t Implement It: Setting Strategic Plan Metrics). Metrics-based measures are also increasingly being used by payors as a way to measure the quality of care as much of the information already collected by providers through their electronic health records can be used to improve outcomes (see Using the Data You Already Collect to Measurably Improve Clinical Outcomes).

A big piece of the metrics-based management process is operational reengineering – driving operational change for the organization’s structure, staff/jobs, and technology. And in those areas, your goal is to “track the people and what they do” (including consumers, staff, and administration), and “track the paper and where it goes” (including consumer medical records, service delivery and billing, and routine financial workflows).

Reshaping Revenue Cycle Management For The Post-Pandemic Era

By Monica Oss

But what is revenue cycle management? In short, revenue cycle management is the set of administrative and clinical functions related to capturing client service revenue. It begins when a consumer schedules an appointment and continues through point-of-service registration, charge capture and coding, claims submission, remittance processing, payer follow-up, and analysis. Crucial to revenue cycle management is clearly articulated workflows, sufficient staffing, integrated technology, and regular oversight.

“The revenue cycle management process is not going to change, the tools and info and detail to manage revenue cycle management are going to change, said Mr. Wawrzynek. “So, when I talk with people, the key is to have the basics done and nailed now, because when you bring in another variable, like outcomes, then it is going to be difficult to be successful.”

Here are some of the key revenue cycle management changes organizations will need to make in our evolving post-pandemic, value-based world.

Easily configurable billing and EHR systems EHR and billing systems should be easily configurable to accommodate value-based contracting specifics. For example, a value-based contract may require outcomes data that is not currently collected in the EHR. A billing system may also need to collect additional discreet variables to identify individual projects or contracts at the payer level and the client level. Ms. Lane did caution that it is important to manage the changes and updates being done to your system to control the complex variables that go into billing. Don’t let your vendor make a change to the system without completely understanding what they are doing and how it will affect your systems (see Beefing Up Your EHR To Beat The Competition).

Adding the ability to suspend claims Mr. Wawrzynek explained that many billing systems can suspend claims from being sent for payments if they do not meet certain regulatory compliance standards. Organizations may need to enhance their systems to suspend claims based upon contract specific requirements. Ms. Lane also added that it is crucial to have a compliance system in place that regularly audits your billing processes. By catching wrongly billed claims earlier, not only can organizations prevent claw backs later in the year, they can build trust with payers by voluntarily offering refunds for incorrectly billed services (see More Data Means More Risk).

Directly access data stored in billing and EHR systems A major part of managing revenue cycle management in a value-based contracts, is actively managing performance data. Therefore, provider organizations should begin developing data warehouses and data models that can be used to manage performance. Ms. Lane explained that Grafton regularly pulls data and looks at their performance. In cases where their performance isn’t what they expected or they are in danger of missing the targets in their contract, they will speak with the payer. She also said that payers like to see that they are proactively reviewing their contracts and are willing to problem-solve. It goes a long way in managing their relationships (see Data-Driven Care: Using Population Health & High-Utilizer Data).

Ms. Lane explained that managers need to take a more holistic approach to the traditional revenue cycle management process. While having the correct systems in place is crucial, managers should be actively using market intelligence and monitoring the data payers are putting out. Additionally, different revenue cycle staff members should attend meetings and conferences to network with payers. People with different specialties, often have different perspectives and may find a new way to solve a problem for a payer (see Addressing Social Determinants As A Path To Revenue Growth).

Finally, it is important to communicate across different revenue cycle management teams and the organization as a whole. Ms. Lane explained that the head of your revenue cycle management team should take their position broadly and sit in on business development meetings and strategy meetings. Value-based reimbursement requires organizations to sell their services, not just fill out contracting forms. Revenue cycle management should understand the different processes and components that are expected. Across the revenue cycle management team, it’s important to communicate new enhanced rates, changes in procedures due to a new contract, etc. As contracts become more complicated and individualized, teams need to be in constant communication to ensure they are billing at or above the negotiated rate and meeting the specified requirements.

As specialty provider organizations look to re-tool their revenue management cycle process for value-based reimbursement, they should stop focusing on whether they are billing and start focusing on relationship management at every level – the C-suite, clinical, and contracting.