Value-Based Care Challenges the ‘Profitability of Sickness’

Will COVID-19 hasten the demise of fee-for-service medicine?

COVID-19 has hurt physician offices. And the stats bear it out. Practice revenues dropped 50% between March and May of this year, according to the American Medical Association. Health Affairs reported on a study estimating that over the course of calendar year 2020, primary care practices could be expected to lose $67,774 in gross revenue per full-time-equivalent physician. And McKinsey’s Physician Survey, conducted in May, showed that 46% of respondents were concerned about their practices making it through the pandemic crisis and 43% expected to have fewer than 28 days cash on hand – an 85% increase since pre-COVID-19.

If there is a silver lining, it may be that the crisis has accelerated the push to drop fee-for-service medicine. “It has underscored that doctors don’t get paid at all when they can’t see patients and bill piecemeal for care,” reported Kaiser Health News.

“The pandemic has exposed the flaws of our traditional, volume-based fee-for-service method, as patients cancelled or postponed visits,” a spokesperson for BlueCross BlueShield of North Carolina told The Journal of Healthcare Contracting. A survey of North Carolina primary care physicians in May showed that almost one in 10 were considering shutting their doors permanently.

Based on outcomes

Value-based healthcare is a healthcare delivery model in which providers, including hospitals and physicians, are paid based on patient health outcomes instead of the amount of healthcare services delivered, according to a January 2017 report in NEJM Catalyst Innovations in Care Delivery. It rewards physicians for “helping patients improve their health, reduce the effects and incidence of chronic disease, and live healthier lives in an evidence-based way. The ‘value’ in value-based healthcare is derived from measuring health outcomes against the cost of delivering the outcomes.”

Ideally, value-based care allows 1) patients to spend less money to achieve better health, 2) providers to achieve greater efficiencies and patient satisfaction, and 3) payers to control costs and reduce risk.

“In a word, it’s better care,” says Don Crane, president and CEO of America’s Physician Groups, a national professional organization of 350 physician groups, all of whom are committed to value-based care. “Today, 90 percent of the U.S. healthcare spend is on people with chronic and mental health conditions, and more than 80 percent of Medicare FFS spending is on the costliest 25 percent of Medicare beneficiaries, many of whom have multiple chronic conditions. It is a disease burden best addressed through value-based care, in which physician groups take responsibility for the health of broad populations, conduct plenty of community outreach, and place heavy emphasis on prevention.

“Fee-for-service was pretty good for 1890. But it is woefully inadequate for 2021.”

For years, the federal government and private payers have been nudging the industry toward value-based care. For example, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) instituted the Quality Payment Program, or QPP, and two payment options: the Merit-based Incentive Payment System (MIPS) and Advanced Alternative Payment Models (APMs).

Private payers are increasingly attracted to the concept as well. In January 2019, BlueCross and Blue Shield of North Carolina (Blue Cross NC) launched Blue Premier, a value-based care program that holds Blue Cross NC and providers jointly accountable for meeting quality and cost measures, says a Blue Cross NC spokesperson. Eight of the state’s largest health systems, plus more than 200 independent primary care practices, are in Blue Premier.

In August 2020, UnitedHealth Group released a report showing that primary care physicians paid under global capitation – which pays a set amount per month per patient – achieve key quality metrics at higher rates than physicians paid under fee-for-service. The study showed that patients treated under global capitation:

  • Were screened at higher rates for breast cancer (80% versus 74%) and colorectal cancer (82% versus 74%).
  • Demonstrated higher controlled blood sugar levels (89% versus 80%) and were given more eye exams (84% versus 74%).
  • Received higher rates of functional status assessment (96% versus 86%) and medication review
    (97% versus 92%). 

Still, progress toward value-based care has been uneven. In 2018, 87% percent of physicians reported that their practice received payment through fee-for-service, making it by far the most commonly reported payment method, according to the American Medical Association. That said, 63% reported payment through at least one of the four APMs of MACRA.

The COVID factor

The question is, what impact will COVID-19 have on the evolution of fee-for-service to value-based care? “Patients have been fearful of visiting their doctor, and the waiting rooms of many practices are empty,” says Crane. “But because our groups are prospectively paid, they continued to receive payment for doing the kind of things they do, such as conducting outreach, mining data to uncover those who might be vulnerable to the virus, and providing counseling when necessary – all while continuing to care for non-COVID patients, who still struggle with chronic conditions such as hypertension, diabetes or COPD.”

In response to COVID-19, Blue Cross NC created its Accelerate to Value Program for Independent Primary Care to provide financial stability to primary care practices during COVID-19 and to serve as a pathway towards participation in a primary-care-provider capitation program starting in 2022. PCP capitation is a fixed payment for a set of core primary care services including office visits (E/M codes), wellness visits (preventive care codes) consults and physical exams.

In August 2020, following more than a year of collaboration and planning, Allina Health and Blue Cross and Blue Shield of Minnesota announced a six-year, value-based payment agreement. Allina Health performs more than 6 million patient visits per year, while approximately one in three residents in the state have coverage through Blue Cross. “We’ve lived in a volume-based healthcare world where the profitability of sickness is greater than the profitability of wellness,” Dr. Craig Samitt, president and chief executive officer at Blue Cross and Blue Shield of Minnesota, was quoted as saying.

“It is extremely important for Allina and Blue Cross that quality of care is improved – not diminished – by this agreement,” said an Allina spokesperson. Allina Health is committed to expanding its expertise on preventive care and new models-of-care delivery (to help reduce overall levels of care), and to share “appropriate, usable, real-time data to inform care delivery and enhance the patient experience.

“Ultimately, providers will be able to focus on more proactive forms of preventive care with less administrative burden with all patients. This means more time spent building patient relationships, streamlining the care delivery experience and reducing provider burnout. The effect will be to encourage preventive care, which can keep patients healthier and reduce rates of debilitating chronic illness.”

Physician practices ready to step away from fee-for-service and toward value-based care need three things above all, says Don Crane, president and CEO of America’s Physician Groups, a national professional organization of 350 physician groups, all of whom are committed to value-based care:

  • Leadership and commitment. Practices making the transition to value-based care may need to develop new infrastructure and competencies, including analytics, better patient communications, and patient registries. “It takes leadership to say, ‘Let’s do this,’” says Crane.
  • An electronic medical records system. “EMRs drive some doctors crazy, while others love them. But from an administrative standpoint, they are absolutely necessary in order to aggregate data” and avoid unnecessary or improper tests
    or procedures.
  • A team. “Keeping people out of the hospital, where costs are high and safety sometimes compromised, is key to value-based programs,” says Crane. “But you need the personnel to do so.” That includes hospitalists, to help avoid unnecessary admissions and facilitate timely discharges from the hospital; care managers, to keep care plans on course; and physician assistants and others to focus on the knotty problems of managing chronic disease. “It’s not rocket science,” says Crane. “You want the whole team working at the top of their capabilities.”

Proponents of value-based care say:

  • The pandemic exposed the flaws of our traditional, volume-based fee-for-service method, as patients cancelled or postponed visits.
  • Value-based care allows 1) patients to spend less money to achieve better health, 2) providers to achieve greater efficiencies and patient satisfaction, and
    3) payers to control costs and reduce risk.
  • The ‘value’ in value-based healthcare is derived from measuring health outcomes against the cost of delivering the outcomes.
  • Chronic illness is a disease burden best addressed through value-based care, in which physician groups take responsibility for the health of broad populations, conduct plenty of community outreach, and place heavy emphasis on prevention.
  • Primary care physicians paid under global capitation – which pays a set amount per month per patient – achieve key quality metrics at higher rates than physicians paid under fee-for-service.
  • Providers are able to focus on more proactive forms of preventive care with less administrative burden with all patients.