Value-based Payments Take a Firm Foothold in Texas Hospitals

Value-based Payments Take a Firm Foothold in Texas Hospitals

Written by Kim Krisberg

In Texas, like across the country, health systems are shifting from traditional fee-for-service and toward care delivery and payment models based on value and outcomes. The shift has been underway for a number of years, with many changes being driven by federal initiatives such as the Centers for Medicare & Medicaid Services’ Innovation Center, which the Affordable Care Act created to pilot value-based payment models.

Yet, even before the ACA, health systems recognized the need for a new approach and had started making changes. Probably the most notable of these efforts is the Institute for Healthcare Improvement’s Triple Aim framework, which first launched in 2007 and continues to guide health systems toward three main goals: improving patient care experiences, improving population health and reducing costs.

Methodist Health System, Dallas, is a part of these nationwide efforts to keep more people healthier at a lower cost. In just a handful of years, the system has saved tens of millions of dollars, all while delivering more valuable care to patients.

“We’re kind of building the plane as we’re flying it and we’re still learning a lot as we go,” said Shannon Huggins, senior vice president for contract strategy and population health at Methodist Health System. “But we believe this is where health care is headed — moving away from the old transactional process to finding new ways to treat the whole patient in the best way possible.”

In 2012, the health system joined the Medicare Shared Savings Program, a federal initiative at CMS to incentivize high-quality, coordinated care by allowing providers to share in the savings they generate. Through the MSSP, Methodist created the Patient-Centered Accountable Care Organization, a group of hundreds of physicians serving thousands of Medicare patients in the Dallas region. To make it work, the Methodist ACO zeroed in on creating more seamless continuums of care and using data to drive quality improvements.

Huggins said the health system has implemented a variety of clinical interventions to meet value-based targets, such as care navigation teams and more coordinated patient handoffs between providers. “The key is making sure the patient is getting the right care, at the right place in the most efficient manner,” Huggins said.

So far, the efforts are working — Huggins reported that the ACO generated $14 million in Medicare savings in the last year and $69 million in savings since 2012. And its value-based models have expanded beyond its Medicare patients since the system first joined the MSSP effort.

 Huggins said a big lesson learned is that many of the costs associated with unnecessary medical care aren’t medical, they’re social, such as barriers to transportation, adequate nutrition and safe housing. Those gaps, she said, have opened up new avenues for partnering with community resources to keep people healthier and out of the hospital.

“It’s slow-growing and takes real traction,” Huggins said of finding success in the new value-based market. “But it’s the right thing for us to do.”

 However, the future of CMS’ value-based initiatives isn’t entirely certain. In August, for example, CMS proposed a new rule that would overhaul the MSSP and significantly increase the financial risks on ACOs. In its proposal, CMS estimates that more than 100 ACOs will likely drop out of the program in the years following the rule change. The current MSSP rules also require that ACOs eventually take on more risk, capping the number of years that ACOs can participate with nearly no risk-sharing at six years. Huggins said the Methodist Health System ACO reaches that cap at the end of 2018 but intends to stay in the program and is now evaluating how much additional risk it can take on.

 “We’re already moving down the road toward taking on more risk,” she said.

While the federal government makes changes to its Medicare value-based initiatives, state lawmakers are making their own push to generate savings for state health budgets. In 2017, a 50-state review of value-based payment models from Change Healthcare, a health technology company, found that more than 40 states have state-initiated plans or strategies to move toward value-based payments and 23 states, including Texas, have established value-based payment targets or requirements for payers and providers.

“I think the move to value-based care will continue and I don’t think it will always be smooth — we still have a lot of learning to do,” said Lisa Kirsch, senior policy director at the University of Texas Dell Medical School. “But we also cannot continue with the spending growth we’re experiencing; we need to improve quality and do it in the most cost-effective way. We need to continue to look for ways to incentivize and reward high-value care that improves health outcomes.”

Value-based Payments Moving Forward in Texas

This year, new Texas Medicaid rules kicked in requiring that 25 percent of overall health plan payments to hospitals and providers have a value component and that 10 percent of a health plan’s total provider payments be tied to value-based models that have a financial downside risk for the provider. The latter target is one that Kirsch predicts many health plans will likely meet via existing state efforts, such as those aimed at reducing potentially preventable hospital readmissions. The new value-based Medicaid thresholds will increase to 50 percent and 25 percent, respectively, by 2021.

The effort began in 2012, when the Texas Health and Human Services Commission found that Medicaid managed care organizations were largely paying providers based on volume, not quality. In response, THHSC required that MCOs implement value-based models and report their progress back to the commission. However, there was no hard, value-based percentage to meet until this year. MCOs do have some discretion in defining “value” under the new rule, but services eligible for value-based payment must still increase the likelihood of good health outcomes and be grounded in evidence-based practice. In other words, Kirsch said, “it has to be high quality, not just save money.”

There are a number of value-based interventions that have shown potential in both boosting health and lowering cost, she said, such as better discharge planning, integrating behavioral health and primary care, and strengthening patient navigation services for high-utilizing patients. Still, Kirsch said adjusting to value-based payments is a daunting task with many moving parts that all have to sync up to meet competing demands and please diverse stakeholders.

“I think this is challenging for everyone,” said Kirsch, who works with THHSC to advance value-based payments within Texas Medicaid and serves as an ex-officio member of the state’s Value-Based Payment and Quality Improvement Advisory Committee. “Value-based payment markets are still so new … A lot of providers are making a run at it and others want to be involved, but they also want to know that if they invest in new systems and change how they deliver care, they’ll see better results.”

The evidence base on effective value-based care delivery is still emerging, but results are promising. In 2015, the Rand Corporation released findings that value-based payment models encouraged team approaches to patient care and facilitated investments in data-driven quality improvement. Another study, that was published in 2018 and surveyed 120 payers nationwide, found that value-based strategies reduced unnecessary medical costs by an average of more than 5 percent.

Of course, not all the findings are positive. The Rand study also found that meeting value-based incentives created a “heavy administrative burden” for clinicians, which other bodies of research have linked to greater risk of physician burnout, a serious problem that’s worsened in recent years.

Kirsch predicts that to meet the new value-based thresholds, Medicaid MCOs likely will focus first on their largest providers with the highest patient volumes and not on smaller, more critical-access providers who work in much thinner financial margins.

Mary Dale Peterson, president and CEO of Driscoll Health Plan, a provider-based Texas Medicaid insurer based in Corpus Christi, agreed that the shift into value-based markets is going to be especially difficult for smaller practices and places where provider-patient ratios are already stretched thin.

“There are real technical and operational challenges here, and every good idea can’t be operationalized effectively without a big cost,” Peterson said. “If I have small practices in rural areas with not very big denominators, it’s hard to make a change that’s meaningful and at the same time, you don’t want to put those providers at risk. We’ve got to be nuanced in our approach — one size doesn’t fit all, especially in a state the size of Texas.”

Driscoll Health Plan, part of Driscoll Children’s Hospital, has been using value-based payment incentives to improve care for about a decade now. Peterson said the key to doing it effectively is following the data — “the process is always evolving,” she added. For example, Peterson said the plan spent a couple of years trying to boost flu vaccination rates, but providers found it too difficult to meet incentivized targets, especially with factors such as flu shot shortages out of their hands. So the effort was dropped. On the other hand, payment models that incentivize better newborn health outcomes — such as lower rates of necrotizing enterocolitis, an intestinal disease in premature babies — have been a success.

Getting value-based payment models right is an ongoing experiment, Peterson said, which is why the plan’s incentive contracts last for only a year.

 “Sometimes, you have to go back to the drawing board because you just can’t operationalize it,” she said. “Meeting the 50 percent risk (in 2021) is going to be a challenge. …We’ll push as much as we can, but I think it will be different for every community.”

Texas Hospitals magazine