Data from Digital Tools is Crucial to Success of Risk-Based Contracting-The HSB Blog 11/8/21



Our Take:


Direct service contracting and other value-based care models are dependent on and require significantly greater data points to enable evaluation and management of actuarial risk. As a result, this opens up more direct need and broader market opportunities for digital health tools like remote and virtual care products. For example, virtual care products that track patients' conditions in their homes and even on the go help providers achieve patient adherence and compliance with treatment protocols to facilitate risk-sharing modes. This in turn allows providers and payers to contain costs based on clinical outcomes. The data points enabled by digital tools are crucial elements to supplement the episodic clinical data that most members of the healthcare ecosystem have if we are going to successfully move from a fee-for-service to a value-based care healthcare system. High quality, granular patient outcome data, cost accounting, and benchmarks, are the core requirements before new workflows can be used for value-based care.



Key Takeaways:

  • According to HCP-LAN, approximately 40% of Medicare fee-for-service payments, 30% of commercial payments, and 25% of Medicaid payments are in some form of value-based payment arrangement.

  • CMS has a goal of having all Medicare fee-for-service beneficiaries in a care relationship with “accountability for quality and total cost of care” by the year 2030

  • According to research from Avalere, on average, physician-led ACOs produced almost 7 times the amount of Medicare savings per beneficiary than hospital-led ACO.

  • CMS estimates that approximately 70% of Medicare beneficiaries were enrolled in either a Medicare Advantage plan or attributed to an ACO in 2020.


The Problem:


Value-based healthcare describes a set of solutions that have been pursued over the last few decades to improve healthcare quality, improve health outcomes, and reduce healthcare expenditure. The transition from fee-to-service to value-based care requires several factors to be considered, such as data interoperability between providers and payers, reimbursement policy that incentivizes supporting chronic and high-needs populations, and tools for provider systems to deliver healthcare at lower costs. Many early models to control costs (such as the HMO models of the 1990s) used risk-adjusted payment models to have provider systems deliver services and achieve specific clinical outcomes for their patient population at pre-negotiated or capitated costs. Capitated payments and other risk-adjusted plans allow provider systems, such as hospitals, to bear financial risk and utilize historical benchmarks to contain the cost of delivering care. Historical cost benchmarks for clinical outcomes are used to reduce cost growth and to provide forecasting for potential revenues if specific clinical and cost targets are achieved. The requirement of cost benchmarking depends on data quality of the measures used for cost accounting and the clinical measures related to health outcomes.

However, with the increased use of digital healthcare tools such as virtual care and remote patient monitoring post-COVID, new entrants in virtual care can empower the transition to two-sided risk (where providers share in both savings and cost-overruns vs. a benchmark) and empower the transition to value-based care. While this will need to be accompanied by an improved level of cost-accounting for providers to track the resources needed to deliver clinical care as well as improved data collection and data analytics around clinical performance data for benchmarking and forecasting, these additional data points lay the groundwork for much more precise models of patient care. In addition, these tools will give providers and payers the data needed to deal with the administrative complexity required to financially model cost and revenues, that underlie such risk-sharing arrangements. The data quality needed to adequately price risk-adjusted models for value-based care is significant and may in fact be a barrier to entry for new entrants and incumbents who don’t embrace the level of patient tracking enabled by digital tools. Virtual care and the broad set of digital tools available to improve patient care are necessary to deliver better patient engagement and better health outcomes. For new entrants interested in direct service contracting and similar risk-sharing arrangements, these tools when used properly (i.e., with appropriate data privacy and security safeguards) may prove to be a competitive advantage.


The Background:


In late October The Center for Medicare and Medicaid Innovation (CMS Innovation Center or “Innovation Center”) released an updated strategic plan. Included in that strategic plan was the goal of having all Medicare fee-for-service beneficiaries in a care relationship with “accountability for quality and total cost of care” by the year 2030. While the long-term future of CMMI’s Direct Contracting model is uncertain, it does appear that it will be here to stay for the foreseeable future as Next Generation ACOs were allowed to join the second cohort of direct contracting organizations for the year beginning January 1st. Medicare’s Direct service contracting is one of the newer models that have been released in 2019 by the Center for Medicare & Medicaid Innovation (CMMI) to reduce expenditures and to improve the quality of care for Medicare beneficiaries. The Global and Professional Direct Contracting (GPDC) Model was released in April 2021, and builds on previous efforts made in value-based care from the Medicare Accountable Care Organizations (ACOs), Medicare Shared Savings Program (MSSP), and the Next Generation ACO (NGACO) model. Direct service contracting poses a unique market opportunity for new entrants in virtual care to participate in a risk-sharing arrangement with Medicare. The opportunity for direct service contracting would enable participating providers to decide whether to take on the full-risk or partial risk for the risk-sharing arrangement. The main benefit of direct service contracting is better cash flow in the risk-sharing process when compared to previous ACO arrangements. The cash flow is more flexible and allows the provider to invest in resources needed for cost-containment. When the model formally launched in April 2021, the participating 53 eligible direct contracting entities (DCEs) included VillageMD, Oak Street, and Iora.


In addition to the direct contracting model, CMMI is looking at expanding and redesigning the use of other holistic care solutions such as Accountable Care Organizations (ACOs). While the success of ACO models has been mixed, CMMI continues to believe they hold promise and research indicates their potential. For example, according to the American Journal of Managed Care, from 2010-2015, ACOs were led by hospitals and health systems, whereas now since 2015, ACOs are increasingly led by physician groups. In 2018, ACOs led by physician groups represented 45%, hospital-led represented 25%, and joint-led ACOs represented 30% of all ACOs. This shift to an increase in physician group-led ACOs indicates a market pressure that corresponds with a need for primary care physicians to play a larger role in cost containment of healthcare expenditures. According to research, physician-led ACOs are better, compared to hospital-led ACOs, at achieving savings and improving quality scores despite having less access to financial resources, less experience managing risk, and less advanced technology systems. According to research from Avalere, on average, physician-led ACOs produced almost 7 times the amount of Medicare savings per beneficiary than hospital-led ACO.


Implications:


Digital health solutions will play a vital role in transitioning to a value-based care model, by providing better data and analytics for cost-containment, managing patient risk, reducing variation in clinical workflows, and improving patient outcomes at a lower cost. These digital care tools are broadly defined encompasses tools related to telehealth, remote patient monitoring, patient engagement, and software that supports continuity of care for the patient experience. Direct service contracts, accountable care organizations, and other similar risk-sharing arrangements from the CMMI create a market opportunity for new products and services to enable existing ACOs and providers to bear more risk through virtual care. These models create an opportunity for new entrants by increasing the flexibility of the benefits design and patient care initiatives that can be offered, such as telehealth, and by expanding the range of organizations that can participate. With CMS estimating that approximately 70% of Medicare beneficiaries were enrolled in either a Medicare Advantage plan at attributed to an ACO in 2020 and a goal of having all Medicare fee-for-service beneficiaries in a care relationship with “accountability for quality and total cost of care” by the year 2030 the detail and depth of patient data underlying patient care will be increasingly important. In addition, organizations that are able to master the collection, refinement, and correlation of patient data with best practices and outcomes as well as those that help empower the standardization, interoperability, and transfer of health data will create sustainable competitive advantage going forward.

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