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The future includes value-based reimbursement

December 01, 2015

The entire U.S. healthcare industry is poised for a massive shift in how providers are paid for their services. By 2018, the Centers for Medicare and Medicaid Services (CMS) plans to transition 50 percent of all reimbursements to value-based models. In the private sector, the Health Care Transformation Task Force, made up of insurers and providers, has pledged to convert 75 percent of their business to value-based payments by 2020.

Experts agree that the prevailing fee-for-service model, which pays for more care rather than good care, must change, but there is no broad agreement as to how the system can get from here to there. For now, frontrunners are experimenting with reimbursement models, looking for keys to saving money and improving care.

Behavioral health

How the trend will translate to behavioral healthcare is still an unknown, but pilot projects underway through CMS, as well as initiatives launched by private payers and managed care organizations are pointing the way.

Clearly, the fee-for-service infrastructure will be difficult to retool. Many providers benefit from the existing volume-based model and fear that any change will negatively affect their solvency. Few are prepared to stake their revenue on standardized quality measures—which in behavioral health are still in development.

“There’s also a dearth of data available on quality,” says Suzanne Delbanco, PhD, executive director of Catalyst for Payment Reform, a non-profit focused on reimbursement reform. “There has to be agreement on measures. If quality will be a component, we need to make sure that data and infrastructure to collect it are there.”

Another question on everyone’s mind is how sustainable these new payment models can be for the long-term. As value-based reimbursement permeates medical care—primary care particularly— behavioral health providers might find themselves caught in the current of new delivery models and new types of partnerships.

“You have to think about how your services fit into the rest of healthcare spending,” says Adam Falcone, a partner in the health law practice group at Feldesman Tucker Leifer Fidell LLP, in Washington, D.C. “In a value-based model, this is an exchange between a buyer and a seller. You have to demonstrate value, collect data and have the ability to manage the total cost of care.”

New payment models emerge

There are two basic payment models emerging that could be adopted in behavioral health: Global payments and bundled payments.

The global payment model has some traction, and it requires providers to manage comprehensive patient costs with zero-based budgeting. This cost-based model is used to determine a per-patient, per-month spending rate. In some cases, there is a shared savings layer that provides financial bonuses to clinics that hold costs below a defined baseline. The distinction is in the grouping of care costs into a fixed payment for fixed population for a specified period of time.

A classic example might be Medicaid managed care. A state would contract with a managed care entity and pay it a per-patient, per-month rate. The managed care entity would then allocate the money in the best way possible across the population and the services needed.

Global payment is sometimes called “capitation,” but the difference from the old model is that quality measures and bonuses are now part of the structure.

Bundled payment is already available in behavioral health. The Medicare and Medicaid Prospective Payment System (PPS) that exists for Federal Qualified Health Centers and Rural Health Centers is a bundled payment approach, based on the average cost of all allowed services per-patient, per-episode, with episodes comprising many individual services. The 2014 Excellence in Mental Health Act is expected to establish a similar PPS for the emerging Certified Community Behavioral Health Clinics (CCBHCs), which still have another year of planning to complete before pilot projects begin.

Bundled payments can also be thought of as episode or case rates. They are predetermined payments that cover the average cost of all services required for a specific episode of care. This model provides financial bonuses for providers who can achieve the outcome at a lower than expected cost.

However, according to Delbanco, the most common scenario right now is a more simple pay-for-performance (PFP) model, which keeps prevailing payments the same for providers but includes limited bonuses based on meeting quality milestones.

 “Evidence on those systems is mixed,” Delbanco says. “There are instances where it has improved quality, but little evidence that it can help contain costs. Better quality care is more expensive in most cases.”

She adds that there has been little movement on the type of bundled payments outlined in the Prospective Payment System.

“There’s been more talk than action on bundled payments, but it’s a promising area because it has been proven to improve quality and contain costs,” she says.

Pilot projects underway

There are a number of programs underway in both primary and behavioral health that will hopefully prove out just how sustainable this pay-for-value approach will be for providers.

In Oregon, for example, the state’s Alternative Payment Methodology (APM) pilot is an attempt to align payment with whole-person care through patient-centered primary care medical homes. In some settings, primary care practices have embedded behavioral health professionals in their on-site teams in order to provide warm hand-offs and referrals.

 “We’ve seen licensed social workers and psychologists that work in primary care practices and bill for those services,” says Deborah Cohen, PhD, an associate professor in the Department of Family Medicine at Oregon Health & Science University. “There’s an overarching higher payment that can be used toward behavioral health hiring, so someone can be there for warm handoffs and for counseling.”

The APM can help enable the integration of primary and behavioral health by making it easier for practices to more broadly treat patients. The practices have the flexibility to allocate combined reimbursement dollars on a variety of services. Clearly the goal is to incentivize high-quality, comprehensive care, not just a higher volume of services.

One key area of concern that has emerged is in monitoring how the providers use the enhanced payments.

“They want to make sure the practices are reaching out and touching patients, and not just taking the money,” Cohen says. “There’s not a lot of confidence in the monitoring.”

In Kansas City, a number of behavioral healthcare providers have entered into pay-for-performance agreements with New Directions Behavioral Health, a managed care carve out and employee assistance program.

 “When we enter into conversations with facilities, the major concern is that they are being measured on things they can’t control,” says Darryl Donlin, vice president of New Directions. “But there are two things we built into the program: 30-day readmission rates and seven-day kept appointments after discharge.”

Providers notify New Directions when the patient is admitted, which triggers discharge planning. The facility also gets measured on scheduling appointments within seven days and providing a discharge summary that outlines community-based resources and services that are in place to help execute the plan.

“It’s really critical to have an outpatient network to discharge members to,” Donlin says. “If that doesn’t exist, that’s our fault. We work with those facilities in areas of network need and build out the provider network so we can avoid unnecessary rehospitalization of the members.”

Preparing for value-based payments

Providers should take a number of steps to prepare for the inevitable shift to value-based payments, even if they’ve not received any direction from their payer partners just yet. Those steps include:

  • Build your business case. Providers will need to offer payers and potential provider partners with evidence that they can deliver quality care at a reasonable cost. Behavioral health providers will need to collaborate with primary care to determine how they can contribute to a measurable improvement in the patient’s overall health, which could be rewarded financially.
  • Gather data. Providers must be able to acquire and analyze outcome, quality and cost data to fulfill the reporting requirements that lead to enhanced payment.
  • Engage clinical staff and set goals. Involve clinicians in planning, set goals and establish incentives to encourage support of those cost and quality goals. The goals should be clear and measurable. Outcome data has to be collected at the patient level and reviewed regularly.
  • Measure quality. There is no national benchmark for behavioral health, although there are efforts underway to establish measures and models. Facilities can measure quality and outcomes against their own past performance.
  • “Some of the quality measures and standards are still in formation in behavioral health,” Falcone says. “The challenge, though, is that many providers are waiting for payers to tell them what measurements should be and what the criteria are. That’s not a good approach if you want to succeed. In order to get out ahead, you have to start doing that thought process yourself. ‘What measures can I report to a payer? What measures do the payers have to report on?’ If you help the payers achieve their goals, there should be something in it for the providers as well.”
  • Understand your actual costs. This is something that many providers (in both primary and behavioral health) have been hard pressed to do in the past. It will be critical moving forward because cost control and profitability will increasingly depend on accurate measurements.
  • Look beyond your four walls. Providers will need to build out new models of care in order to take more control over outcomes. Providers are going to be evaluated based on outcomes that occur after the patient has left their facility, which will put more emphasis on discharge planning and follow-up.

According to Donlin, New Directions has worked with providers at 14 locations to establish “bridge clinics” in their facilities where patients can go after discharge. They speak with a licensed clinician to review the discharge plan and initiate engagement on outpatient treatment.

“We have seen that strategy greatly increase kept appointment rates,” Donlin says.

The wild card in making these models work is going to be patient engagement.

“If the facility and health plan do everything they can to work together, but if the member is not engaged, then you’re still going to have a great deal of waste in the system,” he says. “That’s really going to be the last step in this process, but if you can get that to happen sooner, then you’ll have better outcomes.”

Keeping the lights on

A key concern among providers will be ensuring they have sufficient cashflow to operate during and after the transition from fee-for-service to value-based payments. With many of the models still being tested, revenues aren’t appreciably affected thus far.

“Some of these new payment approaches don’t change the total amount of revenue, they just change the way providers go about earning it,” Delbanco says. “They might get a reduced fee schedule, but when it all gets reconciled, if they’ve done well on the quality measures, they get just as much as they did before.”

How providers in different states finance this transition will vary.

“It may mean obtaining some grant funding from different public agencies,” Falcone says. “It may mean going to managed care payers and asking for grants, or working with foundation grants. It may even mean working with similar providers and putting money into a new type of legal entity, then using that money to facilitate change.”

The industry can expect to see more providers joining accountable care organizations or consolidating. Smaller agencies will find it difficult to maintain their autonomy as they are asked to take on more responsibility for managing care costs and working with other providers.

Efforts to reduce costs will put an additional squeeze on providers. Any reduction in cost to the system at large is essentially a reduction in a provider’s revenue. According to Delbanco, though, providers in many areas still have fat to trim.

“Even in a situation where providers say they are operating at a loss with public payments, in more competitive markets, hospitals have found a way to make a margin because of that competition,” Delbanco says. “They found ways to cut costs in order to be price competitive in the commercial market.”

All in all, the models are shifting more risk onto the provider, which could further cut into a clinic’s bottom line. In order to assume that risk in a financially viable way, providers need a patient population of sufficient in size to spread the risk. For example, community mental health centers would need to either grow significantly or become the dominant provider in a relatively limited geography.

Taking on risk requires scale and scope that many smaller providers simply can’t support. It also requires having the right data on quality and financial performance.

“You get a set amount of money, and if something goes wrong, the provider is responsible for any added costs,” Delbanco says. “They theoretically have an extra motivation to get things right the first time and not overspend.”

Revenue is key

In Kansas and Florida, New Directions and its provider networks are currently working under an “upside model” for providers. In other words, quality achievement means bonus money but falling short on the measures does not mean penalties.

“As we look at moving to an at-risk model, then revenue is key,” Donlin says. “We’re not there yet, but revenue is going to be a concern.”

The key will be for behavioral healthcare providers to start analyzing their own operations and developing ways to market their value now, so they won’t be overwhelmed once public and private payers adopt alternative models. Providers must take a close look at how they can be paid in a way that supports furnishing quality services but also better managing the cost of care.

“That’s a hard discussion to have, and the answers aren’t easy,” Falcone says. “But providers who ask those questions are going to be best positioned to succeed.”

Brian Albright is a freelance writer based in Ohio.

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