Monday’s announcement by the Department of Health and Human Services (HHS) that it plans to move 30 percent of Medicare payments into alternative payment models by the end of 2016 and 50 percent by the end of 2018 has put providers on notice. HHS said these goals will be achieved through investment in alternative payment models such as Accountable Care Organizations (ACOs), advanced primary care medical home models, new models of bundling payments for episodes of care, and integrated care demonstrations for beneficiaries that are Medicare-Medicaid enrollees. Observes Oliver Wyman ACO advisor Niyum Gandhi:
HHS wants to push providers to a tipping point on value. This is a big deal because CMS is trying to push the market more aggressively to take on the affordability of the overall healthcare ecosystem through realigning providers’ incentives.
In the wake of the announcement, Gandhi offers his perspective on how providers can take an integrated, comprehensive approach to transformation:
- It’s hard to have a foot in the two canoes of commercialization and value capture. Providers need a calibrated strategy for sequencing various products and contracts. A multiyear plan will need to be developed for most organizations. Contracting opportunities create an opportunity to accelerate the development of clinical capabilities by rewarding the performance improvements that they deliver, and product partnerships can help lock in membership, market share, and loyalty. Staging and aligning this transition is critical, as a mismatch between performance capabilities and risk taking can create significant downside.
- Shift the clinical model in sync with the payment model. As the market moves towards population health reimbursement, providers will need to reduce utilization to be successful. This requires investment in clinical transformation. To be successful, ACOs need to fundamentally change the way they deliver care. We have seen ACOs roll out many incremental tactics that address low-hanging fruit such as readmissions or moving care to more cost-effective settings. These plays – such as embedding care coordinators – are necessary but not sufficient for the transformation to full population health. The reality is that to achieve significant savings in total cost of care, providers need to effectively manage the overall health of patients, especially the highest-risk patients, in primary care and specialist offices. This is real investment, but also real disruption. Across the country, healthcare innovators are deploying next-generation clinical models that improve quality and outcomes while drastically reducing downstream utilization and cost. And they are maintaining financial stability throughout the transformation of the business by thoughtfully sequencing the value-based contracting and the investments in care redesign (see chart below).
- Changing the reimbursement model necessitates a different model for engaging physicians.The old FFS/RVU model was designed to drive the behavior of productivity. In this new reimbursement climate, providers will have other behaviors that they want to drive, including spending time managing high-risk patients, following clinical protocols, working with a more effective multidisciplinary, holistic team, and innovating clinical models. The various levers available to drive these behaviors include physician group structure, communication strategies, data strategies and motivators, MD leadership development, and incentive alignment. The trick is to identify which levers work best for which behaviors, and then figure out how to time and sequence them.