Managed Health Care

You are a practice manager for Accelerated Health (AH), a 25-physician hospitalist group that practices at St. James Hospital, a large hospital in an urban area. The hospital currently contracts with five hospitalist groups, but AH manages the largest share of the hospital’s 1,500 monthly patient cases. AH has performed better than the other hospitalist groups in some of the hospital’s key performance indicators, such as average length of stay (LOS). Currently, AH operates entirely on a fee-for-service model with no risk-based contracts. Their payer mix is 50% Medicare or Medicaid, 46% private insurance, and 4% self-pay. Referrals from primary care providers and other specialists drive most of their patient volume, and they continue to remain competitive in managing patient volumes at St. James. AH is only one of two hospitalist groups that covers the emergency department and also manages patients at a long-term acute care hospital. Managed care and capitation payments have yet to be widely adopted in your market, but there may be an opportunity for AH to be a first mover considering their payer mix and the patients they serve.

You’re approached by OptiHealth, an insurance payer, to manage their dual-eligible patients admitted to St. James under a capitated arrangement. Most of these patients have multiple comorbidities and require more intensive care, but OptiHealth has a history of transferring its patients from other local hospitals to St. James Hospital. The initial contract would include a $600 payment per patient admission for an anticipated 20 patients per month. It would also require AH physicians to frequently meet with OptiHealth case managers to ensure care is appropriately coordinated. All 25 of your hospitalists need to be in agreement before taking on any form of a risk-based contract.

Identify what you perceive to be the key facts of the case. (20 points)
Identify and describe key stakeholders or areas needing consideration. (20 points)
Describe some reasons why you might recommend accepting the contract. (20 points)
Describe some reasons why you might recommend rejecting the contract. (20 points)
Identify your recommendation and explain why. (20 points)
Addition reading resource>>>

Chapter 4 introduces you to the concept of value-based purchasing (VBP), which is a term that refers to provider payment being connected to both costs and patient outcomes. VBP can technically be both risk-based and non-risk based. However, these payment models provide an incentive for providers to enhance quality care. The Health Care Payment Learning & Action Network (HCPLAN) is a group of public and private healthcare leaders that are working to support industry adoption of alternative payment models (APMs). APMs and VBP are virtually synonymous so there’s no need to confuse the terms.

The APM framework created by HCPLAN lays the pathway for providers and health systems to reduce total costs and improve quality. There are four categories to the APM framework:

1. Fee for service (FFS) with no link to quality and value
2. FFS linked to quality and value
3. APMs built on FFS architecture
4. Population-based payment

The framework intends to help transition the healthcare system away from traditional FFS payments toward more risk-sharing and population-based payments. The ultimate goal is to drive the adoption of person-centered care, defined as “high-quality care that’s both evidence-based and delivered in an efficient manner, where patients’ and caregivers’ individual preferences, needs, and values are paramount.”

Category One refers to traditional retrospective payments, like fee for service (FFS), that reimburses providers based on the volume of services rendered; it doesn’t account for any performance or quality initiatives. Diagnosis-related groups (DRGs) qualify as a form of payment under this category, as these cover all charges associated with an inpatient stay from admission to discharge. Under this payment category, providers have an adverse incentive to render and bill for additional services, as their reimbursement is tied to higher volumes. This category can generally be thought of as the status quo, which HCPLAN is hoping to change.

Category Two includes FFS payment models being adjusted based on initiatives to improve patient care and clinical services. There are several ways to modify payments. For example, investments in implementing and upgrading electronic health records could qualify, as this can enable providers to improve the patient experience. This category also includes requiring providers to report clinical data and performance metrics, which often includes additional investments in internal resources to collect and share this data. Ultimately, the goal of this category is to reward providers for proving they’re rendering high-quality, medically necessary services. Providers may receive more reimbursement for higher performance (in other words, a pay-for-performance payment model), or they simply may be reimbursed more for enhanced reporting. This category also includes provisions stating that providers who don’t perform well on relevant quality measures may be penalized in the form of payment reductions. This category doesn’t include any form of risk-sharing on behalf of providers but simply improves or diminishes their reimbursement based on performance on cost and quality metrics.

Category Three also utilizes FFS payment models but links reimbursement to cost and quality targets. Providers who meet these targets are eligible for shared savings (in other words, upside gainsharing), and those who don’t may be held financially responsible. However, if providers meet quality targets but don’t meet cost targets, they may not be held accountable for higher spending; this is also known as upside-only risk. Bundled payments, including episode-based payments, fall into this category, as these payment models require more intensive care coordination. This category also can include payment models that have downside risk for providers. In other words, providers may have negative payment adjustments based on poor performance on quality and cost measures. Most accountable care organizations operate under these payment models, as they can include both upside gainsharing and downside risk. The goal of this category is to enhance the integration of clinical services and reduce unnecessary care, thereby making the healthcare system more effective and efficient across the care continuum.

Category Four utilizes population-based payment models that intend to cover a range of services, including preventive health, health maintenance, and health improvement. Providers are incentivized to establish care teams to enhance access and care coordination and ensure patients receive care when and where they need it. This will often require health plans and provider groups to integrate financing and care delivery processes and align their strategies to ensure resources are maximized to achieve performance and quality outcomes. Payment models under this category include bundled payments for certain conditions, such as asthma, diabetes, or cancer, and can also include capitated payments for a broad population. Capitated payments virtually remove the incentive for providers to render more services, as risk-sharing may result in them absorbing additional costs. It could be argued that this gives providers the adverse incentive to not render medical care as a means to control costs and enhance their reimbursement. However, by linking payment to quality, performance, and reporting measures, providers are incentivized to provide high-quality and efficient care.

Transitioning from FFS payments to capitated or population-based payments is a necessary step to transform the industry. It will require all stakeholders to be involved and progress along HCPLAN’s APM framework, including patients, providers, insurers, and employers so that everyone understands the goals of such initiatives. It won’t be without its challenges, but payment reform and increased adoption of risk-sharing contracts can be effective at both improving patient outcomes and slowing healthcare cost growth.

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