Driving Value-Based Care as a Health System

July 1, 2019

Why health systems need to move toward full-risk or capitation models.

We continue to see health systems throughout the United States merge to build economies of scale and skill as the health care landscape that is shifting from volume to value. While health systems have the clinical experience and aptitude to drive care that makes patients healthier, many struggle with keeping that care affordable.

And, this struggle is not going away. Government programs like Medicare, where reimbursements are historically below costs for most providers, are predicted to drive 65% of all insured patient growth in the next ten years. As reimbursement decreases, health systems already struggling for financial sustainability will experience further stress to drive down costs.

Related article: How to Successfully Transition to Value-Based Care

To succeed now and in the future, health systems must capture and manage more of the total premium dollar. Specifically for Medicare, it requires a system-wide movement away from fee-for-service toward full-risk or capitation. Health systems can succeed in a full-risk arrangement by segmenting and managing care with targeted interventions for specific patient-level cohorts and expanding their reach into the healthcare value chain to mitigate some of the greatest non-hospital cost drivers today.

Drive value by cohort development, not by payer reimbursement

Health systems have tremendous value savings sitting in the data trove of electronic medical records. Determine how to slice the data to create patient-member cohorts with similar risk profiles, diagnoses, or utilization patterns and design care models accordingly.

 At Presbyterian, we found that 5% of our Medicare Advantage population was driving 50% of care costs due to frequent emergency department (ED) visits and higher-acuity conditions. Through further analysis, we found that interventions at home were highly successful with this cohort. We created a program where a specialized care team-including social workers, pharmacists, and physicians-provides intensive services for this population in the patient’s home. Many of these interventions would not be billable under fee-for-service Medicare, but through our capitated arrangements with our Medicare Advantage plan, we can pursue effective interventions funded out of the full premium pool. Through this program we have seen costs drop dramatically while also providing a better patient experience and avoiding frequent ED visits.  

We could have managed each patient in this population in our clinics visit-by-visit, but by viewing them as a cohort with similar needs, we were able to develop a care model that drove up value and decreased costs to both the Medicare Advantage health plan, our delivery system and the patient-member.

Expand your reach into the healthcare value chain

Facility and professional fees account for just about half of health claims nationally. This leaves nearly half of every premium dollar open to greater influence from the health system. Often systems ignore the potential value of pursuing opportunities to influence care outside of a hospital room-yet with more programs transitioning to a value-based model, they are going to be held accountable for that care and subsequent patient outcomes.

  • Pharmacy: As pharmaceutical costs soar, the opportunities to capture and manage more of these costs also increase.
  • show that when health systems fully engage in specialty pharmacy, it can drive down costs as well as result in better clinical outcomes for patients. Presbyterian’s in-house specialty pharmacy has helped decrease drug spend and increase patients’ medication adherence while also generating additional revenue.  

  • Post-acute care: As reimbursement is increasingly tied to outcomes, managing post-acute care is a critical step to achieving clinical results that lead to higher incentive payments. But, managing post-acute care can be difficult for traditional hospital-based health systems. By partnering with community providers, as well as our own medical group, Presbyterian was able to perform in the top 4% for total reimbursement across all hospitals and 6% among hospitals that achieved an “excellent” rating for CMS’ Comprehensive Joint Replacement model. This required an intensified focus on care coordination and managing the highest-risk patients in post-acute settings where hospital systems have very limited experience or control.

As those closest to the care, health systems should be the primary drivers of health care in a value-based system. Through initiatives centered on the development of new cohort models and finding new ways to influence costs downstream, health systems can start to experience greater clinical and financial outcomes.

Clay Holderman is executive vice president and chief operating officer at Presbyterian Healthcare Services.

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