Preparing for Value-Based Payment

By Lisa Eramo  |  February 24, 2015
Tweet this Kareo StoryHealthcare is a dynamic industry, and physician practices must be able to adapt constantly by revising processes, enhancing documentation, implementing technology, and more. One of the most significant changes on the horizon is the transition from a traditional fee-for-service model of care that emphasizes volume of services provided to a model in which the quality of care as well as patient outcomes dictate payment. In a value-based payment model, physicians are paid for all of the care they deliver to patients, including face-to-face services as well as coordination that takes place outside of the office visit encounter.

The move to a value-based model is already underway, and CMS continues to advance these efforts. On January 26, the agency announced a goal of tying 30% of traditional (fee-for-service) Medicare payments to quality or value through alternative payment models, such as Accountable Care Organizations or bundled payment arrangements by the end of 2016. Fifty percent of payments will be tied to quality initiatives by the end of 2018. These goals are included in its campaign titled, Better Care, Smarter Spending, Healthier People: Improving Our Healthcare Delivery System. As stated in a CMS press release about the campaign, “this is the first time in the history of the Medicare program that HHS has set explicit goals for alternative payment models and value-based payments.”

“Whether you are a patient, a provider, a business, a health plan, or a taxpayer, it is in our common interest to build a healthcare system that delivers better care, spends healthcare dollars more wisely, and results in healthier people,” said HHS Secretary Sylvia M. Burwell in the CMS press release. “We believe these goals can drive transformative change, help us manage and track progress, and create accountability for measurable improvement.”

The value-based payment model will only continue to expand as commercial payers jump on the bandwagon as well. For example, Anthem Blue Cross announced in January that it will ramp up value-based payments, according to an article published in Forbes.

“We’re changing the way providers and insurers interact with one another to lower medical costs,” Anthem chief executive officer Joe Swedish said during a call with Wall Street analysis, the article noted. “Currently, we have more than $38 billion in spending tied to value-based contracts, representing 30 percent of our commercial claims and approximately 40,000 providers.”

In December 2014, United Healthcare announced that it would initiate a new bundled payment program to pay MD Anderson Cancer Center a flat fee to provide care for head and neck cancers. This pre-priced payment provides an incentive to focus on the essential elements of care and avoid unnecessary steps in care.

Many organizations, including the American Academy of Family Physicians (AAFP), support the transition to a value-based model of payment. “Since 2004, the AAFP has had a policy that recognizes the importance of replacing the fee-for-service payment model,” says Amy Mullins, MD, CPE, FAAFP, medical director for quality improvement at the AAFP. “The current focus on fee-for-service payment must end and be replaced with better alternatives, such as blended or prospective global payment models that promote value over volume.”

Embracing the patient-centered medical home (PCMH) that promotes continuous quality improvement processes, team-based care, and population health management is one path to a successful value-based environment says Mullins. ACOs—a group of doctors, hospitals, and healthcare providers that work together to provide higher-quality coordinated care to patients—will also become more prevalent.

Participation in the Physician Quality Reporting System (PQRS) is also important. PQRS previously provided incentive payments to eligible professionals (EPs) who reported quality information via one of five methods, depending on whether the provider is an individual or part of a group practice. However, those incentives are no longer available, and EPs are currently penalized for non-participation. For example, EPs who did not submit quality measure data in 2014 will receive a 2% payment adjustment to their Medicare physician fee schedule amount for services provided in 2016. These payment adjustments will continue to increase over time.

Unfortunately, although physician participation in PQRS continues to increase, overall participation is still relatively low. According to an April 2014 CMS report, the overall PQRS participation rate is 36%.

“Some [physicians] have been trying to meet  PQRS requirements through various means of reporting. Others have decided that neither the incentives nor the penalties are worth the trouble of reporting,” she says, adding that extracting information for EHR and registry reporting is often difficult. Some practices forget to submit appropriate codes for selected measures when using the claims-based submission method.

Mullins says physician practices need to understand and embrace value-based payment models because they  are not going away anytime soon. Tweet this Kareo story
“We anticipate these programs will continue to expand as commercial payers increase their use of this payment model,” she says.

However, physician anticipation of these changes remains unclear. Nearly 49% of the 1,613 respondents who participated in the 2014 Fee Schedule Survey, published by Physicians Practice, said that they expected fewer than 10% of 2015 revenue to come through non-fee-for-service contracts. Only 11% said more than half of their 2015 revenue would come from such contracts.

When asked whether the shift in payment methodology would be good for their practice, nearly 20% said yes. Approximately 23% said the shift would be bad for the practice. Nearly 13% said neither, and approximately 44% said they weren’t sure yet.

Mullins says it’s only a matter of time until  most payers shift to a value-based model of payment. Although this shift may require practices to  transform certain processes to effectively take advantage of the new model, making the necessary changes will surely pay off—especially for smaller practices. For example, the incentives offered through value-based payment oftentimes provide care management fees that can be used support extra office staff—a much-needed commodity in a small practice.

“The new payment models also offer incentives to deliver care outside the office visit, paying physicians for services that they have been delivering for free for years. The focus becomes less on how you deliver the care, and more on how well the care is delivered,” says Mullins.

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