Traditionally, doctors and hospitals get paid more when they do more patient procedures. But this quantity-based health care model has driven up costs to unsustainable levels, say some experts.
In 1983, for example, U.S. health care spending totaled about $355 billion; but by 2016 it rose to nearly $3.4 trillion, according to government reports. One alternative is value-based health care, where medical professionals are rewarded for positive outcomes like fewer return trips to a hospital.
Last month, Atlantic Health System launched Atlantic Alliance, a physician-managed organization aimed at reducing health care costs by coordinating care and optimizing practice operations.
“As health care has moved towards value-based models, it is clear that quality improves when everyone works together, and providers can focus on caring for patients,” said Dr. Thomas Kloos, a vice president at Atlantic Health System and president of the Atlantic ACO (accountable care organization), which is comprised of more than 1,700 physician participants who are affiliated with Atlantic Health System. “Atlantic Alliance breaks down barriers between providers, making it easier to coordinate care while reducing costs. It is a powerful framework that allows physicians to engage with one another while maintaining their autonomy.”
Other organizations in New Jersey have also tackled the challenge. A Medicare ACO at Hackensack University Medical Center climbed to third in the national Medicare Shared Savings Program in 2016, while chalking up more than $50 million in savings — up from $33 million saved in 2015.
“This was achieved through an intense focus among leadership, physicians, IT – really everyone – to provide patient-centered care,” according to Robert Garrett, co-CEO of the hospital’s parent Hackensack Meridian Health Network. “The effort included hiring several care coordinators who serve as a bridge between patient and physician, monitoring analytics to closely track outcomes and approaching care in a longitudinal fashion as opposed to a transaction between patient and provider. The result is fewer hospitalizations and ER visits – not to mention enhanced quality of life for our patients.”
Hackensack Meridian also developed a digital classification system that helps personalize treatment and track costs.
“We found that by performing a genetic test for certain breast cancer patients – which costs $4,000 – we could save $11,000 on average because we learned not all patients would benefit from chemotherapy versus alternative therapies,” Garrett said.
A key differentiator between value-based and traditional health care is the payment system, according to Linda Schwimmer, president and CEO of the New Jersey Health Care Quality Institute, a Princeton-based nonprofit focused on improving the quality and affordability of health care in the state.
“Under value-based health care, providers are paid based on outcomes — both quality and efficiency metrics — rather than paid based on the volume of services provided,” Schwimmer said. “The goal of value-based health care is to align the financial incentives with higher quality and necessary care rather than unnecessary or even harmful care.”
A value-based approach has “demonstrated cost savings by reducing hospital admissions, readmissions and avoidable emergency room use,” she added. “Bundled payment models have also shown success in reducing costs by saving on site of care for post-op rehabilitation services. Regional Cancer Care Associates (a multistate cancer physician network with a location in Hackettstown) has one of the largest bundled payment programs in the country for oncology care.”
In a bundled payment arrangement, a single reimbursement is made for all services related to a specific treatment or condition. Because providers assume financial risk for the cost of services for the treatment, they’re incentivized to eliminate unnecessary services and reduce costs.
“Horizon BCBS has been a very successful first mover on the payer front, as their ‘patient-centered’ medical practice network led to a large pool of shared savings in 2015,” according to Carter Paine, COO at naviHealth, a Brentwood, Tenn.-based company that provides clinical service and other support to health systems, health plans and post-acute providers across the nation. “Horizon BCBS has also been an early mover in commercial bundles, and naviHealth has partnered with Horizon BCBS to use value-based care plans to optimize their post-acute outcomes.”
There are some challenges to implementing a value-based health care approach, Schwimmer noted.
“The obstacles are leadership support — having the commitment to change and willingness to make the investment of time and money — and contracting with health plans to support the arrangement, since it takes multiyear contracts, flexibility and trust,” she said. “Data is another issue, since it takes access to timely data and the ability to interpret and then react to the data to improve and adjust.”
Smaller practices have a tougher time moving to the new approach, according to Schwimmer, since they have less resources to leverage the costs associated with data acquisition and analysis. Some also struggle to find a strong primary care provider that will coordinate care and help patients navigate a system that can be complicated and fragmented.
Still, a growing number of institutions are adopting a value-based approach.
“Our members aspire to having 75 percent of our respective businesses operating under value-based payment arrangements by 2020,” according to an October statement by the Health Care Transformation Task Force, an industry group that brings together patients, payers, providers and purchasers
“The Centers for Medicare & Medicaid Services — the largest and most important payer — requires it,” Schwimmer said. “First there were incentives and lots of opportunities for upside-only pilots. Now there are penalties. Providers are expected to be able to have access to data, use it to coordinate care and reduce unnecessary or even harmful care.