MARCH 12, 2019

Welcome to the Pay for Performance Update eNewsletter
Editor: Philip L. Ronning
This issue is sponsored by the National ACO Summit, the National Bundled Payment Summit,
and the National MACRA MIPS/APM Summit

Increased Bonuses Seen as Key in Pay-for-Performance Systems
Larger bonuses may result in more effective care of patients with common chronic illnesses, a small study of the pay-for-performance approach for physicians found. In an article published online February 8 in JAMA Network Open, Amol S. Navathe, MD, PhD, of the University of Pennsylvania in Philadelphia, and colleagues found greater improvement in quality measures for physicians who could get larger bonuses than those who were not eligible for such an increase. Many insurers and healthcare systems are turning to pay-for-performance (P4P) systems, with Medicare's recent changes in the fee-for-service program serving as a "centerpiece" for these efforts, the researchers write. According to Medicare, more than 1 million physicians and other clinicians were eligible for its Merit-based Incentive Payment System (MIPS) in its start-up year of 2017. However, P4P has not produced consistently positive results" in testing, the authors note. To test the potential benefits of increasing P4P bonuses, Navathe and colleagues designed what they called a "pragmatic" randomized clinical trial. It centered on care of patients with at least one of five chronic conditions: asthma, chronic obstructive pulmonary disease, type 2 diabetes, coronary artery or ischemic vascular disease, and congestive heart failure.

Pay for Performance Works: HealthLeaders Media
Americans are paying more for the same amount of healthcare, according to a new report from HCCI. KEY TAKEAWAYS

  • Healthcare spending per person, largely driven by rising prices, increased 4.2% in 2017.
  • Out-of-pocket spending increased 2.6% per-person but comprised a smaller share of total spending.
  • Average spending for individuals with multiple chronic conditions was more than five times as much as for those without a chronic condition.

Healthcare spending on average totaled $5,641 for individuals with an employer-sponsored health plan in 2017, according to a new study from the Health Care Cost Institute (see Resource section below). Even though overall spending slowed from 2016 to 2017, prices continue to be a factor as the average cost of healthcare for individuals hit an all-time high. Healthcare spending per person in 2017 increased 4.2% year-over-year, while the overall utilization of healthcare services only grew by 0.2%. The phenomenon of Americans paying more for less or similar levels of care utilization has largely been due to average prices increasing, totaling a 17.1% rise from 2013 to 2017. (HealthLeaders, February 12, 2019)

Preparing Patients and the Health System for Curative Therapies in the Pipeline
Experts at the "Paying for Cures: Ensuring patient access and system sustainability" event discussed how the healthcare system can pay for curative therapies that have high upfront costs with benefits that accrue over time. Curative therapies represent a conundrum for healthcare. On the one hand, there is the ability to cure patients of potentially life-threatening diseases or diseases that would require costly treatments for the duration of a patient's life, but on the other hand, these therapies are very expensive and might require novel financing mechanisms that the US healthcare system is not equipped to handle. During "Paying for Cures: Ensuring patient access and system sustainability," a 1-day event in Washington, DC, panelists discussed how the system can catch up with the science by examining ways to pay for products that have high upfront costs with benefits that accrue over time. In the first session of the day, speakers representing patients, providers, and a health system discussed the current situation and what high-cost cures could mean for both patients and the system. Marc Boutin, JD, chief executive officer of the National Health Council, highlighted what a unique situation curative therapies put people in. The patient advocacy business model is more than 300 years old, and advocacy has always had a huge focus on finding a cure. "And now, for the first time, we're actually talking about cures, [which] upends the entire dynamic for people with chronic conditions," he said. (American Journal of Managed Care, February 12, 2019)

Health System Executives Expect 25% of Care Delivery Payments to be Value-Based in 2019
Health system executives predict the shift to value-based payment models will continue to increase this year, according to a survey conducted by The Health Management Academy for Lumeris. The recently released survey was conducted in May and August among 25 healthcare system executives representing organizations that own or operate 280 hospitals. Five survey findings:

  1. Fee-for-service payments still account for 78 percent of care delivery among respondents, although that has decreased five percentage points over the last year.
  2. Only 22 percent of care delivery payments are value-based. However, that has increased five percentage points over the last year, and respondents expect to reach 25 percent this year.
  3. In the third quarter of 2018, 46 percent of respondents said their health system's pace of change toward value-based payment is moving quickly or very quickly, up 14 percentage points from the second quarter of 2018.
  4. Sixty-two percent of respondents indicated plans to take on additional risk in the next 12 months. Common methods for additional risk assumption were ACOs (46 percent), Medicare Advantage (31 percent), and bundled payments (23 percent).
  5. Half of respondents said their health system understands the total cost of care for Medicare patients in specific value-based payment arrangements well or very well. However, many respondents indicated that understanding the cost of care for other payers, such as Medicaid and private commercial payers, is more difficult.

Read more about the survey here.

(Becker's CFO Report, February 21, 2019)

Innovative PBM Launches Unmatched Pay-For-Performance Model
BeneCard PBF, a purely transparent pharmacy benefit manager (PBM), introduces the first comprehensive pay-for-performance (P4P) offering in the pharmacy benefit management industry. BeneCard PBF's P4P model combats the misaligned interests often present in traditional PBM models that lead to well over $750 billion spent on waste in today's healthcare industry. To understand how BeneCard PBF's P4P model is different, it is important to understand how PBMs traditionally operate. Often, "transparent pricing" is not transparent at all. Numerous conflicts of interest arise when PBMs exist as part of large conglomerates that own retail pharmacies, health insurance companies, mail order pharmacies, physician practice management groups, and other businesses that generate profits for the organization as a whole when prescriptions are filled. This provides an incentive to process more and more prescription claims, regardless of medical necessity or the cost to members and plan sponsors. The greater the number of prescriptions dispensed, the higher the profits of the PBM and its healthcare conglomerate. Traditionally, PBMs become profitable in three primary ways: rebates, administrative fees, and "spread" on paid pharmacy claims. (MarketWatch, February 14, 2019)

How Genome Sequencing, AI and Pay-for-Performance Delivery Drive Precision Health
Precision health has become all the rage lately, as it holds ramifications that reach deep into the prospects for success for new models of health care, including pay for performance. So how can precision health benefit patients and the clinicians who care for them today? It starts with an understanding of precisely what it entails and what it can achieve. While there have been different definitions and explanations of precision health, the Indiana University School of Medicine provides a good one, stating that it "is a highly personalized approach to prevention and treatment that takes into account individual variables in genes, environment and lifestyle." Precision health is all about predicting and preventing disease -- not just treating it -- to reduce health care costs. At my company, my group works directly with a number of health care systems and providers who are working to achieve these goals, and through key digital transformation initiatives, they are quickly realizing them. Today, three key drivers are enabling precision health: genome sequencing, innovative artificial intelligence-based technologies and a pay-for-performance model of health care. (Forbes, February 12, 2019)

2017 Health Care Cost and Utilization Report

(Health Care Cost Institute, February 11, 2019)

Pay for Performance Update e-Newsletter is one of a family of free e-Newsletters providing a complimentary video presentation and regularly updated news and key resources on major health care issues such as ACOs, comparative effectiveness, patient safety, bundled payment, readmissions, and Medicaid. To view and subscribe to other e-Newsletters go to www.HealthCareeNewsletters.com.

Update on CMS/CMMI Value-Based Care Initiatives

Kate Goodrich, MD
Chief Medical Officer and Director, Center for Clinical Standards and Quality Centers for Medicare and Medicaid Services, Washington, DC