The targets announced last week by Medicare and the private-sector organizations promote and improve the new payment models, participants say. “We set ambitious goals that are consistent with our commitment to the great healthcare providers, and we don't know everything we need to know about how to get there,” said Dr. Richard Gilfillan, CEO of Trinity and chairman of the Health Care Transformation Task Force. “Advancing a patient-centered health system requires a fundamental transformation in how we pay for and deliver care,” Karen Ignagni, CEO of America's Health Insurance Plans, said during last week's HHS announcement.
Dr. Timothy Ferris, senior vice president of population health management for Boston-based Partners HealthCare, another member of the task force, said the targets give providers greater certainty in developing new payment and delivery models. “Let's get over the conversation of whether this is going to happen,” he said.
Some outside experts celebrated the announced goals to expand alternative payment models. “Most insurers are doing the happy dance right now because this really means that contracting for a result or an outcome is going mainstream if Medicare is doing it,” said John Gorman, a Washington-based consultant who works with health plans. “That will encourage or force reluctant providers to come around.”
Quality experts caution, though, that to make the new payment models work, more useful and accurate quality measures must be developed. “If all you're going to do is you're going to put providers at risk for cost but you don't have a robust system for measuring quality, then you're not leaving patients better off,” said Dr. Ashish Jha, a Harvard University health policy professor.
Most providers and insurers still have far to go to make the payment transformation. Aetna said its capitated payments to doctors accounted for 5% of its total healthcare costs in 2013 and the prior two years. In 2014, the insurer's risk-based contracts accounted for about 27% of its business, and that will increase to 50% by 2018 and 75% by 2020, the company said.
About 10% of Health Care Service Corp.'s contracts share savings with providers, said Dr. Stephen Ondra. “There is no one-size-fits-all approach,” he said.
States also have acknowledged the need to gradually increase financial accountability in their Medicaid programs, said experts with the Center for Health Care Strategies. “States are moving from no risk to increasing risk,” said Tricia McGinnis, the center's vice president of delivery system reform. But they also recognize that “providers are in very, very different starting points.”
Some managed-care companies have made more inroads in certain geographic areas. Health Net, a publicly traded managed-care company, said three-quarters of its California commercial managed-care contracts paid providers under capitation. The figures were 69% and 78% for Medicare and Medicaid, respectively.
Blue Cross and Blue Shield of Massachusetts has introduced contracts with global budgets featuring incentives tied to quality measures. Those account for half of its commercial business. A study published last year in the New England Journal of Medicine found these contracts led to lower costs and higher quality. “I've never seen improvements as broad and deep as the improvements these organizations are achieving,” said Dana Safran, a senior vice president for the Massachusetts Blues.
Even among the more aggressive and sophisticated health systems, strong incentives to aggressively manage care and costs are limited. “We have a long way to go and it's a real stretch,” Trinity's Gilfillan said. Less than 30% of Trinity's business is in contracts with some financial incentives, including its 21 ACOs and six bundled-payment contracts. Trinity's financial statements show the system ended last year with $229 million in capitation revenue, out of a total of $11.8 billion in patient revenue from other contracts.
At San Francisco-based Dignity Health, which is participating in the task force, about 15% of its $9.5 billion in patient revenue last year fell under risk contracts such as ACO and bundled-payment deals. The system reported that just 3% of its revenue is under capitation. But Dignity's capitation contracts let the system hedge by allowing it to default to fee-for-service rates if there is “material deterioration” in financial performance.
Lebanon, N.H.-based Dartmouth-Hitchcock Health System operates half its business in risk contracts. But some have no penalties, and none are capitated, said Dr. James Weinstein, CEO of Dartmouth-Hitchcock. That will change this year when Dartmouth-Hitchcock enters a capitated Medicare managed-care contract in Vermont. Weinstein said he hopes to shift more contracts into greater risk. “Where you just have upside risk, there's not really risk,” he said. “It's kind of like training wheels.”
Partners HealthCare bears full risk for the cost of care for its employees and members in its newly acquired health plan. But other contracts limit the potential penalties and bonuses somewhat, Ferris said. “We're interested in using payments to help us redesign and improve care, and if that ultimately ends up with us taking full risk down the road, it's hard to say,” he said.
Wariness of pure capitation contracts might be warranted based on the 1990s experience, said Boston University health economist Austin Frakt. “Straight-up capitation with no caveats whatsoever can be fairly dangerous and financially risky for providers,” he said. But new incentive contracts can include important differences. “Folding in quality measures and bonuses changes the incentives of just straight capitation,” Frakt said.
Whatever form the new payment models take, payers and providers have to come up with arrangements that discourage systems from using bonuses merely as a boost to the bottom line. “We want to make sure there really is an effort to move people to a new sort of transformative practice approach, as opposed to allowing providers to avoid the transformation by giving them more revenue,” Harvard's Chernew said.
