Over the past three years, the number of people covered under Eastern Maine Healthcare Systems' value-based payment contracts has swelled from 9,400 to 100,000.
In that period, the eight-hospital not-for-profit system has seen emergency department visits decline 2.8%, admissions drop as much as 21%, and primary-care visits jump 23.7%. The system calculates that it has lowered its per-member, per-month Medicare cost trend by 4.7%, and healthcare costs for its employees have grown less than 5%.
But as Eastern Maine's accountable care organization subsidiary, called Beacon Health, has achieved success in lowering costs and utilization, the system has seen reduced revenue from fewer admissions and procedures. Still, that's not stopping Eastern Maine from pushing ahead with its value-based contracts. “We can't continue to do business the way we've always done business,” said Jeff Sanford, Beacon's chief financial officer. “We're not going to sit here and let the change be upon us. We want to be part of the change.”
Maine is one of a few states that have more than 15% of their population enrolled in an ACO, which offers healthcare providers financial incentives for meeting cost and quality targets rather than paying based on the total number of services delivered. But across the country, the move toward value-based payments has been patchy, with some areas of the country moving much faster than others.
More health systems are reporting a higher percentage of their revenue from value-based contracts. But most of these contracts involve bonus-only models or supplemental payments linked to quality. The second and more demanding phase will be in assuming full upside and downside financial risk, said Phil Kamp, CEO at Valence Health, which provides technology and consulting services for value-based payments and population health management.
“The hard part for hospitals is in the transition,” he said. “Provider organizations are resisting this. What will happen over time is they'll realize they're better off in the second phase. They'll have more control.”
Factors such as market competition, experience with Medicaid managed care and the level of physician integration all play a role in the pace at which health systems adopt value-based payment models. There are also mounting pressures from the federal government and private-sector groups to make the shift. The CMS recently announced a three-year goal of having at least 50% of federal healthcare spending under contracts that reward quality and outcomes. In addition, a task force composed of providers, insurers and employers has committed to shift 75% of its members' business into contracts with incentives for health outcomes, quality and cost management by January 2020.
“This is a classic Malcolm Gladwell tipping-point story,” said Ken Kaufman, managing director of consulting firm Kaufman Hall.
Sanford said Maine has been ahead of the curve. “A lot of it has to do with the (healthcare) industry in Maine focusing on these issues before we knew what they were called,” he said.
Nationally, the number of lives enrolled in an ACO tops 20 million, representing about 6% of the population, according to a June report from Leavitt Partners' Center for Accountable Care Intelligence. But nearly 10% of those people, or 2.1 million, live in only three states, Colorado, Oregon and Utah, which have the most mature Medicaid ACO programs.
One of the unanswered questions for providers is whether they can stay in the black while holding down utilization and focusing on lower-cost care settings. For that reason, some systems don't want to be early adopters. “They're making money on fee-for-service,” said Kim Looney, a Nashville-based attorney at law firm Waller. “It will almost need to be a cram-down environment. When people have to, they will.”
Many systems that are choosing to take on financial risk are doing so as a market-share play. “They think they can drive more lives into their system,” said Dion Sheidy, a partner at advisory firm KPMG.
Providers that are best positioned to start taking on risk under value-based payment models are those with sophisticated health information technology systems, physician cooperation and enough market clout to change the delivery model, experts say. “Where you have dominant plans and dominant providers, they're more likely to have these value-based arrangements,” said Dr. Andrei Gonzales, director of value-based reimbursement initiatives at McKesson Health Solutions. “Size gives systems a little more breathing room to try out different models.”