Skip to main content
Sister Publication Links
  • ESG: THE NEW IMPERATIVE
Subscribe
  • Sign Up Free
  • Login
  • Subscribe
  • News
    • Current News
    • COVID-19
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • Transformation
    • People
    • Regional News
    • Digital Edition (Web Version)
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Midwest
    • Northeast
    • South
    • West
  • Digital Health
  • Insights
    • ACA 10 Years After
    • Best Practices
    • Special Reports
    • Innovations
  • Opinion
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
  • Events & Awards
    • Awards
    • Conferences
    • Galas
    • Virtual Briefings
    • Webinars
    • Nominate/Eligibility
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Excellence in Governance
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top 25 Innovators
    • Diversity in Healthcare
      • - Luminaries
      • - Top 25 Diversity Leaders
      • - Leaders to Watch
    • Women in Healthcare
      • - Luminaries
      • - Top 25 Women Leaders
      • - Women to Watch
    • Digital Health Transformation Summit
    • Leadership Symposium
    • Social Determinants of Health Symposium
    • Women Leaders in Healthcare Conference
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Diversity Leaders Gala
    • Top 25 Women Leaders Gala
    • - Hospital of the Future
    • - Value Based Care
    • - Supply Chain
    • - Hospital at Home
    • - Workplace of the Future
    • - Digital Health
    • - Future of Staffing
    • - Hospital of the Future (Fall)
  • Multimedia
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
  • Data Center
    • Data Center Home
    • Hospital Financials
    • Staffing & Compensation
    • Quality & Safety
    • Mergers & Acquisitions
    • Data Archive
    • Resource Guide: By the Numbers
    • Surveys
    • Data Points
  • MORE +
    • Contact Us
    • Advertise
    • Media Kit
    • Newsletters
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Insurance
June 13, 2020 01:00 AM

COVID-19 may end up boosting value-based payment

Shelby Livingston
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Dr. Fuad Sheriff with a patient.

    "Just imagine if you were 100% fee-for-service. You would have been dead meat."

    Dr. Fuad Sheriff, primary-care physician

    Almost overnight, Dr. Fuad Sheriff’s small primary-care practice in Amherst, N.Y., was thrust into unknown territory.

    Like hospitals and other medical practices across the country, his practice saw patient visits screech to a halt as the COVID-19 crisis forced restrictions on nonurgent services. So too, did a big chunk of the income that sustains Sheriff’s practice, Amherst Medical Associates.

    But unlike many other practices, Sheriff’s maintained a steady source of payments that helped keep his doors open even when patient visits, which are now rebounding, were at their lowest. The practice receives 40% of its income in the traditional way: treat a patient, bill the insurance company and collect a fee.

    The rest of its income flows through a payment arrangement known as capitation, in which physicians receive a pre-determined monthly amount to care for a group of patients. While the traditional, fee-for-service income evaporated instantly, the rest of the payments continued to flow and were even bolstered by one payer, Independent Health.

    “Just imagine if you were 100% fee-for-service,” Sheriff said. “You would have been dead meat.”

    The COVID-19 pandemic, which has killed more than 100,000 in the U.S. and threatened to shutter medical practices and hospitals, has highlighted like never before the pitfalls of paying for healthcare based on the number of patients seen and services rendered. It simultaneously reinforced the benefits of financing healthcare in a way that’s tied not to volume, but to value.

    While there is no data yet showing how medical practices involved in some form of value-based payment arrangement have fared during the pandemic compared with strictly fee-for-service providers, anecdotes from physicians, medical group administrators, health insurers and other industry experts suggest that providers paid for value have had an easier time weathering the storm.

    Most payments still have a close tie to fee-for-service models
    Reigniting the cause?

    Though they weren’t immune to the challenges of the pandemic, physician practices taking part in certain value-based payment arrangements were helped by a steady source of income amid the chaos. Investments they made previously in care management, technology and social determinants programs equipped them to pivot to new ways of providing care. They were able to flip the switch on telehealth, use data and analytics to pinpoint patients at risk for COVID-19 infection, and deploy care managers to meet the medical and nonclinical needs of patients even when access to an office visit was limited.

    Some providers said the pandemic has reignited a desire to move even more of their revenue into value-based payment arrangements or take on more risk, meaning payments are staked on meeting cost and quality goals. Others that have been reluctant to leave the traditional payment model for fear of being at risk for the cost and quality of their patients’ care are now rethinking that position.

    “This is going to be the biggest catalyst we’ve seen for value-based care and taking risk in the market,” said Nate Akers, a Chicago-based director at consulting firm Guidehouse.

    Visits to clinicians of all types across the country plummeted beginning in mid-March when providers deferred procedures to conserve personal protective gear and other resources, and patients avoided clinics and hospitals in fear of becoming infected. A report by researchers at Harvard University and healthcare technology company Phreesia found that the number of visits to ambulatory practices fell by almost 60% on average from early March to early April.

    Drained of fee-for-service revenue, many hospitals and physician practices responded by laying off or furloughing staff or cutting office hours and pay. A survey of about 500 primary-care clinicians nationwide conducted May 22-26 by the Larry A. Green Center and the Primary Care Collaborative found that 14% of primary-care practices were temporarily closed; 74% were under severe or near severe stress. Primary care has been particularly vulnerable to the crisis as practices generally lack reserves and operate on razor-thin margins.

    When primary-care practices don’t have that revenue flow and don’t have anything in the bank, they can either furlough or shut down, so it’s in that shutdown that we’re going to see the negative dividends of harm done,” said Dr. Asaf Bitton, a primary-care doctor and executive director of Ariadne Labs at Brigham and Women’s Hospital and Harvard T.H. Chan School of Public Health. “Having a stable, predictable source of funds that you can count on to care for a defined population—that is the critical element to be able to keep these practices open.”

    In Manhattan, Kan., Stonecreek Family Physicians remained open and fully staffed even though patient visits plummeted by more than 50% in March and April, said Dr. Ryan Knopp, one of the practice’s 11 family doctors. While most of Stonecreek’s revenue is fee-for-service-based, it also participates in a value-based contract through an Aledade accountable care organization with Blue Cross and Blue Shield of Kansas in which it receives financial awards for successfully lowering costs.

    Knopp said the awards from that value-based arrangement, which are based on his practice’s performance in 2019 and which the Blues insurer provided ahead of the usual schedule, along with funds from the federal government’s Paycheck Protection Program, have served as “lifelines” during the pandemic. He also anticipates that bonuses delivered in the fall from the Medicare Shared Savings Program, which rewards providers who meet cost and quality metrics, will provide another cash infusion.

    “Value-based care has let us operate as normal, quite frankly,” Knopp said. “Without it we’d have to make much tougher decisions.”

    The percentage of providers in capitated contracts remains low
    Caring for the caregivers

    Virginia Care Partners, an integrated network and commercial ACO, has doled out $2.5 million in badly needed funds to about 300 primary-care doctors over the course of the pandemic so far. The funds come from care-coordination fees and shared savings collected from the physicians’ performance in value-based contracts last year.

    The doctors in the network still make most of their income through fee-for-service models, but the funds from the value-based contracts gave them “at least something that helps keep the lights on,” said Gerard Filicko, the network’s vice president.

    “Through a mixture of payments we were able to make a conversion of face-to-face visits to telehealth so they don’t have all of their volume dry up, and through some of the federal relief programs … they’ve been able to keep their cash flow going,” he said. “I think if it wasn’t for those things, we’d see a lot of practices just shutting their doors.”

    Capitated per-member, per-month payments also benefited OptumHealth, UnitedHealth Group’s care delivery business that employs, manages or contracts with 50,000 doctors. Two-thirds of OptumHealth’s revenue is risk-based, which some industry analysts noted would help protect the business from decreases in patient volume.

    Healthcare providers that have entered contracts in which they are responsible for the cost of care and patients’ outcomes are also more likely to have built defined provider networks and invested in technology and care management strategies, said Dennis Butts, a partner at Guidehouse. Those providers were able to pivot from using the investments to win value-based contracts to using them to reach patients at risk for infection or complications during the pandemic, he said.

    “Organizations that have built a value-based infrastructure and have real networks have done a better job pivoting also from a clinical management and operational perspective,” he said.

    That’s been the case at MediSys Health Network, where a steady stream of revenue from its capitated payment arrangements allowed it to focus on keeping patients healthy during the crisis. Bruce Flanz, CEO of the New York-based not-for-profit system, said its care managers have been in constant communication with patients, reaching out to ensure they had access to food, to screen for depression, and to help them avoid infection.

    MediSys is responsible for the outcomes of 148,000 capitated patients who have insurance through HealthFirst and has shared-savings or shared-risk arrangements for another 15,000 patients enrolled in other insurance plans. More than half of MediSys’ revenue flows through value-based payment arrangements.

    “I imagine many of the providers that rely on fee-for-service were very focused on elective procedures and how much lost revenue they had, but since 50% of our revenue comes from value-based payments, we were fortunate to have a constant stream, so our focus really was on care management,” Flanz said.

    Yet, there are many different forms of value-based payment arrangements and not all of them provide a predictable income stream. Most clinicians participating in value-based contracts still receive the majority of their income based on the number of patients they can get in and out the door. Even those with most of their income in a capitated contract may operate on such thin margins that any drop in fee-for-service revenue necessitates cost-cutting measures.

    Sheriff of Amherst Medical Associates said despite having 60% of revenue in capitated payment arrangements, his practice still was forced to furlough some staff members a month into the pandemic.

    New York-based Caremount Medical’s ACO takes on full risk for 30,000 Medicare patients. About 5% of Caremount’s revenue comes from value-based payments. While the medical group anticipates that it will reap a large amount of savings from the sharp decline in emergency department visits, surgeries and hospitalizations, those potential savings wouldn’t arrive until October 2021, said Dr. Richard Morel, Caremount’s chief physician executive.

    “It’s not like you’re getting monthly cash to take care of these patients and you can operate that way,” he said.

    Wojtek Nowak, CEO of Meritage Medical Network, an independent physician association of 700 doctors in California’s North Bay area, said that “there’s no question” that doctors in value-based contracts have fared better in the short term than those paid exclusively on a fee-for-service basis. The network sped up $2 million in payments to help its physicians and encouraged them to switch to telemedicine by reimbursing them for virtual visits even before insurers began doing so.

    But Nowak said it’s hard to quantify because the network, which receives 80% of its revenue on a fully capitated basis, represents only 20%-30% of the physicians’ business. “The lion’s share of their revenue is fee-for-service business. They were helped somewhat in what I would call smoothing the revenue stream, but there’s no question that all the physicians have seen a significant reduction in their patient volume,” Nowak said.

    Post-pandemic worries

    Some experts worried that while value-based contracts may have helped providers stay afloat in the short term, they could be detrimental to a medical practice after the pandemic. Many contracts are predicated on managing risk, which is tough to do when patients avoid the doctor’s office.

    Patients who delayed necessary care could become sicker and costlier to treat, making it harder for providers to meet certain targets outlined in the contracts, said Anders Gilberg, senior vice president of government affairs at the Medical Group Management Association.

    Caremount’s Morel described having trouble convincing a patient with a lung nodule to come in for a follow-up CT scan. Other patients on blood thinners are afraid to go to the doctor to get their blood drawn for fear of becoming infected with COVID, he said. For six to eight weeks, Caremount was also unable to perform mammograms and colonoscopies—two quality metrics used to score ACOs.

    Paul Hebert, chief administrative officer of New York-based AdvantageCare Physicians, said the primary- and specialty-care practice is thinking about how it can get patients back to the doctor’s office to get them the care they need and to close gaps in Healthcare Effectiveness Data and Information Set measures, such as completing annual wellness visits. The 2½ months of lost time makes it a challenge. He also said it’s unclear how pent-up demand for care or even a second wave of the pandemic will affect the practice over the remainder of the year.

    “I know what we’re doing to manage cost and to manage quality. We’ve always been able to rely on that, and there’s an expectation of incentive revenue that would come to us in 2021, but it’s very difficult to anticipate that now,” Hebert said.

    He added that value-based contracts won’t hurt AdvantageCare, but “I just don’t know if it’s going to generate as much help as we’ve had before.”

    Recently, CMS heeded providers’ calls for flexibility and removed COVID-19 hospitalizations from ACOs’ performance calculations, extended certain deadlines and allowed providers to maintain or lower their current risk level.

    “Going forward, value-based care can help ensure healthcare resiliency,” CMS Administrator Seema Verma wrote in a blog post this month.

    While it’s possible that some providers may rethink taking on more risk given the difficulties of managing care when access to healthcare services is limited, more sources expect the pandemic to serve as a wake-up call for physicians who have been reluctant to enter value-based contracts. The movement to value-based payment has been slow, in part due to providers’ concerns about taking on financial risk.

    Providers’ median percentage of revenue in risk-based contracts has hovered at10% from 2016 to 2018, according to consultancy Numerof & Associates’ latest annual survey on the state of population health. The adoption of capitated contracts has also been extremely low. The survey, which included 528 responses from healthcare organizations, showed that the threat of losing money is the greatest barrier to adoption of these alternative payment models.

    “Most businesses outside of healthcare are continuously looking for ways to configure their businesses so that they’ll yield more predictable revenue streams, but conventional healthcare organizations have fought that idea,” said Rita Numerof, president of the firm. “The irony is that they have called that notion “going at risk,” but if they think that’s going at risk, what can we call what’s going on now? Their revenue has plummeted.”

    Hospitals and medical practices have had to see financial support from the federal government to stay open, whether through grants or loans. Some commercial insurers have also bolstered physician payments.

    Numerof said it’s likely that many organizations will go right back to a fee-for-service model after the pandemic, but there will be others who charge ahead toward value.

    Interest growing

    Dr. Henry DePhillips, chief medical officer at Cedar Gate Technologies, a company that helps manage value-based payment contracts, said his company has seen a “huge” increase in inquiries from prospective clients who are looking for help in moving away from fee-for-service reimbursement. “There’s a whole lot of people who have been resistant to the transition from fee-for-service to fee-for-value who are definitely no longer resistant. They are seeing the folks in value-based care actually surviving during this time financially, and they are not.”

    AdvantageCare signed two new value-based contracts—one with only upside risk and one with upside and downside risk—during the pandemic, Hebert said, and it intends to keep taking on more risk in 2020 and beyond. Likewise, Caremount said it would “double down” on value-based business.

    Joe Damore, vice president of population health at consultancy Premier, described a “rebirth of interest” among primary-care physicians and health systems in moving to capitated payments. Damore said that some providers are worried CMS will cut future Medicare payments to make up for funds they’ve given out to shore up healthcare organizations during the pandemic.

    Another Larry A. Green Center survey conducted in May found that 50% of primary-care practices surveyed felt that predictable payments are key to primary care’s stability; another 37% favored payment options that were prospective, capitated and risk-adjusted.

    “COVID isn’t done. This is (the) first chapter, and I think a lot of (primary-care) practices may have weathered the initial storm,” said Bitton of Ariadne Labs. “But the economic pressure of reduced visit volume is going to continue acutely for most of these practices. Insurers and policymakers need to very seriously consider mechanisms for either moving toward temporary or more than temporary kind of capitated or population-based payment arrangements.”

    Related Article
    Insurers create temporary population-based payment models
    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    medicare-advantage-CMS-audits
    More MA insurer audits mean more scrutiny on providers
    medicare advantage directories
    Provider directories are a mess. CMS' plan to fix them has few fans
    Most Popular
    1
    More healthcare organizations at risk of credit default, Moody's says
    2
    Centene fills out senior executive team with new president, COO
    3
    SCAN, CareOregon plan to merge into the HealthRight Group
    4
    Blue Cross Blue Shield of Michigan unveils big push that lets physicians take on risk, reap rewards
    5
    Bright Health weighs reverse stock split as delisting looms
    Sponsored Content
    Daily Finance Newsletter: Sign up to receive daily news and data that has a direct impact on the business and financing of healthcare.
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • News
      • Current News
      • COVID-19
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • Transformation
        • Patients
        • Operations
        • Care Delivery
        • Payment
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition (Web Version)
    • Digital Health
    • Insights
      • ACA 10 Years After
      • Best Practices
      • Special Reports
      • Innovations
    • Opinion
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Events & Awards
      • Awards
        • Nominate/Eligibility
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Excellence in Governance
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top 25 Innovators
        • Diversity in Healthcare
          • - Luminaries
          • - Top 25 Diversity Leaders
          • - Leaders to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Conferences
        • Digital Health Transformation Summit
        • Leadership Symposium
        • Social Determinants of Health Symposium
        • Women Leaders in Healthcare Conference
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Diversity Leaders Gala
        • Top 25 Women Leaders Gala
      • Virtual Briefings
        • - Hospital of the Future
        • - Value Based Care
        • - Supply Chain
        • - Hospital at Home
        • - Workplace of the Future
        • - Digital Health
        • - Future of Staffing
        • - Hospital of the Future (Fall)
      • Webinars
    • Multimedia
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • Data Center
      • Data Center Home
      • Hospital Financials
      • Staffing & Compensation
      • Quality & Safety
      • Mergers & Acquisitions
      • Data Archive
      • Resource Guide: By the Numbers
      • Surveys
      • Data Points
    • MORE +
      • Contact Us
      • Advertise
      • Media Kit
      • Newsletters
      • Jobs
      • People on the Move
      • Reprints & Licensing