Dozens of Oregon healthcare companies have committed to boosting their value-based payment models as the state looks to reduce healthcare expenses.
Forty healthcare organizations, including some of state's largest health systems and insurers, signed a voluntary compact Thursday that aims to tie 70% of their payments to capitation and other alternative payment models by 2024. The pledge aligns with the Oregon's cost growth benchmark that goes into effect this year, which looks to reduce the current 6.5% cost growth rate to 3.4%, said Jeremy Vandehey, director of the health policy and analytics division at the Oregon Health Authority.
"This signals a commitment to the fact everyone needs access to high quality healthcare and that costs are growing at an unsustainable rate," he said, adding that part of the goal is to facilitate an ongoing dialogue about how to curb costs.
The primary alternative payment model should be a capitated system where a provider is paid up front for a population of patients and a predefined set of services, according to the compact. When that isn't feasible, healthcare organizations should pursue ones that include both shared savings and downside risk, it reads.
Oregon's coordinated care organizations and Medicaid program, which are touted as some of the most progressive in the country, already have value-based payment requirements as well as cost growth benchmarks. These programs build on that foundation, industry observers said.
"The only consistently effective ways to control health spending while preserving adequate levels of access are prospective budgets (like Oregon's CCOs) or standard prices that approximately reflect providers' actual costs like Medicare," Jeff Luck, an associate professor at Oregon State University who has studied the state's Medicaid expansion, wrote in an email to Modern Healthcare. "The question will be whether health plans and providers actually follow through with implementing (alternative payment models) more broadly, but a public compact should help to encourage that."
Oregon has one of the most sophisticated managed care infrastructures in the country, said Jeff Goldsmith, founder and president of healthcare consultancy Health Futures.
"A lot of the hard work has already been done," he said. "But how is this going to change patient care?"
Goldsmith suggested targeting out-of-pocket costs or care quality in the state initiatives.
Oregon fashioned its cost growth benchmark after Massachusetts', which resulted in about $5.5 billion in savings for consumers between 2013 and 2016.
The 3.4% target would be in place for the next four years and then wind down to 3%. If certain organizations repeatedly miss the mark, the state can enforce a performance improvement plan and potentially issue a financial penalty that will fund healthcare affordability initiatives.
Unlike the Massachusetts law, which currently has the benchmark set at 3.1%, Oregon does not set any floor or ceiling for the benchmark.
"It's significant for the industry to basically say that we'll cut cost growth in half," Vandehey said. "The end goal is to get our arms around cost so we can ultimately get premium and deductible growth down."