Resetting Payer-Provider Arrangements for COVID-19 and the Evolving Improvement Journey

Resetting Payer-Provider Arrangements for
COVID-19 and the Evolving Improvement Journey

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Resetting Payer-Provider
Arrangements for COVID-19
The path to healthcare transformation rests in
the improvement journey—the incremental steps
that move the industry towards higher-quality
care and lower cost.
A health system’s comprehensive improvement
journey includes payer-provider arrangements
that motivate improvement efforts.

COVID-19 renewed the importance of payer-
provider arrangements, as the pandemic
resulted in lower volumes for providers.
Strained hospital resources were common
as high-acuity COVID-19 patients occupied
ICU beds.
Changing the structure of the payment
programs was not a top priority for providers
or payers during the pandemic’s emergency
phases.

Progressing in the improvement journey
requires the industry to reset the perform-
ance standards of these payer-provider
models to the post COVID-19 environment.
For example, moving forward, the industry
must consider the impact of remote care,
how to reimburse telehealth services,
and the need for consistent payments
to providers.

Healthcare Payers and Providers:
A Financial Arrangement Review
No matter how committed an organization is
to provide the best care, a system often
struggles to take the steps necessary to kick
off change without some financial stimulus.
As the industry recovers from COVID-19,
providers are re-evaluating the financial
arrangements that motivate them to
improve their processes while benefiting
payers and patients.

As arrangements for healthcare payers and
providers continue to evolve, the payer
industry increasingly pushes for downside
risk for providers.
A review of the most popular models include:
 Pay for Performance
 Bundled Payments
 ACOs

Pay for Performance
The most basic arrangement for healthcare payers
and providers is pay for performance (P4P).
A straightforward incentive system, rewarding
improvement based on established metrics (might
penalize the provider for missing the metric).
For example, if a certain percentage of patients
in a population receives preventive screening
during the year, the provider will receive the
incentive payment.
This kind of arrangement is a basic starting
point that drives some improvement.

Pay for Performance
The majority of fee-for-service (FFS) payment systems link quality metrics to
payment. For Medicare payments, hospitals participate in three programs:
The Hospital Value-Based
Purchasing (VBP)
Program rewards and
penalizes hospitals for
experience, quality, safety,
and efficiency.
The Hospital Readmission
Reduction Program
(HRRP) compares
readmission rates for
specific high-volume
conditions and reduces
payments based on high
readmission rates.
The Hospital-Acquired
Condition Program
(HACRP) hits hospitals
with reductions for high
rates on conditions such
as central line-associated
bloodstream infection
(CLABSI) and catheter-
associated urinary tract
infection (CAUTI).

Pay for Performance
CMS has extended the above types of programs
to physicians and post-acute care.
This emphasis on quality metrics increases
awareness of the measures and forces
organizations to focus on improvement.

Bundled Payments
In a bundled payment arrangement, a
payer gives a single payment for all
provider services constituting an
episode of care, regardless of how
many providers that episode involved.
Before bundled payments, the provider
would bill each service separately, but
under a bundle arrangement, hospitals,
post-acute providers, and physicians
receive one payment for the episode.

Bundled Payments
This arrangement holds providers accountable
as a group for their performance and motivates
them to work together to eliminate duplication
and waste.
The CMS bundled payment program is called
Bundled Payments for Care Improvement
Advanced (BPCI Advanced).
CMS defines in advance what constitutes an
episode of care and which providers’ services
that episode includes.

Bundled Payments
CMS updated its voluntary BPCI-Advanced
program in 2018, and the program will
operate until 2023.
CMS has given indications this program
may become mandatory after 2023.

Bundled Payments
Providers participating in BPCI Advanced
chose to enroll in 1 or more of the 32
clinical episodes, including congestive
heart failure, urinary tract infection, sepsis,
and various orthopedics procedures.
As of March 2019, there are 334
participants in the program representing
715 hospitals and 580 physician group
practices across the country.

Bundled Payments
Most participants chose to participate in fewer
than five bundles.
The program offers an upside and a downside
if costs exceeded a target price, and the
organization didn’t maintain quality standards.

Bundled Payments
Health Affairs did a preliminary review of the
CMS bundle program for lower extremity
joint replacement (LEJR) and reported the
program maintained quality and reduce cost.
The study found variability among non-LEJR
episodes and urged continued research as
the BPCI program adds more data and
participants.

Bundled Payments
Bundled payment arrangements are becoming more common for commercial
payers and employers, including the following examples:
An employer coalition, including
Walmart and Lowe’s, negotiated
with four centers to perform hip and
knee implant procedures.
Employees who have their
procedures done at participating
centers will receive complete
coverage, including travel costs.

Bundled Payments
Humana expanded its Episode-
Based Models beyond maternity,
oncology, and joint bundles to
spinal fusion in 2019.

Bundled Payments
UnitedHealthcare announced its Care
Bundles Program in 2019. In specific
geographic regions, the payer offered
incentives for providers who exceed
standards on price and quality. United
Healthcare partners with providers on
services and support, such as care
management, to help patients navigate
the continuum of care from pre-hospital
to post-acute care.

Bundled Payments
Horizon Blue Cross uses the
Episodes of Care model to engage
specialty care physicians. The
upside-only program goals include
achieving the best long-term
outcomes, reducing the total cost of
care, and creating a positive
experience for patients.

Bundled Payments
Bundled payments are a good way
for organizations to ease themselves
into a shared savings agreement.
Because the bundled payment
focuses on just one type of care,
such as orthopedics, the organization
isn’t taking on as much risk.

Bundled Payments
However, the management of the program
may require high resources for success.
Quality metrics, such as reduced
complications and lower readmissions,
are an essential part of these programs.
Providers must control utilization and
provide high-quality care in multiple
settings to succeed in bundles.

ACOs
Establishing an accountable care
arrangement with a payer means
entering a total cost-of-care system
that rewards or penalizes based on
a patient population’s total cost.
This arrangement measures and
defines quality metrics.

ACOs
As of the third quarter of 2019, there were
1,588 public and private ACOs in the
United States covering 44 million lives.
The Medicare Shared Savings Program
started in 2012 with 114 participants and
peaked in 2018 with 561.
For 2021, the MSSP has 477 participants,
with 41 percent in up-side and down-side,
covering 10.7 million beneficiaries.

ACOs
There are no new MSSP participants in
2021 because CMS did not allow new
applications during the pandemic.
In 2018, CMS introduced Pathways to
Success, which limited the time an ACO
could take to assume down-side risk and
changed formulas for sharing the savings.
These requirements caused some ACOs
to withdraw from the program.

ACOs
Commercial payers continue to work with
providers to offer ACO-like arrangements
for members.
These arrangements cover the total cost of
care and quality metrics, and programs
tend to have broad cost measures over a
longer timer period, such as reducing total
cost of care by 10 percent over five years.

ACOs
In December 2020, Intermountain Health
Care and UnitedHealthcare announced
an ACO that aims to improve care coordin-
ation and health indicators for a Medicare
Advantage population.

ACOs
CMS introduced the next-generation ACO
models in late 2019.
The ACO-like model called Global and
Professional Direct Contracting (GPDC)
accepted applications for a 2022 start date
but announced there would be no new
applications accepted in 2021.
This downside risk model offered flexible
cash flow, more predictable cost targets
and few quality metrics.

ACOs
Some organizations may want to ease
into the ACO world incrementally by
starting with bundled payments.
The ACO down-side risk evaluation
should involve a detailed review of the
participant’s market and organization.

ACOs
The organization needs to develop specific
analytical and clinical strategies that will
guarantee success in an ACO arrangement.
One way to gain knowledge is participation
in pilot programs to learn the processes
and evaluate risk-tolerance and ability to
manage a population.

The Evolving Improvement Journey:
Resetting Performance Standards for Healthcare Payers and Providers
Several common threads run through
the three types of payer-provider
arrangements above.
In each, payers and providers must
figure out how to work together to
improve processes.
They must agree on a set of quality,
efficiency, and/or patient satisfaction
metrics by which they’ll measure
performance.

Then, organizations must adopt a system
for implementing, measuring, and
sustaining cost-structure improvement,
enabling organizations to profit from a
more significant portion of their shared
savings payments.

Though CMS paused payer-provider
programs in 2020 due to COVID-19,
the pause is likely temporary.
Organizations should continue to work
with payers and support programs to
improve quality and reduce costs to
continue to improvement journey.

For more information:
“This book is a fantastic piece of work”
– Robert Lindeman MD, FAAP, Chief Physician Quality Officer

More about this topic
Link to original article for a more in-depth discussion.
Resetting Payer-Provider Arrangements for COVID-19 and the Evolving Improvement Journey
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Bobbi Brown is the Vice President of Financial Engagement for Health Catalyst. Ms.
Brown started her healthcare career at Intermountain Healthcare supporting clinical
integration efforts before moving to Sutter Health and, later, Kaiser Permanente,
where she served as Vice President of Financial Planning and Performance. Ms.
Brown holds an MBA from the Thunderbird School of Global Management as well as
a BA in Spanish and Education from Misericordia University. She regularly writes
and teaches on finance-related healthcare topics.
Other Clinical Quality Improvement Resources
Click to read additional information at www.healthcatalyst.com
Bobbi Brown, MBA

Other Clinical Quality Improvement Resources
Click to read additional information at www.healthcatalyst.com
Health Catalyst is a mission-driven data warehousing, analytics and outcomes-improvement
company that helps healthcare organizations of all sizes improve clinical, financial, and operational
outcomes needed to improve population health and accountable care. Our proven enterprise data
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Health Catalyst was recently named as the leader in the enterprise healthcare BI market in
improvement by KLAS and has received numerous best-place-to work awards including Modern
Healthcare in 2013, 2014, and 2015, as well as other recognitions such as “Best Place to work for
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