Value-Based Readiness

By Jonathan Bees | May 9, 2017

Providers continue to take a cautious approach as they prepare their organizations for a value-based future, focusing their efforts on making the necessary changes to care delivery, finance, and infrastructure they will need to transition from fee-for-service successfully. While their approach has generally been one of restraint, there are reasons for optimism given the level of progress that has been made.

According to the 2017 HealthLeaders Media Value-Based Readiness Survey, for example, respondents have a much more positive appraisal when evaluating their organizations’ level of strength in preparing for value-based care compared with last year’s survey results. Seventy-three percent say that their level of strength is very strong (21%) or somewhat strong (52%) for overall preparation for value-based care delivery changes, up 18 percentage points, and preparation for value-based financial changes is also very positive, with 72% saying that their level of strength is very strong (16%) or somewhat strong (56%), up 21 percentage points. Further, preparation of a value-based infrastructure is also encouraging, with 65% reporting that their level of strength is very strong (14%) or somewhat strong (51%), up 21 percentage points.

However, while respondents paint an optimistic picture of their level of strength in these areas, survey results also reveal that gaps in value-based competencies still exist.

“People think that they’re ready for value-based care, but based on some of the other survey results, I’m not sure they are,” says Pamela J. Stoyanoff, MBA, CPA, FACHE, executive vice president, chief operating officer at Methodist Health System, a Dallas-based nonprofit integrated healthcare network with 10 hospitals and 28 family health centers, and the lead advisor for this Intelligence Report.

Care delivery competencies

Survey results for care delivery competencies are revealing, with the majority of respondents demonstrating broad commitment to the discipline’s areas. For example, the top three care delivery areas that respondents say that their organization has committed to developing or has already developed competencies to prepare for value-based care are care coordination/guiding patients to appropriate care (79%), clinical integration (73%), and broader access to care (68%), and the top five areas all receive a response greater than 65%.

On the other hand, longitudinal patient care (40%) is low on the list of responses and is the only area below a 50% response, although its result is up nine points over last year’s survey. The response for this critical area indicates the early stage at which most respondents currently reside in the transition to value-based care. Note that as providers continue to commit to developing care delivery competencies to prepare for value-based care, longitudinal patient care will play an increasingly important role as providers manage patient care over longer periods of time and across multiple care settings.

Survey results also reveal that respondents are confident in their ability to deliver value-based care within the various areas of care delivery. For example, 73% say that their level of ability is very strong (20%) or somewhat strong (53%) for broader access to care, 72% say that their level of ability is very strong (21%) or somewhat strong (51%) for clinical integration, and 72% say that their level of ability is very strong (20%) or somewhat strong (52%) for care coordination/guiding patients to appropriate care.

Longitudinal patient care receives the lowest rating for respondent organizations’ ability to deliver value-based care in this area. For example, 54% of respondents indicate that this is very weak (11%) or somewhat weak (43%), an indication that it remains a work in progress for respondents.

According to respondents, moderate progress has been made in supporting care teams and practices in their coordination, communication, and patient outreach efforts, another important aspect of value-based care. For example, 44% say that their care processes and systems are evolving to a mature state, up 11 percentage points from last year’s survey, and 43% say that they are in the beginning stages of evolving their processes and systems, down nine points. However, only 3% say that their care processes and systems are fully mature, and 11% say that they are still evaluating required changes, results that are identical to last year.

A close examination of the survey data reveals that health systems and hospitals are further along in the evolutionary process than physician organizations. For example, a greater share of health systems (51%) and hospitals (49%) than physician organizations (31%) say that their care processes and systems are evolving to a mature state. On the other hand, a greater share of physician organizations (49%) than health systems (42%) and hospitals (40%) say that they are in the beginning stages of evolving their processes and systems, and a greater share of physician organizations (16%) than hospitals (10%) and health systems (5%) indicate that they are still evaluating required changes.

Value-based finance

The survey results for healthcare finance competencies tell a similar story as the results for care delivery, with most respondents demonstrating commitment to the discipline’s areas. For example, the top healthcare finance areas that respondents say their organization has committed to developing or has already developed competencies to prepare for value-based care are value-based performance metrics (79%), followed by collaborative relationships with payers (66%), and aligning employed physicians/

providers (60%), and these three areas are joined by two others in receiving a response that is 50% or greater.

Notably, aligning independent physicians/providers (41%) is rated low on the list of responses—it joins linking provider compensation to value-based metrics (49%) and provider-sponsored health plans (27%) as areas with a response less than 50%—an indication that providers are initially focusing their efforts more on developing performance metrics and risk-based relationships with payers and employed physicians.

Stoyanoff identifies one of the key challenges for providers thinking about a provider-sponsored health plan. “We’ve looked into it a little bit, but it was going to take years to break even. The investment is substantial and you have to wait a very long time. And for healthcare institutions who don’t have running a health plan as a core competency, which most of us don’t, I don’t know that we have more than 10 years to wait and see if things are going to happen in our favor.”

According to respondents, large organizations in particular are developing value-based healthcare finance competencies in the top three areas. For example, based on net patient revenue, a greater share of large organizations (90%) than medium (78%) and small organizations (76%) mention developing value-based performance metrics, and a greater share of large organizations (80%) than small (64%) and medium organizations (63%) cite collaborative relationships with payers. Further, a greater share of large organizations (84%) than small (59%) and medium organizations (52%) cite aligning employed physicians/providers.

Survey results indicate that respondents have a fairly positive view when rating their organizations’ ability to deliver value-based care within various areas of healthcare finance, and the three areas with the strongest ratings are the same ones identified in areas of healthcare finance competencies that organizations are committed to developing or have already developed to prepare for value-based care. For example, 76% say that their level of ability is very strong (27%) or somewhat strong (49%) for developing value-based performance metrics, 72% say that their level of ability is very strong (19%) or somewhat strong (53%) for collaborative relationships with payers, and 66% say that their level of ability is very strong (19%) or somewhat strong (47%) for aligning employed physicians/providers.

Digging into the data reveals that respondents from large organizations rate their ability to deliver value-based care within the same top areas of healthcare finance mentioned in the previous paragraph more strongly than small and medium organizations, likely because their greater financial resources allow them to do so. For example, based on net patient revenue, a greater share of large organizations (89%) say that their level of ability is very strong (35%) or somewhat strong (54%) for developing value-based performance metrics than small (74%: 28%, 46%) and medium organizations (69%: 21%, 48%).

The areas of healthcare finance receiving the weakest ratings according to respondent organizations’ ability to deliver value-based care are generally the same areas found lower on the response list for respondent organizations’ commitment to developing healthcare finance competencies to prepare for value-based care. For example, 62% of respondents indicate that their provider-sponsored health plan is very weak (33%) or somewhat weak (29%), 54% say that aligning independent physicians/providers is very weak (15%) or somewhat weak (39%), and 53% say that linking provider compensation to value-based metrics is very weak (12%) or somewhat weak (41%).

Aligning independent physicians/providers for value-based care is one of the more challenging areas of healthcare finance, and one of the more important because of the role they play in the continuum of care. Stoyanoff points out the essential connection between independent physicians/providers and longitudinal patient care.

“I think a lot of folks feel like value-based care is providing care to patients you have within your network and within your physician group. That is part of it, but it’s also providing longitudinal care across the continuum, wherever they might seek it,” says Stoyanoff. “That’s where it involves the independent physicians and other providers that you might not have control over and that’s where value-based care will really come into play. 

“So if we don’t have the independent physicians aligned and we’re not ready for longitudinal patient care, what we can deliver in terms of value-based care is only within our own systems and hospitals. We can do it with patients that we have full control over, but when it gets beyond us, then we’re going to struggle.”

IT competencies

Developing IT competencies is critical to the effective delivery of value-based care, and the majority of providers consider this area a strategic priority. Notably, EHR capabilities dominate the top three IT items that respondents say their organization is committed to developing or has already developed competencies to prepare for value-based care, led by EHR standardization among care partners (64%), and enhancing provider efficiency through EHR usability (62%) and EHR interoperability (62%) in a tie.

Note that while the response for prescriptive analytics (predictive plus suggested solutions) (33%) is lower on the list of responses, this will likely change over time as providers place greater emphasis on developing skills and investing in IT staff to leverage this important tool. A greater share of health systems (49%) than physician organizations (33%) and hospitals (16%) mention prescriptive analytics.

Survey results indicate that the respondent commitment to developing EHR competencies to prepare for value-based care is starting to produce results—55% of respondents say that their EHR standardization among care partners is very strong (17%) or somewhat strong (38%), and 53% say that their EHR interoperability is very strong (15%) or somewhat strong (38%). Rounding out the top three, 50% of respondents say that enhancing provider efficiency through EHR usability is very strong (10%) or somewhat strong (40%).

At the other end of the spectrum, prescriptive analytics (predictive plus suggested solutions) and staff actuarial skills for financial risk assessment are low on the response list, with 73% of respondents saying that prescriptive analytics is very weak (25%) or somewhat weak (48%), and 71% saying that staff actuarial skills for financial risk assessment is very weak (33%) or somewhat weak (38%).

Payment models

The transition from fee-for-service to value-based care is still in the early stages, and survey results reveal that respondents are all over the map in terms of their exposure to the various value-based models. This is likely because providers are experimenting with value-based payment models and programs to determine which is most appropriate for their organizations, and ultimately weighing improved outcomes on one hand and reduced costs on the other.

“I would call it a dipping your toe in the water kind of thing,” Stoyanoff says. “For example, we have an MSSP ACO. We have some narrow network contracts where we’re responsible for all outcomes throughout the continuum, but they’re small and don’t include a lot of covered lives. And we’ve done a little bit of bundled payments, but again, on a very small scale.”

It probably comes as no surprise that respondents say that the fee-for-service with no value-based component payment model is the least effective model in terms of quality and cost improvements; more than one-third (37%) say that it offers neither improved outcomes nor lower costs. This result is more than double the response of any other payment model on the list, and has the highest participation rate by respondents—only 7% say they have no involvement with this program.

On the other hand, full capitation (9%) receives the lowest response for yielding neither improved outcomes nor lower costs; however, it also has the lowest participation rate by

respondents—40% report they have no involvement with this program, and only 10% report improved outcomes and lower costs, indicating that the model has yet to yield much value.

Notably, fee-for-service with upside rewards, such as performance awards (22%), has the highest response for improved outcomes and lower costs, although its response is only marginally higher than bundled payment programs (20%). Interestingly, the top three responses for improved outcomes, no cost reduction, are all fee-for-service based: fee-for-service with upside rewards, such as performance awards (27%); fee-for-service with no value-based component (23%); and fee-for-service with downside risk, such as reimbursement penalties (19%).

Looking to the future, respondents indicate that fee-for-service with upside rewards, such as performance awards (29%), is the first-ranked payment model they expect will evolve into one of their organization’s principal payment

models for value-based care. That model receives a significantly higher response than for the next two payment models, fee-for-service with downside risk, such as reimbursement penalties (16%), and shared risk, such as ACO (14%).

At the other end of the spectrum, the payment models receiving the lowest responses are partial capitation (2%) and full capitation (4%), indicating respondents’ low expectations that these value-based models will become their principal payment model.

Taken in aggregate, combining first-, second-, and third-place rankings, respondents say that the top three payment models are bundled payment programs (58%); fee-for-service with upside rewards, such as performance awards (55%); and shared risk, such as ACO (52%).

Prospects for value-based growth

While value-based care is still in the early stages of adoption, respondents expect robust growth in the share of patients in value-based programs. For example, they indicate that 26% of their patients are currently in value-based programs, but in three years’ time, that number will double to 52%.

Survey results also reveal that hospitals are leading the way in value-based adoption—according to respondents, a greater share of hospital patients (32%) are currently in value-based programs than those in health systems (27%) and physician organizations (20%). Looking ahead three years, a greater share of patients will be in value-based programs at hospitals (58%) and health systems (55%) than physician organizations (45%).

According to respondents, hospitals (32%) currently have larger shares of net patient revenue coming from value-based payment models than health systems (24%) and physician organizations (17%). Looking ahead three years, hospitals (56%) will continue to have larger shares of net patient revenue coming from value-based payment models than health systems (48%) and physician organizations (44%).

Value-based challenges

Although respondent expectations for value-based growth are strong, they may be overly optimistic. There are many hurdles still remaining, such as developing care and payment models and competencies that address longitudinal patient care and the alignment of independent physicians/providers, to name just two. Without such things, value-based care will still exist, but in a more limited form.

Stoyanoff describes the hurdles holding back widespread adoption of value-based care this way: “Even though we talk about population health, we are still paid largely for episodic care, not longitudinal care. That’s been the issue for years. In order for hospitals to manage populations and really truly improve health, we have to manage along the whole continuum of care, but right now we’re not paid or incented to do that very much.

“The right thing to do is try and help patients so they don’t have to be readmitted. But the financial incentive is certainly not there for everybody to invest lots of resources on that effort.”