The Traditional Model
In the traditional care delivery model, health systems have billed or reimbursed for each service or treatment provided rather than for an overall health outcome. In this volume-based model, patients are viewed as a source of revenue and doctors are viewed as revenue producers.
Importantly, health systems have been incentivized for over-provision of services in the traditional model, which often leads to excess costs—and, in some cases, patient harm. In 2011, The Institute of Medicine (now the National Academy of Medicine) identified the problem, reporting that “‘unnecessary services’ are the largest contributor to waste in United States healthcare, accounting for approximately $210 billion of the estimated $750 billion in excess spending each year.”
This excessive and unnecessary spending has contributed to the increasing total spent on healthcare in the U.S., which reached $3.3 trillion in 2016. Making matters worse, the aging U.S. population and the prevalence of chronic conditions have further exacerbated the problems with the fee-for-service model.
Changing the Paradigm
The healthcare system has begun to confront the inherent flaws in the volume-based model by starting to develop and incentivize value-based care models. In fact, as Change Healthcare reported at AHIP 2018, “value-based care is bending the healthcare cost curve, reducing unnecessary medical costs by 5.6% on average while improving care quality and patient engagement.”
As opposed to fee-for-service, value-based reimbursement shifts the focus to improving outcomes. In a value-based reimbursement system, providers are rewarded for the quality—not the quantity—of the care they provide. For example, Blue Cross and Blue Shield of Louisiana (BCBSLA) became an early adopter of the value-based care model by “applying powerful data, provider education and expert guidance to improve population health.” BCBSLA implemented statewide patient-centered medical home (PCMH) and accountable care organization (ACO) programs that “empower providers to improve care, reduce costs, and offer a better patient experience,” invested in health technology for enhanced patient data and analysis, promoted continuing medical education for its providers, and fostered an environment of collaborative, multidisciplinary care.
After making the transition to value-based care, Blue Cross and Blue Shield of Louisiana experienced a 25% improvement in diabetes care, a 31% improvement in hypertension care, a 40% improvement in vascular disease care, and a 69% improvement in care for kidney disease. Since improved outcomes result in fewer readmissions, costs went down, too.
The fundamental shift in how health systems function was accelerated in 2015, with the U.S. Department of Health and Human Services’ announcement that 30% of Medicare payments would go toward alternative payment models by the end of 2016 and that 90% of payments will be tied to quality or value by 2018.
As the largest payer for healthcare, the Centers for Medicare and Medicaid Services (CMS) have influenced other providers to reconsider how they offer care.
Former CMS Chief Medical Officer Patrick Conway, MD may have put it best when he stated that “it’s in our common interest—as patients, providers, businesses, health plans, taxpayers—to build a healthcare delivery system that delivers better care; spends healthcare dollars more wisely; and makes individuals and communities healthier.”
The Quadruple Aim
In 2008, the Institute for Healthcare Improvement introduced the Triple Aim of healthcare delivery, which was first published by Dr. Donald Berwick and colleagues. The goals, here, were “improving the experience of care, improving the health of populations, and reducing per capita costs of healthcare.”
While the Triple Aim was certainly a step in the right direction, some thought it didn’t go far enough.
To this end, Dr. Thomas Bodenheimer D introduced the Quadruple Aim in 2014, adding a fourth goal: improving the work life of healthcare providers. The Quadruple Aim is a framework designed to improve the performance of any health system, and an important element of the transition from volume- to value-based care.
Illustrated above, the four tenets of the Quadruple Aim are as follows:
- Improving the patient care experience, including quality and satisfaction. By making doctor visits more palatable to their patients, providers can raise their patients’ spirits, increase opportunities for diagnosis and/or earlier treatment, and ultimately, improve patient outcomes.
- Improving the health of populations. Managing similarly afflicted patients as one cohesive population makes it easier to treat these individuals and enables health systems to deploy resources more efficiently. Outcomes are improved as a result.
- Reducing the per capita cost of healthcare. By focusing on patient experience and population health, systems can function more efficiently, reducing overall care costs.
- Ensuring the well-being of the care team. The best care is delivered by providers that truly enjoy their work. By creating a positive work environment, health systems can improve their staff’s morale, ensuring that they are attentive and responsive during patient engagements.
By making concerted efforts to achieve each of these goals, health systems advance the overarching objective shared by all stakeholders: improving patient outcomes. But what can systems do to make the transition to a value-based model?
Making the Transition
- Study and understand the patient population. With a better understanding of their local patient population, systems can detect trends and patterns in their community, allowing them to prepare for and address their patients’ needs.
- Embrace technology. The use of electronic health records and analytics can streamline processes and provide real-world data that will assist systems in providing optimal care.
- Provide continuing medical education. By fostering an environment of “continuous learning,” systems arm their providers with the latest data and evidence-based guidelines for best practices in patient care.
- Emphasize collaboration. The value-based model rewards systems for providing coordinated, effective and efficient care, as providers are incentivized for using evidence-based medicine, engaging their patients, upgrading their health IT systems, and using data analytics.
How Can Pharma Partner with Health Systems and Patients to Support Their Value-based Care Efforts?
In the ever-evolving healthcare landscape, the pharma companies that position themselves as most collaborative will win. As health systems migrate to value-based care, pharma has an exciting opportunity to help transform healthcare for the better. For example, instead of trying to push specific medications, pharma companies should take a solutions-oriented approach that addresses the total cost of care for a particular patient population, working with healthcare systems toward optimal patient outcomes. Pharma should play the role of active and engaged partners—not vendors. By understanding health systems’ specific needs and greatest challenges, pharma can take a proactive approach to partnerships, helping providers make a fluid transition.
In the current environment, it’s no longer enough to have the best drugs or medical devices; if you are unable to position them well in the market, you are likely to fall behind the competition. Areas to consider:
- Know your customers’ business models and revenue streams
- Quantify the real world clinical impact of your products on appropriate patient populations
- Address physician burnout and engagement
- Explore value/risk-based contracting opportunities with health systems and payors
By partnering with health systems in these areas, pharma companies are proving they have skin in the game—putting their financial well-being on the line to make sure providers and patients get the best possible results.
Finding the Ideal Partner
Several health systems have also begun working with companies that specialize in helping providers quickly and efficiently shift from volume to value.
One organization, The Kinetix Group, is helping health systems across the country thrive in a value-based delivery environment. Together with the Consortium for Southeastern Hypertension Control, Kinetix supports over 4,000 clinicians serving millions of patients across the Southeastern US through QualityImpact, a Practice Transformation Network funded under the CMS Transforming Clinical Practice Initiative (TCPI). The four-year program—which provides technical assistance, quality care strategies, and care delivery redesign support to primary care and specialty practices—seeks to identify areas of quality performance improvement and spread new strategies to solve key issues impacting patients and their families.
Searching for best practices
Because value-based care is a relatively new phenomenon, there aren’t any universally accepted blueprints for health systems to follow as they make the transition. There are, however, some programs—including Kaiser Permanente’s referral program—that have been implemented that can serve as a good starting point. The recent merger between CVS and Aetna, the partnership between JPMorgan Chase, Amazon and Berkshire Hathaway, and the merger between Advocate Health Care and Aurora Health Care illustrate how non-traditional partners are starting to work together so that pharma can contribute to the transition to value-based care.
According to Dr. Berwick’s 2012 JAMA article, “there is an urgent need to bring US healthcare costs into a sustainable range for both public and private payers.” Berwick advises that, rather than cutting costs and reducing benefits, the better strategy is to mitigate wasted spending, noting that six categories of waste (overtreatment, failures of care coordination, failures in care processes, administrative complexity, pricing failures, and fraud and abuse) account for at least 20% of total healthcare expenditures in the U.S.
Value-based care can help systems achieve significant savings, but as Berwick cautions, “the potential economic dislocations are severe, and require mitigation through careful transition strategies.” Entering into strategic partnerships with industry, and with organizations whose sole focus is designing and delivering sustainable value-based models, can significantly reduce the burden on health systems while keeping costs controlled and improving overall patient satisfaction.