Transitioning from Volume-Based to Value-Based Healthcare

Transitioning from Volume-Based to Value-Based Healthcare

Susan Hawkins, SVP, Population Health, Henry Ford Health System

Susan Hawkins, SVP, Population Health, Henry Ford Health System


In today’s national landscape, healthcare organizations are being pressured by consumers and purchasers to compete on value: high quality health outcomes, excellent experiences, and lower costs. Integrated delivery systems must be able to manage pluralistic care and payment models, simultaneously ensuring the highest value to customers in both risk-based and traditional fee-for-service contracts. This “both/and” environment requires new ways of managing healthcare at multiple levels—the organization, its multiple populations, and individual patients.

National Transition to Value-Based Care

The past 30 years have shown dramatic changes in how healthcare is financed. In the 1980s, health plans (led by the federal government through the Center for Medicare and Medicaid Services, or CMS) transitioned from pay-for-volume approaches with discounted fee schedules to DRG-based payments for inpatient services regardless of lengths-of-stay. Almost two decades later, large commercial payers (such as Blue Cross Blue Shield of Michigan) created quality bonus programs, tying earned incentives to relative performance on collaborative quality improvement programs. In 2012, CMS introduced value-based payment programs, which use increasingly outcome-based quality, satisfaction, and utilization measures as the basis for earn-back incentives (for certain quality and service measures) or straight penalties (such as the readmissions and hospital acquired condition penalties).

"In the long run, effective population health strategies will demand new partnerships among providers and payers, new care management models, integrated data support, redesigned IT structures, and a potentially seismic shift in thinking by health system leaders on the definition of healthcare success"

Value-based care was expanded to physician services when CMS launched an alternative care deliver/payment model for medicare beneficiaries called an Accountable Care Organization (ACO) as part of the Affordable Care Act (ACA). An ACO is a network of doctors and hospitals that shares responsibility for providing care for “attributed” patients (patients with some existing relationship with the network’s physicians). Under an ACO risk-based arrangement, providers share in savings or losses with the payer based on the negotiated risk contract. Healthcare costs (described per-member, per-month or PMPM)—along with pre-defined quality and service metrics—are tracked against baseline or target performance, and the difference between actual and targeted performance represents the potential shared savings pool.

CMS’s value-based payment programs continue to expand the earnings potential for high-performing organizations. The most sophisticated (with highest potential for both upside and downside risk) are the latest versions of the Medicare Shared Savings Programs (MSSP track 3), Bundled Payment Programs (such as hip/knee replacements), and the Next Generation Accountable Care Organization (NGACO). Increasingly, non-government payers and even large employers are also entering into contracts with healthcare organizations using similar value-based parameters.

Creating a Value-based Care Strategy

“Value-based care” and “population health” are widely used but seldom defined. Successfully managing healthcare value begins with clarifying what is meant by these terms.

Healthcare Value: The ratio of outcomes (healthcare quality plus experience) to cost.

Population Health: The health outcomes of a group of individuals and the distribution of these outcomes among them (examples include mortality rates, disease or condition prevalence, and behavioral/physiological factors such as smoking, physical activity, diet, blood pressure, and BMI).

Population Health Management: The design, delivery, and coordination of high-quality healthcare services to manage the health outcomes, experiences, and costs for a population using the best available resources within the healthcare system. Examples include team models and patient registries to care for patients with multiple chronic conditions.

Value-based Care: A system of care which enables providers to be successful under contracts in which shared savings or losses depend on improving the value of care delivered to populations. Population health management becomes the linchpin for succeeding in value-based care.

Henry Ford Health System (HFHS), including its provider-owned health plan Health Alliance Plan (HAP), has a long history of care delivery innovations. Many approaches introduced over the years would now be called population health management. Examples include chronic disease programs developed collaboratively by HFHS providers, HAP, and Detroit’s “Big 3” automotive companies, care coordination activities to assist patients with transitions between sites of care, and a new electronic medical record implemented system-wide in 2013.

Figure 1. HFHS Population Health Strategic Framework

Building on this foundation, and to ensure success in the CMS Next-Generation ACO contract, HFHS implemented a system-wide approach to population health management in late 2014. The system’s Population Health Strategic Framework (depicted in Figure 1) supports the system’s vision to be the trusted partner in health, leading the nation in superior care and value.

Under this framework, HFHS identifies targeted populations, implements care delivery models or programs that address value gaps in those populations, and responds to existing or new value-based contracts based on success with these population health management capabilities. This ongoing process is enabled by robust analytics to measure performance, engaged clinicians implementing best practices, EMR tools and alerts, and integrated process improvement and contracting expertise.

Critical Success Factors for Delivering High-value Care

Over the past three years, HFHS has introduced dozens of population health management programs to leverage people, processes, and technologies in new ways, yet broad success in value-based care requires a holistic, organization-wide transformation. As healthcare organizations aim to transition from volume-based care to value-based healthcare delivery and financing, the following infrastructural elements have emerged as critical for long-term success:

Culture and Leadership: Leadership teams and incentive structures must reinforce shared accountability for simultaneous growth in population health management and strategic tertiary/ quaternary care programs.

Physician Strategy: Ongoing development of a high-performing network of physicians providing primary care, specialty, and geographic coverage for value-based populations.

Operations, Technologies, and Partnerships: Innovative care models and tools to enhance coordination across the care continuum, both inside and outside the health system. Examples include new access approaches (such as telehealth and walk-in clinics), community partnerships and information networks to capture data (such as social determinants of health) and connect patients with needed resources, and analytics tools that give physicians and care teams the data they need to close gaps in care.

Risk-based Contracting Expertise: Speed and agility in launching new risk-based arrangements as part of a growing portfolio of successful value-based contracts.

In the long run, effective population health strategies will demand new partnerships among providers and payers, new care management models, integrated data support, redesigned IT structures, and a potentially seismic shift in thinking by health system leaders on the definition of healthcare success.

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