Value-Based Care

“What’s in a name? That which we call a rose by any other name would smell as sweet.”
William Shakespeare, “Romeo and Juliet”

Dr. Sam Monroe became intrigued by hospital operations and equally more interested in learning about the significant role utilization review/utilization management (UR/UM) played in the flow of money to and from the insurers.

He continued to study and learn about how case management oversees areas such as bed status (outpatient in a bed, inpatient), the accurate way of defining an observation status, and the two-midnight rule, all of which are intimately tied to the payment made to the hospital.

Taking a simplistic view, UR/UM is an entire ecosystem devoted to adequately characterizing the type of care that a patient receives to match the right payment for the right services. The hospital’s revenue cycle team depends heavily on the UR/UM processes to receive the appropriate payment allowed for the right level of care of the patient.

As Sam became more sophisticated with his utilization acumen, he became aware of another piece of the revenue ecosystem devoted entirely to something known as clinical documentation.

In addition to the level of care, payments are tied to the DRG classification system, but the assignment of the DRG is complex. Under the rules established by CMS, the codes used to assign the appropriate diagnosis are extensive and somewhat restrictive in that the bulk of the assignment is drawn directly from the note entered into the chart by the physician or another provider. Upon discharge, the notes in the chart are finalized and any attempt to amend the document for coding purposes is essentially prohibited.

In reviewing the patient’s medical record, coding specialists look for information to support the most appropriate coding to submit the most accurate claim. Most providers are unaware, for example, that while they may assess a patient as having CHF, there isn’t one single DRG for CHF; that each DRG in the CHF group can be characterized as with or without a major complication; and that each of those characterizations ought to be connected to a principal diagnosis and a detailed description (e.g., acute vs. chronic, systolic vs. diastolic, right chamber vs. left, etc.) in the chart. This creates a “weight” for the DRG and payment is determined by the level of detail and weight. As one would expect, the more weight, the higher the payment.

Sam’s hospital, realizing the vast sums of money involved, developed a clinical documentation improvement (CDI) program under its revenue cycle team to capture the most accurate picture of the patient’s condition for the purposes of billing.

When claims are submitted to CMS, a case mix index (CMI) is established based on the sum of all of the DRG weights divided by the number of discharges. Further, the CMI is tied to the payment rate to the hospital. Those hospitals with a higher CMI see a bump in the rate of payment made.

Sam knew from his experience as a hospitalist that he would often be asked to clarify something in the medical record (often known as a “query”), but until undertaking his PA role, he did not quite understand what was happening in the background. In response to an alert from the CDI team, the physician could clarify the chart note, leading to a better DRG classification (i.e., weight) and higher payment to the hospital.

As a physician, Sam never saw any personal compensation for that adjustment. As a PA, he realized he could work collaboratively with the hospitalists and the CDI team to potentially improve the chart documentation more than the team could do alone. He believed this would continue to demonstrate his value to the hospital.

EVER-EVOLVING CMS PAYMENT MODELS

Meanwhile, Sophie was also moving up on her learning curve in the clinic world that she inhabited at JMED. Her ability to manage the EHR had not improved much, and she, along with others, were advocating for a new EHR system.

As a result of her advocacy, she had been volunteered to serve on a committee that would investigate a new EHR that claimed to have the right build to take advantage of a variety of new alternative payment models (APMs) recently announced by CMS.

The EHR company also believed its software was prepared for upcoming changes by private commercial health insurance companies that would shift toward alternative “value purchasing” payment models as well.

Sustainable Growth Rate Algorithm

Sophie’s committee was to render a recommendation to JMED’s board of directors about the EHR ease of use and to validate the company’s claims regarding billing and payments under future models.

She and her fellow committee members felt reasonably assured that they could address ease of use fairly well; however, to understand future payments, they had to quickly educate themselves on the current state.

Recall that in the late 1980s, CMS had established the RBRV scale to determine what healthcare professional fees ought to be “worth” and, from there, the elements of the RVU and the conversion factor that would assign a dollar amount to the base unit.

In the late 1990s, Congress, under pressure to control CMS spending, legislated the sustainable growth rate (SGR) algorithm intended to set a growth rate target for Medicare expenditures based on changes in enrollment, overall economic growth, and a measure of provider efficiency.

In theory, this captured what had been missed in the 1960s when Medicare began. As the population aged and enrolled in Medicare, as the economy changed pricing of goods and services, and as carried out more care, naturally Medicare would spend more money each year to cover its beneficiaries. The SGR formula was an attempt to predict whether actual spending would or would not exceed the SGR target and the formula would adjust the conversion factor up or down accordingly.

The expanding economy of the late 1990s elevated the SGR targets and the SGR actually afforded moderate increases in physician payments. But when the economy turned in 2001 and the country experienced the first recession since the formulas were created, the SGR targets demanded that Medicare spending growth slow down as well.

Thus, the formula worked in the opposite direction and cut the monetary conversion factor by up to 4.4%, delivering a pay cut to physicians carrying out the same functions as the prior year.(1)

Needless to say, this was wildly unpopular, and after 2001, Congress continually replaced SGR cuts with moderate payment increases. This naturally pumped more money out of CMS than was originally designed and actual expenditures continuously exceeded each annual SGR target which, as a result of the algorithm, forced further downward adjustments in the conversion factor.

Congress felt even more pressure to avoid cutting physician payments and placed a cap on the size of the cut to the conversion factor, limiting cuts of between 3% and 5%.(1)

For the next decade and a half, the physician payment formula saw virtually no increases, essentially paying the same dollar amount —or in some years, less — for the same office visit year after year.(1)

The Medicare Access and CHIP Reauthorization Act

After a series of legislative tricks to manage the conundrum that was created, the situation reached an untenable level of fiscal responsibility, and a new solution was proposed. On April 16, 2015, President Obama signed into law the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which permanently repealed the SGR payment formula for physician reimbursement under Medicare.(1)

This sweeping change required CMS to implement, by 2019, a new two-track payment system for physicians. One of these tracks, the new merit-based incentive payment system (MIPS) tied any increase in physician payments to outcomes. The other track included a variety of APMs that moved payment away from fee-for-service reimbursement altogether and was based on the quality and cost of care for particular episodes or defined patient populations.

While Dr. Sophie Liontari was getting caught up on the new acronyms and implications, her old pal Dr. Sam Monroe was bringing more value to himself in relation to the hospital. His involvement in the CDI program increased the hospital’s CMI and this resulted in an increased payment rate to the hospital and more net revenue.

Although none of the newfound skills that Sam acquired were learned in medical school or had anything to do with the delivery of care, his training and experience paid off since his knowledge of diseases and interventions could be applied to the revenue enhancement of the hospital.

As for the hospitalists he worked with on the CDI program, they walked a tightrope between delivering high-quality care and trying to be accurate in the documentation without spending too much time documenting in the chart.

Sam began to hear some rumbles that the physicians were increasingly unhappy with the time spent in the medical record at the expense of interacting with the patients or other clinicians to improve the care of the patient.

While the hospital was pleased with Sam as the physician advisor, Sam was not so sure he was pleased with himself once he had mastered the new skills and created some distress for his fellow physicians. With his efforts to improve LOS and CDI, he wasn’t sure if he was making anyone’s life any better, and certainly could not directly display any improvements in clinical outcomes.

Sophie and the JMED EHR committee evaluated the new payment models along with the role of a new EHR. The first thing they realized is that to be paid under the MIPs track or the APM track, they would have to re-engineer some workflows and reporting. They quickly concluded that MIPS was combining two prior elements of MU (quality measure reporting and the resource use of a certified EHR) with clinical practice improvement activities, and that as the practice was currently constructed, unless the current EHR could adapt to the new reporting, the practice might lose an opportunity to enhance the payments to the practice.

This felt like “déjà vu all over again” as Yogi Berra once said, as the committee would have to recommend to the board that a financial analysis be conducted to determine if any new EHR investment would benefit the practice.

Because MIPS and APMs are constantly changing, it’s best for readers to review the information on CMS.gov. As examples of MIPS, suffice it to say that a practice might report the percentage of patients with elevated hemoglobin A1c levels, or the percentage of patients receiving antiplatelet therapy for cardiovascular disease.(2) As for APMs, examples include enhanced payments for providing care navigation or for discussion/documentation of a qualified care plan.(2)

Again, whether there were increased payment rates for all claims or lump payments based on episodic care, the intent was to replace SGR adjustments with these new payments by paying for new programs, services, care delivery, or quality reporting, thus keeping physician payments static. And, once more, this required practitioner investment into the design and implementation of such things.

We can also see once more that CMS was rearranging its payment methods from the pure fees for service of the 1970s–1980s to the modern era of payment for models of care as another way of splitting the money flowing from payer to physician. Perhaps it would have been easier to add a fourth component to the wRVU and to call it “model effort” or “quality effort,” but, alas, that did not occur.

RAF and ACO

In parallel to MIPS and APMs, CMS also designed and implemented a wide range of other reimbursement opportunities for physicians and other participants in care. The two most notable and widely adopted include the use of risk adjustment factors (RAF) and accountable care organizations (ACOs).

Under these programs, CMS once more established methods for linking the complexity of the patient care and/or the population served by an MA plan to the payment for the patients.

Like Sam’s efforts with CDI in assigning the most detailed documentation to the most appropriate code for hospital payment purposes, practices could render RAF scores on patients covered by an MA plan, which in turn supported potentially increased payments from CMS to the plan and its providers.

Structured in the ambulatory environment, RAF scoring is yet another way of describing the acuity of a patient such that payment is aligned with the level of “work” involved to care for such a person. But, unlike in the hospital, physicians in practice may see a share of this assigned payment depending on its arrangements with the insurance company that is managing the MA patient plans. As such, care delivery and professional services were diverging in both payments and care models.

Physicians who worked in both offices and hospitals might see differences in how they were paid depending on the environment of care; even if they did not see it in the payment, they certainly would have felt it in the work expended to receive the renumeration. In some cases, work in the office took on a variety of new tasks in order to be paid at the going rate, or work in the hospital was more complex and/or time consuming, but without direct compensation.

Finally, CMS attempted to influence bridging these gaps with attention to the continuum of care by virtue of the accountable care organization (ACO).

The model of an ACO is linked to the more recent changing dynamic wherein physicians are paid to manage the health of populations rather than based on the volume of services they provide.

Between 2005 and 2010, CMS began its efforts with the Pioneer ACO pilot program to foster ACOs, any of which would include a group of healthcare providers (physicians, hospitals, non-physician providers, etc.) coming together and collectively agreeing to become responsible for the financial and quality outcomes for a defined population.(3)

By 2012, CMS was well on its way to providing the accompanying payment models that shifted financial risk from CMS to the group of providers in an ACO, particularly under the newly created Medicare Shared Savings Program.(3)

Similar to MIPs and APMs, the ACO groups had to measure and report on a variety of process improvements along with appropriate risk stratification of the beneficiaries to be paid appropriately.

Some of those payments were made as “per member per month,” similar to capitation, and in some cases additional payments were not distributed until the performance measures were submitted and audited; either way, providers were strongly incentivized to change how they were delivering care with the goals of decreasing spending while improving quality measures and patient satisfaction.

This is also an area in which the notion of “shared savings” entered the vernacular, as it became another potential incentive for profitability through care management by the providers.

PHYSICIAN PRACTICE MANAGEMENT REDUX

With the initiation of MIPS/APMs/ACOs, the physician practice management companies resurfaced under different structures as well. One such company, Privia Health, was founded in 2007, and labeled itself as a “physician enablement company” with a “focus on reducing physicians’ administrative burdens, accelerating the transition to value-based care and helping physicians adopt user-friendly technology to better engage patients.”(4)

The company enabled the physicians with the tools, education, analytics, and workflow to help them move to value-based care over time through the use of technology, its proprietary EHR, and its scale to achieve large ACO structures.(5)

Some of the more recent Privia performance highlights include a lower ED utilization, lower outpatient and inpatient facility utilization, higher PCP utilization, and an overall decrease in expenditures compared to other MSSP participating ACOs or compared to fee-for-service Medicare (for a similar population).(5)

Further, Privia also maintains a large enough number of physician portfolios under its structure that it can competitively negotiate commercial contracts for its physicians and those same physician practices are NOT owned by Privia — a twist from the PPM days.

In return for all of these services, it has been reported that Privia charges the practice a fee of 12% on any fee-for-service payment and 40% on any value-based service payment.(6)

Had Sophie known about companies such as Privia, she might have encouraged the committee to recommend that the board consider joining an ACO in partnership with such a company that could deliver a new EHR and software to capture the required measurements for the APMs, along with leverage to secure higher commercial insurance payment rates. This would accomplish the goal of delivering a solvent and sustainable way to upgrade the EHR and netting an increase in revenue without requiring a new capital partnership or a sale of the practice.

PHYSICIANS’ CHOICE

Sam and Sophie were colleagues during her education in Akron, albeit Sam was a few years ahead of Sophie in the trajectory of medical education. They both, however, had strong skills in internal medicine, regardless of whether they provided care inside a hospital or in an office. In the span of only about a decade, Sam’s and Sophie’s careers had drifted about as far apart from each other’s in ways that they had never imagined back in residency.

Nothing in their education or training prepared them for the rapid changes in structure, payment, or work effort required to care for patients as independent professionals. Neither of them could even begin to gather all of the moving parts quickly enough to see the big picture, much less the landscape from a suborbital view. They were doing the best they could under the circumstances while remaining attentive to their immediate roles and responsibilities.

But while they were hundreds of miles apart and separated by different architectures of care, they individually and independent of each other decided to make radical decisions that would stay with them for the rest of their careers.

LESSONS LEARNED

• Time spent away from direct patient care is not reimbursable in the traditional fee-for-service payer equations unless it is incorporated into the “work” component of the wRVU. Neither practice expense or malpractice would change, nor would the work payment increase, but new payment designs were attempting to compensate the added work incurred with complex patient populations.

• Time spent documenting medical conditions is precious time, but the value of that time depends on who is spending it and who is compensated for it. The value may also depend on what else could be done with the same units of time (e.g., direct patient care, reading medical literature, family time, etc.).

• CMOs need to be knowledgeable about the various CMS payment models and develop a strategy to keep up to date. While they do not necessarily need to be subject matter experts on any one model, they need to be alert to changes/ modifications. It would behoove any CMO to have regular engagement with team leaders involved in finance, coding, managed care, revenue cycle, etc.

• Currently evolving payment models are requiring shifts in physician workload and care delivery, none of which are learned while in medical school or residency when physicians are attempting to master a set of professional skills to diagnose and treat those with health issues.

• CMOs must be prepared to lead efforts around adaptability and to be able to weigh in on the role of cost, infrastructure, training, and performance to adopt new models successfully.

• The landscape of care delivery continues to widen between care of the sickest and most critically ill within hospitals and the chronically ill and reasonably active in the ambulatory settings and those who are chronically institutionalized, such as the elderly or severely disabled. While not discussed in this article, there is also widening of the care of those who have reasonable access to care and those who do not.

• The divergence of care and the payment models behind them continued the trend of tension between those who provide the care (“who is on call”) and how to “split up the money.” Furthermore, some physicians care for highly specialized elements of a patient’s condition under static fees, while others care for populations under capitated like arrangements.

QUESTIONS TO ASK

• Is it appropriate that physicians must be masters of clinical documentation in order to be professionals?

• What is the role of a CMO when the organization seeks to leverage his or her skills as a physician to translate the clinical mastery into revenue?

• Is it appropriate that payers pay more for more complex care? Alternatively, should physicians be incentivized to reduce complexity of care? Who benefits under each structure?

• If physicians are to be incentivized to reduce complexity, shouldn’t the physicians be adequately rewarded? How should the physician and the payer share in the reduction of long-term costs? Is this what is meant by “shared savings”?

• What exactly are payers “purchasing” in value-based care? Is it process-based care? Is value-based care, just fee-for-service by another name, and payers are asking for different services?

• Is accountable care another form of capitation, in part or in whole, but with a different service that the providers are now accountable for?

• Who has control within value-based payment models?

• When did physicians lose control of their ability to set pricing for their skills? If the payers were seeking different skills, who should have been delivering those skills?

• What were patients seeking in these various models? Quality outcomes? Quality experiences?

Excerpted from The Chief Medical Officer’s Financial Primer: The Vital Handbook for Physician Executives by Lee Scheinbart, MD, CPE, FAAPL.

REFERENCES

1. Ryan C. Explaining the Medicare Sustainable Growth Rate. American Action Forum Insight. March 26, 2015. http://americanactionforum.aaf.rededge.com/uploads/files/insights/2015-03-25_Explaining_the_Medicare_ Sustainable_Growth_Rate.pdf

2. Centers for Medicare and Medicaid Services. Quality Payment Program. CMS website. https://qpp.cms.gov/

3. Kocot SL, White R, Tu T, Muhlestein D. The Impact of Accountable Care: Origins and Future of Accountable Care Organizations. Brookings Research. May 12, 2015. https://www.brookings.edu/wp-content/uploads/2016/06/impact-of-accountable-careorigins-052015.pdf

4. Landi H. Physician Enablement Company Privia Health Pops In Public Debut With Outsized IPO. Fierce Healthcare. May 2, 2021. https://www.fiercehealthcare.com/tech/physician-enablement-company-privia-health-pops-public-debut-outsized-ipo

5. Borchert R. Privia Health Reports Results in CMS’ Medicare Shared Savings Program for the 2022 Performance Year. Press Release. Privia Health. August 25, 2023. https://www.priviahealth.com/press-release/privia-health-reports-results-in-cms-medicare-shared-savings-program-for-the-2022-performance-year/

6. Gatlin A. Privia Health Says It’s The Uber Of Managed Care — Here’s What That Means. Investor’s Business Daily. July 1, 2022. https://www.investors.com/research/the-new-america/prva-stock-how-this-bullish-ipo-is-enabling-doctors-to-succeed/