Transitioning from volume-based to value-based healthcare

Value-based care approaches are widely used to create favourable health outcomes for patients.

October 15, 2019 Morris Blake, Project Director, International Initiatives, Henry Ford Health System

In today’s national landscape, healthcare organisations are being pressured by consumers and purchasers to compete on value. This means providing high quality health outcomes, excellent experiences and lower costs. To accomplish this, 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 organisation, its multiple populations and individual patients.

National transition to value-based care

The past 30 years have shown dramatic changes in how healthcare in the United States is financed. In the 1980s, health plans (led by the U.S. federal government through the Centers for Medicare and Medicaid Services [CMS]) transitioned from pay-for-volume approaches with discounted fee schedules to Diagnosis Related Group (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 programmes, tying earned incentives to relative performance on collaborative quality improvement programmes. In 2012, CMS introduced Value-Based Payment programmes, which use outcome-based quality, satisfaction and utilisation measures as the basis for earn-back incentives (for certain quality and service measures) or straight penalties (such as for readmissions and Hospital Acquired Condition penalties).

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. Under an ACO risk-based arrangement, providers share in savings or losses with the payer, based on the negotiated risk contract. Healthcare costs, described as 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 programmes continue to expand the earnings potential for high-performing organisations. The most sophisticated, with highest potential for both upside and downside risk, include the Next Generation Accountable Care Organization (NGACO) model, in which Henry Ford Health System (HFHS) has participated since 2016. Increasingly, non-government payers and even large employers are also entering into contracts with healthcare organisations using similar value-based parameters. These can be referred to as direct-to-employer contracts, such as HFHS’s General Motors ConnectedCare contract, which began in 2019.

“Henry Ford recognised more than a decade ago that we could not continue to work in the fee-for-service model and still provide our patients with the best and most appropriate care possible,” said Bruce Muma, MD, Medical Director of Henry Ford’s Population Health Management team. “Additionally, we recognised our Health System’s ability to survive and thrive in a strictly fee-for-service world was coming to an end, as the healthcare industry made a definitive shift to value-based care. We embraced this new path and began putting people and programmes in place to become a leader in value-based care in the industry.”

Creating a value-based care strategy

“Value-based care” and “population health” approaches are widely used to create favourable health outcomes for patients. HFHS has an extensive Population Health Management team, which is responsible for designing, delivering and coordinating high-quality healthcare services to manage health outcomes, experiences and costs for a population using the best available resources within the healthcare system. Examples include patient-centred team models, electronic patient registries, and virtual care alternatives for patients with multiple chronic conditions.

HFHS, including its provider-owned health plan Health Alliance Plan (HAP), has a long history of care delivery innovations, now referred to as population health management. Examples include chronic disease programmes developed collaboratively by HFHS providers, care coordination activities to assist patients with transitions between sites of care, and an electronic medical record (EMR) implemented system-wide in 2013. The EMR is also offered to private practice physicians who are part of the Henry Ford Physician Network (HFPN), Henry Ford’s Clinically Integrated Network of employed and private practice physicians.

The System’s Population Health Strategic Framework 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 programmes 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.

“We recognised our Health System’s ability to survive and thrive in a strictly fee-for service world was coming to an end, as the healthcare industry made a definitive shift to value-based care. We embraced this new path and began putting people and programmes in place.”

Critical success factors for delivering high-value care

Over the past three years, HFHS has introduced dozens of population health management programmes to leverage people, processes and technologies in new ways. Still, broad success in value-based care requires a holistic, organisation-wide transformation. As healthcare organisations 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 programmes.

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, finally, 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 that can make value-based care a success demands 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.

“Henry Ford Health System has fully supported the shift to bring in more value-based contracts,” said Susan Hawkins, Henry Ford’s Senior Vice President of Population Health. “To achieve high performance on these contracts, we have needed resources, creativity and commitment, which we continue to receive from the system and from our team members. We are constantly exploring, creating and implementing new interventions to improve health outcomes, improve the care experience and reduce the cost of care – the cornerstones of value-based care.”