Pharmacy OneSource Blog

Clinical Corner: Time to Catch the P4P Train – New Clarity around Timelines to Value-Based Payment Models

The Patient Protection and Affordable Care Act (PPACA), commonly called the Affordable Care Act (ACA) or “Obamacare,” was signed into law on March 23, 2010. While the individual and employer mandates received a lot of attention, key provisions addressed reforms to the Medicare payment system meant to promote greater efficiency in the healthcare delivery system by restructuring Medicare reimbursements away from the fee-for-service model that has dominated the healthcare environment for many years.

The moment the Act was signed, providers of healthcare were placed into a significant dilemma of determining how aggressively and quickly to embrace the new paradigm of pay-for-performance (P4P), value-based and risk-based payment models. The graphic below is a simple way of viewing the transition providers were facing and the bottom axis points to the biggest concern: time.


A hospital moving too quickly into the value-based approach stood the risk going into the red financially. After all, the vast majority of patients were still under fee-for-service (FFS) contracts. Hiring care coaches to track high-risk discharges and paying pharmacists to complete post-discharge medication reconciliation may reduce readmissions, but no one was truly paying for this service and readmissions penalties were still a few years off in 2010.

However, taking no action in a health care environment of increasing competition might mean getting left behind and losing contracts if quality performance scores were lagging. Added to this dilemma were the persistent legal challenges to the ACA, which fueled concerns that proactively changing the care delivery model may be a waste of time if the Act was repealed.

In 2012, the ACA withstood a major challenge (National Federation of Independent Business v. Sebelius) when the Supreme Court ruled in favor of the Act. Still, there was uncertainty. Many hospitals, health systems and physician practices were still unsure of the rate of transition from FFS to new payment models. As a consequence, many organizations were hesitant to commit significant resources too early into this transition phase.

I am happy to say that both government and commercial payers have apparently realized the stifling impact of this uncertainty. In January 2015, the Department of Health and Human Services (HHS) announced its intentions to “focus its energies on augmenting reform in three important and interdependent ways: (1) using incentives to motivate higher-value care, by increasingly tying payment to value through alternative payment models; (2) changing the way care is delivered through greater teamwork and integration, more effective coordination of providers across settings, and greater attention by providers to population health; (3) and harnessing the power of information to improve care for patients.”

Sylvia Burwell, U.S. Secretary of Health and Human Services, announced that CMS would target a goal to “have 85% of all Medicare fee-for-service payments tied to quality or value by 2016, and 90% by 2018.” In addition, CMS will aim to have “30% of Medicare payments tied to quality or value through alternative payment models (e.g., ACOs, bundled care) by the end of 2016, and 50% of payments by the end of 2018.”

The changes described by HHS will shift half of their spending not devoted to managed care—roughly $362 billion last year—into accountable care, bundled payments and other contracts. These are highly ambitious goals and, I believe, clearly reflect the commitment to healthcare reform.

Not to be outpaced, the commercial sector has responded in kind. At the same time as the historic HHS announcement the Health Care Transformation Task Force, a group made up of providers, insurers and employers announced the goal of shifting 75% of their business to contracts to those models by January 2020. The HCTTF includes some of the largest U.S. health systems, including Ascension Health and Trinity Health, and insurance giants Aetna and Health Care Service Corp. The group will seek to develop policy proposals and private-sector initiatives. Initial efforts will focus on accountable care, bundled payments and management of the cost and quality of care for high-cost patients, including those with multiple chronic conditions and near the end of their lives.

Another critical facet of the HHS plan is to accelerate the availability of information to guide decision making. Ongoing efforts will advance interoperability through the alignment of health IT standards and practices with payment policy so that “patients’ records are available when needed at the point of care to permit informed clinical decisions to be made in a timely fashion.”

It would seem that the tipping point for the new quality and outcomes-based health care delivery system is nearly upon us. If your organization was waiting to see if and when the performance-based payment models would become reality, then the time has come to jump on that train. One thing that is certain is technology that helps clinicians optimize care by enhancing integration of evidence-based information (clinical decision support), that facilitates best-practice work flows and provides data that supports both the point of care delivery as well as the perspectives on organizational performance will be critical for success.

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