2016: Year in Preview

On or off track? 2016 could be the year that value-based payment arrives – or maybe not


Timothy Kelley

Just because you hear a whistle from two miles down the track doesn’t mean it’s time to hoist your heavy suitcase.

American health care has been waiting a while for “value-based payment” to pull into the station. But don’t look for it to fully arrive in 2016.

Propelled by the ACA’s ACOs and new Medicare payment methodologies, the movement toward “value, not volume” calls for shifting risk from insurers to providers and, in the process, nullifying incentives to overtreat.

Yet “fee-for-service is still the core of our payment model and will be for some time,” says Jeffrey Goldsmith, president of Health Futures, a Charlottesville, Va., consulting firm. Goldsmith, a member of Managed Care’s editorial advisory board, says providers are agreeing to limit rate increases—in effect, having “inflation risk” shifted to them.

“But I don’t see a lot of capitation,” he adds. “I don’t think carriers need to shift premium to providers now to control their medical line. That was one of those ‘groupthink’ ideas whose advocates got way out over their skis. And I think 2016 will be the reality check.”

Andrew Croshaw

Value-based payment will get a boost from ACOs shifting more risk onto providers, says Andrew Croshaw, president of Leavitt Partners. Health care is moving from volume incentives.

Andrew Croshaw, president of Leavitt Partners, says his firm’s research shows that as many as a fifth of the lives covered by ACOs—up to 4.7 million—are under capitated contracts. That estimate is one reason he’s more bullish than Goldsmith about payment changing.

He agrees that in many parts of the country plans won’t be forced to share risk in 2016 but says they should do so anyway—to get ready. “They’d be wise not to approach contracting with providers the old way—maximizing leverage, holding back risk,” he says. “Because it takes time to figure out how to succeed with these models—to determine the technology and the contracting terms, to build networks and find the right physicians. And if you don’t start that journey early, you may not be able to catch up.

“Risk is moving from payers to providers,” says Croshaw. “You see it in Medicare, and on the commercial side too, though not as clearly because not all the information is public.” He notes that Pioneer ACOs will enter their fifth performance year next year with 100% risk sharing fully authorized for the first time.

Leavitt Partners counts 761 ACOs with 1,056 different payment arrangements and among the payers, 121 commercial ones that account for two thirds of the commercial payments.

The majority of these commercial arrangements aren’t full risk but Leavitt Partners has found that “the longer an ACO is involved in the Medicare Shared Savings Program, the higher its savings rate,” says Croshaw. “So ACOs get better at the game over time.

“I don’t think 2016 will bring the tipping point, but we’re certainly approaching it,” he says.

So, apparently, some see the valued-based train pulling into the station while others hear only a faint whistle in the distance.

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