Mandatory Value-based Care Payment Models on the Horizon

Updated on December 16, 2021

Cool Photos from Depositphotos

By Dominic Galante, MD, MS and Erin Lopata, PharmD, MPH

The U.S. federal deficit is at an all-time high, and healthcare spending makes up the biggest and fastest-growing share of it. To get healthcare costs under control and “bend the cost curve,” the Centers for Medicare & Medicaid Services (CMS) is moving from a volume-based reimbursement model to one based on value, which shifts healthcare risk from their books on to provider organizations. 

To make this happen, the Center for Medicare & Medicaid Innovation (CMMI) has developed over a dozen new voluntary and mandatory value-based payment models. These new programs follow two basic models: accountable care organizations (ACOs) and bundled payments. In an ACO, patients are usually assigned a primary care physician who, in collaboration with the ACO, is responsible for managing all the care and costs for that patient. CMS reports the ACO model has demonstrated the ability to reduce costs while increasing quality for those participating in the program with $1.4 billion in savings for Medicare in 2020. In bundled payment programs, specialists are given a set budget to care for patients with a specific healthcare need, such as a cardiac procedure or a joint replacement.

The shift from fee-for-service to value-based payment models in healthcare has been years in the making, and while significant progress has been made, the U.S. healthcare system has not yet fully achieved this goal.  According to Revcycle Intelligence, less than 20% of Medicare spending is currently value-based; by 2030, CMS wants to have close to 100% tied to VBC contracts. This translates to approximately $1 trillion of healthcare risk shifting from the government to hospitals, health systems, and physician practices across the country. 

Within the current value-based payment models, participating providers who deliver care efficiently and perform well against quality outcome measures can significantly increase their revenue through performance-related bonus payments. Another benefit of participation is the increased autonomy that specialists have in providing care and running their businesses. Many providers have more than doubled their per patient revenue in their organizations while improving outcomes and saving money for Medicare. Participation in these models has traditionally been voluntary with CMS providing favorable financial incentives to entice providers to participate. Under voluntary arrangements, providers have the option to participate in the programs. Providers may elect to participate based on their perceived ability to impact patient outcomes and the potential to earn performance bonuses; providers who do not believe they will perform well enough to generate revenue are less likely to participate and will also have the option to leave the program. CMS reports the number of ACOs decreased from 517 in 2020 to 477 in 2021. Voluntary models can lead to risk selection, which may reduce the ability of these programs to generate overall savings for the Medicare program.

To further scale alternative payment models while preventing risk selection among healthcare providers, the Biden administration is signaling a shift to use of more mandatory value-based payment models as opposed to voluntary. According to the CMMI, implementing a mandatory payment model will aim to support health equity, address social determinants of health, and increase access to cost-effective behavioral care.  Given the rise in mental health issues since the onset of the COVID-19 pandemic – with roughly 41% of adults reporting symptoms of anxiety and depression in 2021, compared to just 11% in 2019 – the CMMI’s goals for a mandatory value-based payment model are increasingly important.

CMMI has considered the relative advantages and disadvantages of both voluntary and mandatory payment models. Voluntary models often include more favorable terms for providers, given that these programs must be structured to incentivize providers to participate, but providers can ultimately determine their potential for success within the model. While there have been many early adopters of alternative payment models, there are still many providers that have been hesitant to participate. 

Mandatory models will better support CMMI in its ability to evaluate different types of models across a broad population and better understand a model’s ability to generate savings for the Medicare program. A more robust and accurate evaluation process will provide more transparency for all stakeholders on which models are able to meaningfully move the need in reducing costs and improving outcomes. With Commercial payers often taking their lead from Medicare, there results will also be important in understanding which models can support quality in that population. Mandatory models are also likely to accelerate participation in these programs and increase the proportion of providers who take on meaningful financial risk. There are various drivers that may have dissuaded providers from participating in the current voluntary value-based payment model offerings, such as patient mix, resources/staff available, etc. As late-adopters enter into mandatory arrangement, they will likely require additional support to achieve their quality goals, which could take the form of support from CMMI, increased use of technology, or other resources to track progress and develop initiatives to support care delivery. 

Chief Medical Officer, Access Experience Team

Dominic has over 35 years of experience in the healthcare industry and an extensive career in managed care. Prior to joining ​PRECISIONvalue in 2013, he spent 16 years working at MVP Health Care, a regional health plan, in numerous medical executive roles, including Senior Medical Director/Corporate Vice President of Medical Quality Management. In this role, Dominic managed the strategic development and implementation of services for the commercial and government programs, as well as overall management of the quality improvement program. He has extensive experience in the healthcare industry in a variety of areas, including managed care, pharmaceutical markets, clinical quality management, healthcare provider performance-based reimbursement models, healthcare system migrations, community health alliances, organizational change, communications, and medical marketing, and has published monographs, articles, and software programs.

Dominic is responsible for supporting the development of medical strategies, products, benefits, and policies for the PRECISIONvalue portfolio of business.  As examples, Dominic has been involved in numerous competitive simulation workshops, advisory boards, round tables, expert speaker panels, IDIs, medical coverage policy development, and healthcare technology assessment ​engagements in support of various healthcare stakeholders such as health plans, health systems and integrated delivery systems.

Vice President, Access Experience Team

Erin brings more than 10 years of managed care experience, specializing in formulary and utilization management, IDN-health plan collaboration, specialty pharmacy strategy, and medical drug management. Prior to joining Precision, Erin led commercial formulary development and specialty pharmacy management for UPMC Health Plan. She supported system-wide formulary initiatives through coordination with provider, health system, pharmacy, and employer stakeholders. She worked closely with system-owned pharmacies to align formulary and utilization management strategies with pharmacy operational processes. She developed and maintained relationships with provider thought-leaders in key therapeutic areas throughout the IDN, including rheumatology, pulmonary arterial hypertension, multiple sclerosis, hepatitis C, immunology, and orphan diseases/medical genetics, to drive collaborative management strategies. Additionally, she had responsibility for managing Affordable Care Act (ACA) Exchange formularies for multiple states. She employed a multi-pronged approach to specialty pharmacy strategy that focused on clinical management, operational optimization, unit cost reduction, and member-centric wrap-around programs.

At Precision, Erin supports strategy development and tactical execution for life sciences companies, with a strong focus on specialty medications, orphan drugs, oncology, and cell and gene therapies. Erin has conducted and published research discussing payer, provider, and employer perspectives on the affordability of orphan drugs.

The Editorial Team at Healthcare Business Today is made up of skilled healthcare writers and experts, led by our managing editor, Daniel Casciato, who has over 25 years of experience in healthcare writing. Since 1998, we have produced compelling and informative content for numerous publications, establishing ourselves as a trusted resource for health and wellness information. We offer readers access to fresh health, medicine, science, and technology developments and the latest in patient news, emphasizing how these developments affect our lives.