At the Philadelphia HIT Summit, One Healthcare Leader Parses the Current State of Payer-Provider Convergence

As the healthcare industry continues a steady transition from fee-for-service payment models to value-based care models, one healthcare thought leader sees the commercial payer market playing a larger role, going forward, in pushing provider organizations into value-based care arrangements.

Mark Caron, executive vice president, business platforms and solutions, Capital BlueCross, provided a sweeping overview of the market forces driving change and convergence in healthcare in the current moment and what may be ahead, during the Health IT Summit in Philadelphia, sponsored by Healthcare Informatics. Caron, who also is CEO of Geneia, a subsidiary of Capital BlueCross that provides analytics and technology solutions, shared his perspective on the regulatory, market and demographic forces driving change and the impact on healthcare delivery organizations.

Harrisburg, Pa.-based Capital BlueCross, a regional payer, launched its first value-based care partnership, what it calls accountable care arrangements (ACAs), back in 2011. There are now more than 2,800 physicians and 362,000 customers participating in Capital BlueCross’ ACAs.

At the federal policy level, Caron noted that federal healthcare leaders have made it clear that CMS (the Centers for Medicare & Medicaid Services) is committed to moving toward value-based care, however he contends that commercial payers are making more strides in this area, especially with bundled payments.

“Contrary to what I had earlier thought—that the federal government would be the Goliath to push things over the hump—I’m now sensing that there is more impetus with the commercial payers. In fact, with employers engaging more, because now their self-funding and there are more transparency requirements, I think the commercial is going to have the stronger push,” he said. “That’s not to say CMS is backing away. Like every major program in our country, I think they underestimate the complexity. Healthcare is local, and one local market is different from another.”

He added, “I think commercials are going to continue to make more strides there. I think they see bundled payments a way to help do that and when delivery systems get more comfortable with that, they’re going to take those things on and slowly move away.”

Addressing the progress toward value-cared care, and specifically the lack of readiness among organizations in some markets, Caron said. “I would argue that part of the reason that we’re way behind is that we, first, underestimate how hard this is. And, another reason we’re not seeing a quick evolution is that as healthcare organizations implement EMRs (electronic medical records) in their own shops, and acquiring other organizations that might have the same or different EMRs, and synthesizing all of that, I think M&A (mergers and acquisitions) has slowed down some of this,” he said, adding, “I’m concerned about the rural market. If you get out to some of the more rural markets around the country, you see that; it’s a challenge.”

Market and Government Forces Driving Change

Caron noted that there continues to be uncertainty about the future of the Affordable Care Act (ACA), as Congress passed a tax bill repealing the individual insurance mandate. Insurers continue to price in uncertainty on ACA plans, he said, noting, “Hospitals are telling us, the payers, that their uncompensated care is increasing because some people are no longer on exchanges or subsidies. We’re starting to see a downward trend on the exchange population,” he said.

Under new leadership, specifically U.S. Department of Health and Human Services (HHS) Secretary Alex Azar and CMS Administrator Seema Verma, CMS is moving forward with new priorities, such as rebranding the meaningful use program as “Promoting Interoperability.” CMS continues to advance forward with value-based care initiatives, although mandatory bundled payments have been delayed. “We’re seeing more hospital systems moving towards that, and in fact, employers are more interested in that too, which we haven’t seen in the past,” Caron said.

These developments are unfolding as healthcare costs continue to rise. Caron noted that federal healthcare programs—Medicare, Medicaid, the Children’s Health Insurance Program (CHIP) and the ACA marketplace subsidies—accounted for 26 percent of the federal budget in 2016. According to data from the Healthcare Cost Institute, in 2016, there was a 4.6 percent increase in healthcare spending per capita and 12 percent cumulative growth in out-of-pocket spending from 2012 to 2016. The price of an emergency room visit increased 34 percent from 2012 to 2016 and the price of surgical admissions increased 30 percent in the same time period.

“What’s Interesting here is that it’s not so much utilization that is driving these costs, it’s unit price. I would submit that one of the unintended consequences of the ACA, in creating these integrated systems, is taking competition out,” he said. “From a payer perspective, we saw that with imaging systems, as independent imaging centers got merged in with hospital systems. In one year’s time, the same number of images doubled in cost.”

And, Caron noted that the move to accountable care models would continue to have a significant impact on hospitals and hospital-based systems moving forward. “One of the things that we’ve overlooked in this country, with moving to accountable care, is that many hospitals have a significant debt load that they carry from investing in EHRs, investing in diagnostic imaging systems and oncology programs. We have this hangover of debt, if you will, and that is going to continue to be figured into cost, because you’re getting less business, but you need to keep the lights on and pay your staff,” he said.

He continued, “I think there is going to be a period of time, it might be an unintended consequence or a direct intent, that we need fewer hospitals and the next-generation of care is going to be delivered somewhere else.”

Demographic trends also will put demand on healthcare delivery systems, as current data shows about 50 percent of adult Americans, about 117 million people, have at least one chronic condition and more than 25 percent have two or more chronic conditions.  Three-fourths of those 65 and older have multiple chronic conditions. “By 2050, 20 percent of Americans will join the Medicare system, that’s up from 15 percent today, or 40 million more people on Medicare. That’s the silver tsunami,” he said.

Payer and Provider Performance and Capabilities

With all of these market forces at play, the shift to value-based care is well underway, Caron noted, as the major private health insurance companies—Aetna, Anthem and UnitedHealth—currently have 50 percent of their reimbursements through value-based care models. Aetna plans to grow its value-based care contracts to 75 to 80 percent by 2020, Caron said. Currently, 19 million Blue Cross Blue Shield members receive care through value-based care models.

Early results for value-based care programs show promise, he noted, with improvements in utilization, cost and quality. In 2017, Medicare ACOs generated more than $466 million in total program savings and 125 ACOs met quality standards and savings thresholds to qualify for shared savings payments. Among commercial payers, Anthem and UnitedHealthcare have reported a reduction in acute patient admissions and cost savings per participating patient.

What’s more, Capital BlueCross’ accountable care providers are outperforming their peers with lower acute inpatient hospital admissions (down between 4.7 percent to 7.2 percent) and hospital readmissions (down between 8 percent to 14.8 percent), fewer ED visits (down 8 percent) and ACOs are meeting or exceeding agreed-upon quality goals and exceeding the regional average for Healthcare Effectiveness Data and Information Set (HEDIS) measures for chronic disease management.

“There are concerns about whether value-based care is working, but we have proven in our own marketplace that it is. There is room for improvement, as we bring in other data and get more knowledgeable and intelligent about how we use that data, we’ll get better around these programs,” he said. However, he also acknowledged that the move to take on more risk has been slower than expected.

“We expected by year three that physicians in hospital organizations would be taking risk on. That has not been the case. It’s a lot harder than the power points show, but I think as you start to see some of the benefits, it is showing its value.”

There are also market shifts among employers impacting the healthcare industry, namely, a huge shift among employers to self-funded health plans since the passage of the ACA, Caron said. In 2017, 60 percent of employees were in plans fully or partially self-funded, up from 54 percent in 2005.

“Many employer groups are diving into understanding their costs. They are demanding more of payers to understand where are my costs, what are you doing for value, what are you doing for patient engagement?” Caron noted that employers like GE and Walmart are buying directly with bundled payments for joint replacement, spinal and bariatric surgery. According to a recent survey, 21 percent of large employers will promote or contract directly with an ACO in 2018, and another 26 percent are considering doing so within two years, he said.

This trend of taking on more risk is fueling explosive expansion of ACOs, from 64 in the first quarter of 2011 to 836 in Q1 2016, with 2.7 million covered lives in 2011 increasing to 28.3 million covered lives in 2016, he said, citing data from Leavitt Partners Center for Accountable Care Intelligence. “The horse is way out of the barn; we’re not turning this one around,” he said, noting that this growth, in turn, fuels the need for data and analytics.

However, U.S. healthcare is still in the early stages of building the technology capabilities to support value-based care, he said. Citing the Chilmark Research’s payer provider convergence model and timeline, which outlines three stages of maturity to get to a value-based platform and capability, he noted that U.S. healthcare was still in stage 1, with disparate capabilities across most of the country.

“I would submit that, by 2021, we’ll start to see that maturity shift, and it’ll be three years before we have fully integrated systems,” he said.