AUGUST 6, 2019

Welcome to the Pay for Performance Update eNewsletter
Editor: Philip L. Ronning
This issue is sponsored by the National ACO Summit, the National Bundled Payment Summit,
the National Medical Home Summit, and the National MACRA MIPS/APM Summit

Atrius Health Makes the Business Case for Risk-Based Payments
At a time when operating income is falling for most hospitals and practices, Atrius Health, Inc., the largest non-profit independent medical group in New England, is reporting a $38.7 million operating surplus. And risk-based payments are the reason why. The group of 31 medical practices across eastern Massachusetts recently reported that it finished 2018 with a 2.1 percent operating margin on revenues of $1.89 billion, adding to the $24.4 million operating surplus from the previous year. The group also derived about 75 percent of its revenues from full-risk contracts that year, the announcement highlighted. Those statistics are related, emphasized the group's chief strategy officer and senior vice president of external affairs Marci Sindell. "2018 was a pivotal year for us," she said in an interview with RevCycleIntelligence.com. "We demonstrated for the second year in a row that we can generate meaningful margins with risk-based contracts in order to finance the things that we need to do to keep the practice going for our patients." Risk-based payments have helped Atrius fund innovation, from a robust analytics program and non-face-to-face encounters to a patient navigator initiative and a VNA home health care organization. "Value-based care in an independent physician practice allows for innovation because we're able to take a whole budget and think about how we're going to move resources," she explained. "Additionally, as a medical group, we're not trying to fill hospital beds. So, we can take the resources that might be used for a hospitalization and translate them into a hospital-at-home program or an urgent care-at-home program, which allow patients to be treated where they want to be treated." (RevCycle Intelligence, July 18, 2019)

Michael Porter on "Value Based Health Care Delivery"
While this video is eight years old, hearing from this well-known author and educator on this timely topic is well worth the time (approximately 90 minutes).

(Harvard Center for Public Leadership, January 24, 2011)

Spending More on Primary Care Translates to Better Patient Outcomes, Report Says
States that spend more on primary care have better patient outcomes, including fewer hospitalizations and emergency department visits, a new study concluded. However, spending on primary care remains low throughout the country, according to an analysis by the Patient-Centered Primary Care Collaborative (PCPCC), which undertook a state-by-state look at spending.

The collaborative released its report Wednesday that included the first-ever state-level analysis of primary care spending and also looked at commercial and public payers. See the Resource Section below for further information. (Patient-Centered Primary Care Collaborative, July 18, 2109)

Value-Based Payment Reform Key to Moving Forward with Value
At AHIP's 2019 Institute & Expo in Nashville, the Leonard D. Schaeffer Professor of Health Care Policy explained that, of all the reforms the industry has taken to move to value, altering the way providers receive revenue is the path forward for value-based care. "If we were sitting here saying, 'Where would you go next?' Charging people more is not my go-to answer. My answer is: the delivery system is going to be crucial and the payment reform stuff is going to matter," he told a room full of industry leaders. Since the passage of the Affordable Care Act almost a decade ago, the healthcare industry has pursued a number of reform strategies to not only lower the unsustainable trajectory of healthcare spending but also improve patient outcomes and satisfaction. The three goals became what Chernew described as "the move to value," and chief among those efforts are value-based payment, value-based insurance, and value-based networks. Accountable care organizations (ACOs), bundled payments, and other models that tie provider reimbursement to care quality represent the value-based payment reform strategy, while value-based insurance reform centers on ways to use member cost-sharing, patient-facing incentives, and other benefit designs to improve the value of care. The final strategy value-based networks involves payers creating narrow networks of providers based on the quality and/or cost of care they deliver. Examples of value-based networks include tiered networks and referencing pricing programs. (RevCycle Intelligence, June 26, 2019)

How to Improve: IHI (the Institute for Healthcare Improvement) Uses the Model for Improvement as the Framework to Guide Improvement Work.

The Model for Improvement,* developed by Associates in Process Improvement, is a simple, yet powerful tool for accelerating improvement. This model is not meant to replace change models that organizations may already be using, but rather to accelerate improvement.

Learn about the fundamentals of the Model for Improvement and testing changes on a small scale using Plan-Do-Study-Act (PDSA) cycles.

*Source: Langley GL, Moen R, Nolan KM, Nolan TW, Norman CL, Provost LP. The Improvement Guide: A Practical Approach to Enhancing Organizational Performance (2nd edition). San Francisco: Jossey-Bass Publishers; 2009.

**For permission requests to use the Model for Improvement figure and/or related content, please contact the book publisher, Jossey-Bass (Wiley).

(The Institute for Healthcare Improvement, accessed July 31, 2019)

How Healthcare Capitation Payment Systems Work
Capitation is a type of a health care payment system in which a doctor or hospital is paid a fixed amount per patient for a prescribed period of time by an insurer or physician association. It pays the doctor, known as the primary care physician (PCP), a set amount for each enrolled patient whether a patient seeks care or not. The PCP is usually contracted with a type of health maintenance organization (HMO) known as an independent practice association (IPA) whose role it is to recruit patients. he amount of remuneration is based on the average expected health care utilization of each patient in the group, with higher utilization costs assigned to groups with greater expected medical needs. The term capitation comes from the Latin word for caput, meaning head, and is used to describe the headcount within an HMO or similar group. An example of a capitation model would be an IPA which negotiates a fee of $500 per year per patient with an approved PCP. For an HMO group comprised of 1,000 patients, the PCP would be paid $500,000 per year and, in return, be expected to supply all authorized medical services to the 1,000 patients for that year. If an individual patient utilizes $2,000 worth of health care services, the practice would end up losing $1,500 on that patient. On the other hand, if an individual uses only $10 worth of health care services, the doctor would stand to make a profit of $490. Projected profitability for this model is ultimately based on how much health care the group is likely to need. Given that patients with pre-existing conditions will be often mixed with younger, healthier ones, the expected profits can sometimes converge from the actual profit. There are both primary and secondary capitation relationships. Primary capitation is a relationship in which the PCP is paid directly by the IPA for each patient who decides to use that practice. Secondary capitation is one in which a secondary provider approved by the IPA (like a lab, radiology unit, or medical specialist) is paid out of the PCP's enrolled membership when used. There are even PCPs contracted under a preventive health model who receives greater financial rewards for preventing rather than treating illness. In this model, the PCP would benefit most by avoiding expensive medical procedures. (Very Well Health, July 6, 2019)

Investing in Primary Care
The PCPCC 2019 Executive Report provides quantitative data and analysis of primary care spend at the state and payer levels, as well as a window into the association between primary care spend and key patient outcomes. In short, the report shows that primary care investment as a percentage of total health care expenditures was low between 2011 and 2016, and it varied considerably across states and across payers. The analysis also shows an association between more primary care investment and better patient outcomes. Finally, the report includes a description of legislative/regulatory efforts in 10 states to measure and report on primary care spend and to shift more resources into primary care.

Pay for Performance Update e-Newsletter is one of a family of free e-Newsletters providing a complimentary video presentation and regularly updated news and key resources on major health care issues such as ACOs, comparative effectiveness, patient safety, bundled payment, readmissions, and Medicaid. To view and subscribe to other e-Newsletters go to www.HealthCareeNewsletters.com.

HHS/CMS/CMMI Keynote Address

Adam Boehler
Senior Advisor to the Secretary, US Department of Health and Human Services; Deputy Administrator and Director, Center for Medicare and Medicaid Innovation (CMMI), Centers for Medicare and Medicaid Services, Washington, DC