Will or won’t private payers join CMS’ Primary Care Demo?

by Torsten Bernewitz

Tweet

In two weeks, on November 15, public and private payers interested joining the CMS Comprehensive Primary Care Initiative, or “primary care demo”, must file a non-binding letter of intent. Final applications will then be due in mid January. See more details here: (http://innovations.cms.gov/documents/pdf/cpc_initiative_solicitation.pdf)

But what is in it for the payer – and at what cost?

The program will test new payment and delivery approaches with the aim of lowering Medicare, Medicaid and Children’s Health Insurance Program (CHIP) spending. CMS will enter into agreements with practices in selected (still to be defined) markets.

Payers and practices will have to sign agreements of their own in order to accommodate a shared-savings component envisioned to kick in after two years, when CMS’s additional per-beneficiary care management fee will be reduced.

The model will reward primary care providers for improved, comprehensive care management. The hope is that better outcomes will also lower overall costs.

CMS will pay – in addition to their usual Medicare reimbursement - an average risk-adjusted care management fee of $20 per Medicare FFS beneficiary per month to participating primary care practices. This fee is to compensate providers for several activities, including helping patients with serious or chronic illnesses follow personalized care plans, giving 24-hour access to patients for care and health information, providing preventive services, and working with specialists to improve care coordination.

Like most other alternative healthcare delivery and payment models, the program will incorporate systematic data sharing with practices about cost, utilization and quality metrics to monitor improvements. The monthly fee will drop in later years of the program – the time when benefit sharing with payers will become available.

So how attractive is all this for the payers, in particular the private ones?

At the recent AHIP Shared Responsibility Summit, which showcased alternative delivery and payment models very similar to the one envisioned here, it was highlighted that in all cases significant upfront payer investment is needed to get things started, in particular to help with the processes and systems managing data and money flows (see http://payer-strategies.blogspot.com/2011/10/love-is-all-you-need-well-not-quite.html).

It is not quite clear to what extent the additional CMS fees will covers this need, and that is of course a headache for the payers who are contemplating if they should join or not.

Of course the CMS argument is that the increased effectiveness of the primary care physicians will also benefit the payer. And this may be true – in other places system cost saving could indeed be shown.

However, there is potentially also a “free rider” effect here – if providers change the way they deliver healthcare, for example through more cost conscious referral approaches, we can expect this to spill over into all patients they handle. We see a this phenomenon time and again when the benefit designs of one health plan influences provider behavior and then has a halo effect on other plans. 

Thus all plans will benefit, even if they do not sign up for the initial program. So if I am a payer, what is my motivation to sign up for more costs (at the hope of cost savings later), and share the benefits (that I might have enjoyed anyway)?

________________________

Torsten Bernewitz is a healthcare industry analyst and management consultant.
He is Managing Principal, Healthcare Insurers and Payers at ZS Associates.

This post is the author’s own and does not necessarily represent ZS Associates’ positions, strategies or opinions.

Contact: torsten.bernewitz@zsassociates.com

A working experiment: replacing the fee-for-service model for providers

by Torsten Bernewitz

At the beginning of this year, Andrew Dreyfus, CEO of Blue Cross Blue Shield of Massachusetts (BCBSMA) had an important message to providers:  work with payers in a collaborative way to improve quality of care and contain the growth in healthcare costs – or else (http://articles.boston.com/2011-01-23/business/29346724_1_payment-system-global-payment-care-providers).

In this context he was also talking about a new payment model – BCBSMA call it Alternative Quality Contracting (AQC) – that replaces traditional fee-for-service contracts. BCBSMA is really pushing for this approach as the preferred model for the future – and warns that those insisting on fee-for-service will have to reduce their costs or at least freeze them.

Alternative Quality Contracting (AQC) is a global payment model that uses a budget-based methodology, combining a fixed per-patient payment with performance incentive payments.

The global budget is based on each organization's historical costs and is adjusted annually to reflect inflation. It includes a global payment for all services received by a BCBSMA member, including primary, specialty, and hospital care, as well as ancillary, behavioral health, and pharmacy services.

AQC offers hospitals and physicians the opportunity to increase their total payment by up to 10 percent based on their performance toward nationally accepted quality measures and improvements in the efficiency of the care delivered.

It seems to be working:

During a Healthcare Information and Management Systems (HIMSS) webinar last week, Dana Safran, SVP Performance Measurement & Mmprovement at BCBSMA, presented the results the program has been able to achieve so far:

• In the first year, a reduction of medical spending by 2 percent. This is well in line with BCMSMA’s goal to cut spending growth by half (historically annual growth has been in the range of 8-12 percent.
• All AQC reported budget surpluses, giving them the opportunity to make additional infrastructure investments.
• Each AQC organization showed improvement of clinical quality measures. More than half approached or met the maximum performance target on diabetes and cardiovascular care.
• AQC groups could reduce hospital re-admissions – one group by 15%.
• For some preventive care metrics, like cancer screening and well-child visits, AQC group’s performance were three times that of non-AQC groups and more than twice the performance before joining the program.
• Network participation rose to 44 percent in 2011 (up from 26% in 2009).

________________________

Torsten Bernewitz is a healthcare industry analyst and management consultant.
He is Managing Principal, Healthcare Insurers and Payers at ZS Associates.

This post is the author’s own and does not necessarily represent ZS Associates’ positions, strategies or opinions.

Contact: torsten.bernewitz@zsassociates.com