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