The ‘Bumpy Ride’ to Value-Based Health Care

There is little disagreement that New York is taking steps in the right direction with its ambitious initiative to improve health care, reduce unnecessary hospital visits and shift payments to reward actual results instead of volume of medical services. 

But even though the state has already achieved substantial cost savings since launching the initiative through the formation of the Medicaid Redesign Team in 2011, there is still plenty to do—and major question marks and issues to be worked out.

“It’s going to be a bumpy ride, there’s no question about that,” said Jason Helgerson, the state Medicaid director. “What it’s going to mean is there is going to be consolidation, there’s going to have to be closure of certain services, and those services are going to have to be replaced with other services that better meet the needs of the community.”

Helgerson, who spoke at City & State’s Future of Health Care in New York conference Wednesday morning, noted that the state has already cut costs since he launched the MRT process four years ago, recently bringing per-recipient Medicaid spending back to 2003 levels.

As a result, New York secured a Medicaid waiver from the federal government that will allow some of the savings to be used to promote a state-level shift to value-based payments. Driving the initiative is the $6.4 billion Delivery System Reform Incentive Payment program, which rewards health care providers for improved care.

New York officially launched its DSRIP program in April, and awards will be announced shortly for Performing Provider Systems, the groups of hospitals, doctors, health centers and others that have banded together to cut costs. The state’s goal is for 80 to 90 percent of Medicaid payments to be value-based arrangements by the end of the five-year DSRIP period, and for reforms to ultimately expand beyond the public sector.

“We need to start reimbursing providers when they collectively are successful,” Helgerson said. “The problem with the majority of how health care is paid for today is that the more you do, the more you get paid, whether or not the patient got better, whether or not there were good outcomes, whether the service was effective or not. Really very little of our total payment in health care is actually tied to performance, and we need to change that.”

Yet there are a number of unanswered questions surrounding the process, from defining “value” to dealing with the financial risks of failing to meet performance goals in a new era of accountability.

The chance to take advantage of shared savings or grants aimed at spurring reform is welcomed by many in the health care industry, but some observers say providers are wary of agreeing to get paid less if they fail to control costs or improve care.

Helgerson said the next step is to spur the wholesale adoption of value-based payments. Initially, a PPS can keep about half of the money it saves through various reforms. Later, it could choose to accept greater risk—such as losing payments if it fails to meet benchmarks—but enjoy greater potential rewards, perhaps up to 90 percent of future cost savings.

“You have the risk associated with if you don’t perform, so we don’t want people to get there too quickly,” Helgerson said. “But I suspect that once people begin to make the investments in the strategies, they begin to change how they’re behaving and the way they’re treating patients, and the way they’re addressing population health, that they will want to get from level one to level two pretty quickly, because they won’t want to see savings generated by their efforts going out of their institutions, out of their provider groupings.”

Another question is how quality care will be defined, and how uniform the definitions will be across the entire health care system. As insurers and others define quality differently, a doctor or hospital dealing with multiple plans might have a hodgepodge of goals to meet and keep track of.

Helgerson said that uniformity versus flexibility is one of “the most challenging tradeoffs that we’re dealing with.” The argument for uniformity is that having a single system is appealing to health clinics dealing with a wide array of insurance companies. More flexibility, however, allows larger or more sophisticated providers to tailor their plans to their own needs. What’s more, different communities have different needs, bolstering the case for flexibility.

Federally qualified health centers, as a group, are trying to develop a standardized approach to value-based payment, and others could follow suit. In New York, the current plan is to offer a menu of choices that people can pick from.

“We’re trying to set the right balance between those two very reasonable perspectives,” Helgerson said. “I think at the end of the day, and in certain settings, we’re going to end up with more uniformity.”