Delivery system reform includes a variety of activities designed to change the way care is delivered and paid for to promote more efficient and effective health care. At its core, delivery system reform involves “altering care delivery, payment incentives, or both to stimulate and sustain delivery system changes.”13 Value-based payment (VBP), value-based care, and alternative payment models (APMs) all fall within the broad category of “delivery system reforms.” In addition, change to how care is delivered such as using digital platforms to connect providers to members is also a trend in the transformation of health care delivery.
Trend 1: Alternative payment models and value-based purchasing
Increasingly, states are encouraging or requiring Medicaid Managed Care Organizations (MCOs) to participate in and support delivery system and payment reforms. Specifically, MCOs are being asked to: 1) enter into diverse value-based arrangements with an increasing number and types of providers, 2) collaborate with other members of the delivery system to increase efficiencies, 3) support providers to take on greater risk for outcomes, and 4) use a variety of other strategies to coordinate care for beneficiaries with complex care needs.
In January 2020, Bailit Health released a report on behalf of the Medicaid and CHIP Payment and Access Commission (MACPAC) analyzing Medicaid VBP approaches in five managed care states. These encompassed state-established thresholds for minimum percentage of payments tied to value, quality, and performance withholds, Accountable Care Organizations (ACOs), medical homes, and bundled payments.14 The report is one of the few reviews of the opportunities and challenges tied to VBP models in Medicaid managed care. Bailit found that although states have multiple tools to promote the use of VBP and that related contract requirements are effective in changing MCO behavior, most providers are not yet ready or willing to engage in downside risk arrangements.
Impact of COVID-19
In the fall of 2020, the Health Care Payment Learning and Action Network (HCP-LAN) released the Healthcare Resiliency Framework, outlining steps for payers, providers, and other health care stakeholders in transitioning to APMs that support system resiliency in a post-COVID-19 environment. Simultaneously, CMS distributed a letter to State Medicaid Directors discussing the role of VBP in the post-COVID-19 health care environment. The letter quoted then-CMS Administrator Seema Verma, saying “…by accepting value-based or capitated payments, providers are better able to weather fluctuations in utilization, and they can focus on keeping patients healthy rather than trying to increase the volume of services to ensure reimbursement… Value-based payments also provide stable, predictable revenue— protecting providers from the financial impact of a pandemic.”15 The COVID-19 pandemic renewed conversations on the potential benefits of VBP arrangements to providers, particularly capitated models, to serve as pathways for financial resiliency. Even with the pandemic further illuminating the challenges of fee-for-service (FFS) reimbursement, providers are still likely to vary in their ability and desire to adopt capitated payment structures and accept financial risk.
APMs to reduce health disparities and improve equity
The death of George Floyd in May 2020 and the more than 2,000 protests across U.S. cities that followed fueled growing public acknowledgement of the systemic racial inequalities in America. At the same time, COVID-19 continued to disproportionately affect communities of color in America, with Black, Hispanic, and Native American case and death rates far exceeding rates of White, non-Hispanics.16 These events combined to accelerate conversations with states on the role of the health care system and APMs in addressing health disparities, including how value-based interventions could be deployed to improve health equity. This topic is particularly relevant to the Medicaid population given that more than half of Medicaid beneficiaries under age 65 are a part of a racial or ethnic minority group.
State Medicaid agencies’ increasing interest in addressing health disparities through APMs has been reflected in both
MCO contracts and in recent RFPs.17
- In Michigan, MCOs are held to plan-specific health equity measures as part of the state’s performance withhold program.18 To score well on these measures, MCOs must reduce the index of disparity between white members and Black and Hispanic members on certain metrics.
- North Carolina has also expressed interest in exploring how VBP could be deployed to address health disparities, both through the state’s planned managed Medicaid program and through the Integrated Care for Kids (InCK) model.19
- Minnesota’s recent Medicaid managed care RFP asked respondents to elaborate on how their organization uses VBP or other incentive arrangements to “improve racial equity in quality of care and health outcomes.”
Given CMS’s and HCP-LAN’s shared goal of having providers across all market segments shift to APMs with higher total cost of care accountability, it is likely that the recent trend of multi-payer alignment in models will continue. CMS’s recent letter to State Medicaid Directors on Medicaid VBP models emphasized the importance of developing models that apply to Medicaid, Medicare, and commercial populations. Multi-payer models can reduce fragmentation in the health care system and provider concerns over the number of VBP models and related quality measures they report on, which may encourage increased provider engagement.
While multi-payer participation in models is one method for easing provider burden during the transition to value-based reimbursement, over the long-term multi-payer initiatives must thoughtfully consider the differences between market segments, including payment and revenue structures and populations of interest. Given the variation between state Medicaid programs and the unique amount of churn within the member population, models that are successful in commercial and Medicare segments are not necessarily transferable to Medicaid. As CMS continues to develop multi-payer models, they must consider the methodological elements necessary to ensure models effectively apply to the Medicaid population as well as other market segments.