Pay-for-performance models aim to reward providers for high-quality care at lower costs. However, value-based reimbursement structures tend to require substantial upfront and ongoing investments and put practice revenue at risk, straining the already tight profit margins of independent physicians and small practices.
Current models typically require extensive practice transformations that can cost practices thousands, if not millions, of dollars.
From health IT tools and quality reporting systems to additional staff and preventative care services, small practices that operate with month-to-month budgets and tight profit margins cannot always shoulder the initial outlays required to join an alternative payment model.
In light of financial challenges, providers in small, solo practices have been hesitant to adopt pay-for-performance models.
However, pay-for-performance implementation is not impossible for independent physicians and small practices, and success may be easier to find than many reluctant organizations might think.
While the financial challenges may make smaller organizations wary of participating in value-based care arrangements, independent and small practices are already well on their way to delivering the level of care quality that alternative payment models are seeking.
Recent research showed that small, physician-owned practices not only provide more personalized and responsive care to patients, but the organizations have lower average costs per patient, fewer preventable hospital admissions, and lower readmission rates compared to their larger and hospital-owned counterparts.
By combining high-quality care delivery with some of the incentives, regulatory flexibilities, and collaboration strategies geared towards helping small practices succeed in the value-based environment, small practice leaders may be able to leverage their organization’s strengths to overcome financial and operational challenges in the pay-for-performance environment.
Take advantage of flexibilities, rewards offered to solo, small practices
CMS is leading the value-based reimbursement transition with MACRA’s Quality Payment Program (QPP) and over 80 Innovation Center demonstrations. However, even as the largest provider of alternative payment models, CMS acknowledges that independent physicians and small practices struggle to participate in their programs and implement care delivery processes that align with value-based care.
In response, the federal agency designed Medicare reimbursement and Quality Payment Program provisions to support these practices by implementing value-based arrangements.
Medicare Physician Fee Schedule support
The Medicare Physician Fee Schedule (PFS) primarily includes codes for face-to-face encounters. But treating the patient outside of the clinic is key to value-based care and pay-for-performance success.
Developing population health management strategies is critical to tracking populations along the risk continuum, identifying high-risk patients, and delivering preventative and wellness care.
Effective population health management initiatives will boost care quality and reduce unnecessary utilization. As a result, incentive payments and reimbursement adjustments under pay-for-performance and other value-based reimbursement models will increase.
However, follow-up calls, chronic disease management, care coordination efforts, and other population health management services typically do not have an associated reimbursement code, leaving providers to do “extra” work without associated compensation.
CMS aimed to address this issue by creating an ongoing chronic disease management code in 2015.
The Medicare PFS code 99490 is intended to cover the costs of creating and updating care plans, reviewing test results, communicating with other providers outside of the practice, and regularly adjusting treatment regimens for patients with multiple chronic diseases.
“In creating this new billing code, CMS acknowledged that the existing payments for some patient visits did not provide sufficient compensation to cover all the prep and follow-up work required for such visits,” the Urban Institute’s Health Policy Center wrote in a recent report.
However, few physicians are taking advantage of this opportunity.
CMS only received claims with the code for 500,000 Medicare beneficiaries by November 2016 despite CMS estimates that 26.5 million Medicare fee-for-service beneficiaries suffered from two or more chronic conditions, the report stated.
Providers argued that documentation burdens associated with the code prevented providers from billing for it. Medicare required physicians to conduct a qualifying visit, obtain written consent from beneficiaries, and meet certified EHR use requirements.
Providers also needed to offer constant care access and continuity of care, comprehensive care management, care transition management, home- and community-based care coordination, and advanced communication methods (e.g., secure texting).
CMS responded to these concerns by reducing the documentation burdens in 2017 and adding another code, 99487, for treating medically complex patients.
CMS set the rate of the 99490 code to $42.71 in 2017, while the newer code 99487 was $93.67, the Health Policy Center reported.
Providers in small and independent practices may wish to increase their use of the Medicare PFS codes for chronic disease management to see a return on their investment in these activities.
The additional reimbursement can help to offset the costs incurred from building the infrastructure and capabilities for population health management under value-based reimbursement models.
Quality Payment Program resources
MACRA’s Quality Payment Program is quickly transitioning Medicare providers to pay-for-performance structures. The new value-based reimbursement strategy is part of the HHS strategy to tie 90 percent of traditional Medicare payments to value-based reimbursement models by the end of 2018. The system positively or negatively adjusts Medicare reimbursement based on quality and cost performance.
However, many independent physicians and small practices fear that the Quality Payment Program will threaten their independence. Approximate 80 percent of physicians expect MACRA to drive providers to merge with larger healthcare organizations, causing up to two-thirds of remaining independent physicians to consolidate by 2019, a 2016 Deloitte survey revealed.
Providers in the survey stated that small and independent practices will merge with a larger organization would give them access to value-based care capabilities and reduce individual provider risk.
But merging with a larger organization also means loss of some or all control of what goes into the practice, including the staff and clinical areas that can addressed within the office. For many independent organizations, this is simply not an option.
In an effort to address practice concerns, CMS created the Small, Underserved, and Rural Support initiative. The five-year program provides free, customized technical assistance to practices with 15 or fewer clinicians.
Small practices can call on selected organizations in their state to receive help with choosing quality measures, strategic planning, education and outreach, and health IT optimization.
CMS awarded $100 million to supporting organizations in 2017 and expects to invest up to $80 million in the program over the next four years.
The federal agency also included several reporting flexibilities and rewards specifically targeting solo and small practices under the Quality Payment Program’s Merit-Based Incentive Payment System (MIPS).
First, eligible clinicians with low Medicare volumes do not have to participate in the Quality Payment Program. Clinicians who billed $30,000 or less in Medicare Part B allowed charges or treated 100 or fewer Part B-enrolled Medicare beneficiaries are exempt from reporting 2017 performance period data to MIPS.
Under the participation threshold, CMS anticipated more than half of all clinicians will be excluded from MIPS.
CMS exempted even more low-volume Medicare providers from the program track in 2018, according to a recent final ruling. The 2018 Quality Payment Program rule expanded the exclusion threshold to $90,000 or less in Part B allowed charges billed or 200 or fewer Medicare Part B beneficiaries treated.
The federal agency also designated the 2017 and 2018 performance periods as transition years for clinicians. Eligible clinicians only need to report on one quality measure or one Improvement Activity in 2017 to avoid a negative payment adjustment in 2019.
The federal agency recently extended the relaxed reporting requirement to 2018. Eligible clinicians must earn 15 points under MIPS to avoid a negative payment adjustment in 2020. The total number of points needed to avoid a penalty is up from 3 points in 2017.
Small and solo practices should take advantage of the longer MACRA implementation timeline. The additional time allows for practices to implement the technology and workflows needed to fully report to the Quality Payment Program by the third performance year.
In addition, CMS has included MIPS points and reporting flexibilities specifically for eligible clinicians in small practices in both the 2017 and 2018 performance period rules. Eligible clinicians in small and independent practices of 15 or fewer clinicians can leverage the following flexibilities:
- 5 bonus points added to composite scores in 2018
- 3 additional points for measures in the Quality performance category that do not meet data completeness requirements
- Report on only two Improvement Activities to earn full points in 2017 and 2018 versus four medium-weighted or two high-weighted activities for all other eligible clinicians
- Hardship exception for the Advancing Care Information category in 2018, which shifts the category’s weight to the Quality category for organizations that do not have certified EHR technology
While CMS provides exceptions for some small practices without certified EHR technology, engaging in any value-based reimbursement model without an EHR system will hinder success. Population health management requires providers to identify high-risk patients, deliver preventive and care management services, and constantly track patient outcomes and costs.
Providers need an EHR system to manage the data needed for population health management. Practices should consider the investment to maximize value-based reimbursement.
For practices with an EHR system, leaders should start building population health management strategies using the platform and data. Practices should implement the strategies as soon as possible to stay ahead of the curve.
Partnering with peers without losing autonomy
To implement and succeed in alternative payment models, providers must be able to shoulder some degree of financial risk, coordinate services across the care continuum, and analyze large amounts of data.
Larger healthcare organizations can leverage their size and scope to implement value-based arrangements. But independent physicians and small practices may need to turn elsewhere to meet the requirements.
Collaborative models, such as accountable care organizations (ACOs) and independent practice associations (IPAs), can help to preserve practice autonomy and allow small practices to create economies of scale.
Accountable care organizations
Accountable care organizations are networks of providers that commit to reducing costs and improving care quality. Participating providers share clinical and financial responsibility for treating attributed patients.
Independent physicians and small practices can join an ACO without sacrificing their independence. This makes the ACO option attractive to independent practices and community hospitals, Beth Israel Deaconess Care Organization’s (BIDCO) CMO Sarika Aggarwal said at Xtelligent Media’s Value-Based Care Summit in November 2017.
“The reason a lot of independent physicians want to join our network is they want autonomy and mastery of their environment,” she said. “They want to keep these close relationships and don’t want anyone out there to sort of sit on them. As an ACO, we are actually not owned by the hospitals and we’re not owned by the providers.”
“We work very well with our primary care docs because we really are not veering toward one or the other hospitals, specialists, and so forth,” she continued. “I like to think of our network as a Star Wars confederation — everyone of different shapes and sizes. We do give them the things that they need — data, resources — in a different way, but we really allow them to keep that mastery and those relationships that they want.”
Gaining access to robust data sources and analytics tools through the ACO helps providers in independent and small practices understand their patient costs, even outside of their office. Knowing total costs of care is key to succeeding under value-based reimbursement models, independent physician and Aledade Arkansas ACO Medical Director Shawn Purifoy added.
“Most of the Arkansas practices in the Aledade ACO are well-established,” he explained. “And most primary care physicians especially after some period of time in practice have established referral patterns, but we have never had to pay attention to the cost before.”
After joining Aledade, Purifoy could control patient costs across the care continuum while still maintaining those close relationships with his patients.
“Now as a collective group, we can call the cardiologist and say, ‘You’re really practicing outside what is considered to be a norm in your field. Is there a reason for that? Could you cut that out for me because I like you and I would like for you to keep getting my patients?’ We’re not going to try to tell you cardiologists how to practice medicine, no more so than we want you to tell us primary care physicians how to do that. But we can all agree on some things,” he stated.
“We hold each other’s feet to the fire, and the patient benefits. That’s one way we can tamp that cost down a bit.”
Open community and honesty within the organizations are key to not only the success of small practice owners, but the ACO as a whole.
Independent practice associations
Independent practice associations bring together independent physicians in the same region. Under an IPA, solo and small practices leverage their collective resources to negotiate payer contracts, purchase supplies, and provide management services, including payroll, bookkeeping, benefits management, and marketing. Some IPAs also offer health IT and EHR implementation help.
IPAs are key to value-based reimbursement in the independent and small practice setting because providers can use the administrative functions of the association to negotiate and participate in risk-based contracts.
The association also helps solo and small practices compete with hospitals and larger organizations in the region, explained Paul Reiss, MD, CMO of HealthFirst, an IPA in Vermont.
“Practices are at a disadvantage with hospitals consolidating, especially here in Vermont where we have no hospital competition,” he said.
The large health systems created in Vermont threatened independent physicians and small practices because systems could see many of the same patients as their smaller peers and get paid more for the same services.
Increased clout in the market resulted in Vermont hospitals negotiating claims reimbursement rates that were two to three times higher than the rates independent physicians received for the same services.
HealthFirst helped independent practices fight back by maximizing their market power. The IPA negotiated contracts with a major payer in the area for all practices within the association. Some of the contracts contain value-based reimbursement provisions.
HealthFirst even established the state’s first Medicare ACO, the Accountable Care Coalition of the Green Mountains. The IPA also recently added a commercial ACO, the Vermont Physicians Collaborative.
The IPA does not require practices to participate in value-based reimbursement contracts or its ACOs.
“They can leave at any time,” he said. “It doesn't commit them to joining any ACO. They're not committed to joining any of our contracts. It just provides them the opportunity to access all those things that they can benefit from and it's unfortunate that all the independent doctors aren't part of this because to tell you the truth they're benefiting from it even without being members.”
“Sometimes independent physicians are so independent that it's a detriment to their own survival,” he continued. “Whereas joining with other like-minded individuals in similar practice situations creates this energy that allows them to survive.”
Virtual groups under MACRA
Even CMS acknowledges that independent physician and small practices cannot always succeed with value-based reimbursement alone. The federal agency has created virtual groups that allow practices to partner for quality reporting under the Quality Payment Program.
Starting in 2018, solo practitioners who meet participation thresholds, and practices with 10 or fewer qualifying clinicians, can report as a group to the Quality Payment Program. Practices can join the virtual group regardless of location, specialty, or other factors.
Virtual groups allow small and independent practices to band their resources and patient mixes together to boost their Quality Payment Program performance.
Providers should be aware that CMS will assess the group as a whole. Only clinicians eligible for MIPS will receive a payment adjustment.
Healthcare stakeholders viewed virtual group implementation as a win for small and independent practices.
“The ‘preservation of independent clinical practices’ is now stated as a key aim of the Quality Payment Program, and the substance backs it up,” stated Travis Broome, Healthcare Policy Lead at Aledade. “Specifically, the new MACRA rule creates virtual groups that allow small practices to band together while keeping their independence.”
“Ultimately, it helps clear the way for smaller, independent primary care practices to maintain their independence and take the path into value-based care,” he continued.
The shift away from fee-for-service is a challenge for healthcare organizations of all sizes. But it is not impossible for small practices and independent physicians. Leveraging flexibilities and codes and collaborating with like-minded peers should help practice leaders engage with value-based reimbursement and realize a return on investment.