Value-Based Payment, Fee-for-Service Levels Hold Steady
There was no significant difference in the percentage of reimbursements flowing through fee-for-service and value-based payment models from 2020 to 2021, although some payers saw greater movement.
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- Value-based payment levels barely moved in 2021, with some movement in the downside financial risk category, according to the latest data from the Health Care Payment Learning and Action Network (HCP LAN).
The majority of healthcare payments—59.5 percent—from 63 commercial plans, five state Medicaid programs, and Medicare were tied to value and quality in some capacity, the annual APM Measurement Effort report showed this year. The remaining 40.5 percent of payments stemmed from fee-for-service models.
The proportion of healthcare payments in fee-for-service models is actually up slightly from the 2020 results when 39.3 percent of payments were tied to the models. However, this does not indicate a backslide for the healthcare industry, according to value-based care expert Andréa E. Caballero, MPA.
“The steadiness across the board from a pretty tumultuous year to 2021 is noteworthy,” says Caballero, program director for the Catalyst for Payment Reform (CPR), an independent nonprofit corporation working to catalyze employers, public purchasers, and others to implement value-based strategies. Caballero is also moderating an expert panel at the LAN Summit later today to discuss alternative payment model (APM) progress.
Healthcare stakeholders struggled in 2020 as COVID-19 hit early that year. The global public health crisis continued to disrupt nearly every facet of healthcare operations through the rest of the year, leaving many organizations in a financial crunch.
However, more healthcare payments flowed through downside risk APMs in 2021 compared to 2020 despite the financial hardships healthcare stakeholders continue to go through.
The latest LAN data shows that 19.6 percent of healthcare payments were risk-based, coming from APM Categories 3B, 4A, 4B, and 4C. These categories represent upside and downside APMs for appropriate care, condition-specific population-based payments, comprehensive population-based payments, and integrated finance and delivery systems. In 2020, 17.9. percent of healthcare payments were under Categories 3B through 4C.
Medicare Advantage, in particular, saw a nearly 6.0 percentage point jump in the percentage of healthcare payments in downside risk APMs.
Medicare continues to lead the downside risk transition compared to commercial and Medicaid payers which had 12.7 percent and 16.6 percent of payments under risk-based APMs in 2021, respectively. In contrast, Medicare Advantage reported 35.2 percent of payments in risk-based APMs and Medicare reported 24.0 percent.
Commercial and Medicaid payers also had the highest percentages of healthcare payments in fee-for-service in 2021, with over half of payments (53.7 percent and 52.3 percent, respectively).
Medicare and Medicare Advantage are unique in that provider organizations have to see patients with some type of Medicare coverage, Caballero explains. The US population is rapidly aging into Medicare, making it difficult for provider organizations to turn away patients with the public insurance option that tends to pay less than the actual costs of care.
“Some would also say the commercial market usually has to make up for what lacks in payment from other market segments,” Caballero says. “Then again, you have providers who may not need to from a competitive standpoint and engage in any kind of alternative payment mechanism beyond pay for performance or shared savings.”
Providers may just be at capacity when it comes to risk-based payments and, therefore, do not want to take on more risk in the commercial space, Caballero also hypothesizes. But that does not mean the transition to value-based payment and downside risk APMs will plateau.
In a survey of the payers participating in the APM Measurement Effort report, none said they think APM activity will decrease. In fact, 83 percent said they think activity will increase and 34 percent felt it would increase the most in Category 3B.
“How I would interpret that is health plans are going to be bullish on APM adoption regardless, and they always have been, that number has always been quite high in terms of APM increasing,” Caballero states. About 87 percent of payers in the 2020 survey and 2019 survey said APM activity will increase.
“That's an indicator that APM adoption will increase,” Caballero continues. “If you look at that with what looks like stable data, I think APM adoption will be increasing steadily, not in big jumps and we won't see one-to-one increases, so movement directly from shared savings to shared risk and shared risk to population-based.”
The future is bright for downside risk models, though. Caballero sees the significant jump in Medicare Advantage risk-based payments as an indicator of the future of value-based payment.
“Medicare Advantage, in its two prior years, had downside risk payments at the same number. For it to then increase 6 percentage points this year is quite an acceleration. I don’t know if the pace will be maintained. It’s hard to know what was driving that increase,” Caballero says.
“But it is an indicator that there is resiliency in these downside risk models and health plans and providers, at least in some market segments, are continuing to push through to them. There’s commitment, it seems, to keep moving forward with them."
The bottom line: The transition to value-based care and ultimately downside risk APMs—a major goal for the federal government—will be a marathon, not a sprint.
Check back for more coverage of the LAN Summit.
