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Sustainable Financing for Complex Care Management Is Critical to a Value-Driven Health Care System

Article · January 31, 2019

Effective management of high-need, high-cost individuals is integral to the success and sustainability of a value-driven health care system. These patients make up 5% of the population but account for more than 50% of U.S. health care spend. Complex care management programs coordinate essential services, address critical gaps in communication, and prevent costly, avoidable hospitalizations and other urgent care services. Evolving innovative programs even incorporate nonmedical services such as transportation, housing assistance, and proper nutrition, which address the broader socioeconomic influences of health. Ultimately, complex care management is one of the best available tools to prevent costly and unnecessary use of the health care system — and improve patient outcomes in the process.

Yet despite strong supporting evidence, robust complex care management programs are not ubiquitous. Sustainable financing is a major roadblock; while provider organizations are typically closest to the patient, they may not have the means or desire to fund comprehensive programs themselves. Payers are supportive of care management services but may not adequately pay for those services outside of their own programs. This fundamental disconnect creates a piecemeal system in which programs are not scalable across lines of business, and where not all high-need, high-cost individuals are appropriately identified and targeted for services. Without adequate and secure funding streams, providers may feel compelled to ration care — and innovative programs may be left to wither away after initial seed money runs dry.

The Pacific Business Group on Health and the Health Care Transformation Task Force — two member organizations committed to advancing value-based care — looked closely at these challenges and released a report and contracting guidance with the support of The Commonwealth Fund and The SCAN Foundation.

The study found that provider organizations were more likely to stint on care management if they didn’t have a strategic imperative from executive leadership to internally fund programs or equitable payer funding across multiple lines of business. Without either, providers offered limited services or reserved participation in complex care programs for individuals with higher-paying insurance.

Why Providers and Payers Must Collaborate

This outcome is unacceptable if the goal remains to achieve a health care system that is truly rooted in value for all. Care management should be payer-agnostic at its core. All individuals, regardless of how they are paid for, should have access to complex care management programs as their needs require. Yet for providers to make adequate and continued investments in these programs, payers must recognize the value of care management for everyone — regardless of line of business. They must also routinely pay for those services. Providers must be clear and direct in negotiations with payers on how much they need to adequately support these programs and that there’s a return on investment for doing so. Finally, payers must be able to offer robust complex care management services in partnership with providers and/or when providers have limited capability or inclination to do so.

The most effective care management occurs when providers and payers know the value and limitations of their programs, work collaboratively to offer the most comprehensive services to consumers, and procure adequate funding for promising programs. Instead of viewing provider programs as a threat, payers should welcome the opportunity to partner with innovative organizations, and to encourage development/continuation of evidence-based care management programs.

Guidance for Collaborative Contracting Negotiations

The Pacific Business Group on Health and the Health Care Transformation Task Force created practical guidance for payers and providers in their contracting negotiations. The guidance tracks to the four categories of risk established by the Health Care Payment Learning and Action Network: fee-for-service with no link to quality and value, fee-for-service with links to quality and value, alternative payment models built on fee-for-service architecture, and population-based payment.

The guidance specifies ten key elements of an ideal contracting process: type and level of risk, data sharing, patient population, consumer engagement, service requirements, quality metrics/performance evaluation, provider network requirements, financial structures, return on investment, and confidentiality requirements.

Elements of a Sustainable Complex Care Management Contract

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The type and level of contractual risk for complex care management should be broadly defined by the provider prior to negotiations with the payer. How much financial risk the provider is willing to assume will directly impact the scope of the contract and determine what the payment structure looks like. As part of the pre-contracting process, providers and payers should conduct internal return-on-investment (ROI) analysis; this is especially critical for providers participating in advanced risk models, as it can be important to determine how long the contract must be in place before the provider will break even on infrastructure investments. ROI analysis is also important for negotiating reimbursement terms.

Another key contracting element to consider is data sharing, which is often neglected in contracting negotiations. Identifying how data will be transferred, where it will be housed (e.g., in a secured claims data warehouse) and how it will be used (by designated individuals with the ability to develop registries and employ predictive analytics to segment and stratify the patient population) can greatly increase the likelihood that payers will share critical data for provider population health management. Data sharing is directly tied to confidentiality requirements, which manage the use of personal health information.

It also is critical for negotiators to define contracted populations in clear detail. When individuals are specifically excluded based on factors such as age, comorbidities, and medical history, a well-written contract will define how/why these individuals are carved out and encourage both parties to put a plan into place for their ongoing management. Payers and providers can ensure that consumers are directly engaged in their care through contractual language that specifies shared care planning structures, descriptions of beneficiary cost-sharing arrangements, shared decision-making tools, standards for informed consent, and access to health records and comparable quality information.

Other key contractual elements include service requirements, quality measurement, and network adequacy — these elements are perhaps even more critical for contracts that specifically cover medically complex individuals. Complex care management services are often shared between payer and provider, so any contract should reflect a clear breakdown of clinical responsibilities. Contracts should ideally include specification on topics such as core service delegation and care management program structure: how the program is administered, how the care team is structured, and who has final decision-making authority. Quality metrics should be streamlined as much as possible to reduce physician overload. Networks should be designed to clearly address potential coverage gaps and adequacy requirements, factoring advanced specialty service referrals into preferred network systems for chronically ill patients.

New Ways of Delivering and Paying for Care

We already see growing success with and interest in certain provider-payer collaborations and markets; the research behind the current study primarily focused on evaluating provider programs. For example, Trinity Health, a longstanding national nonprofit health system with operations in 22 states, has a strong commitment to value-based care that is reflected in its contracting strategy. The organization has established robust care coordination and population health programs that operate in lockstep with its risk-based alternative payment model (APM) structures such as accountable care organizations. Trinity Health is accountable for $8.6 billion in total cost of care for about 1.4 million people, with a $120 million investment in its APMs. The organization has established thoughtful payer contracting relationships that facilitate innovation in both payment and care delivery, with continued investment by the organization in long-term value arrangements that are showing signs of success through shared savings programs such as the Next Generation ACO Model.

Another example is ChenMed, an innovative national primary care company that operates under a capitated payment model to serve more than 40,000 elderly and complex patients in so-called “primary care deserts” — typically low-income urban areas with little access to health care — in 43 medical practices. ChenMed collaborates with payers to obtain claims and census data, which is used by doctors, care coordinators, and clinical quality teams to help manage patients under full-risk contracts. These contracts provide adequate reimbursement for ChenMed’s high-touch model, which has proven to drive successful outcomes: ER visits are 33.6% lower than the national average among Medicare beneficiaries, and patients average 28% fewer hospital admissions.

Of course, not all providers have the means or ability to drive the outcome of contracting negotiations with private payers or are well positioned to take on full-risk contracts with payers. Yet examples such as Trinity and ChenMed speak to the universal importance for providers of identifying and pursuing new ways of delivering and paying for care.

Why Collaboration Can Miss the Mark

Part of the challenge in aligning payers and providers around effective payment models for complex care management is a fundamental disconnect in the perceived value of provider-led programs. Most large payers have already developed and optimized extensive remote care management structures, and often contract directly with independent providers in different markets. These programs typically have a clearly defined return on investment and allow the payer to have direct oversight over complex patient care. These programs can be incredibly valuable in markets where there is a lack of provider leadership in complex care management. However, they can also create a disincentive for payers to cover costs for newer provider-led programs, even if these programs present evidence of successful administration and improved patient outcomes.

From an employer/purchaser perspective, truly collaborative care management partnerships between payers and providers benefit everyone. Employers already subsidize care management (or the lack thereof) in the form of higher claims costs and/or greater system utilization. While employees tend to be less sick on average than elderly and disabled populations, there is still a contingent of high-need, high-cost individuals who could benefit from complex care management services. Access to comprehensive, evidence-based care management programs should be standard. Distributing the cost as equally as possible across lines of business should also be a primary goal, as it can help increase programmatic scale.

The Leadership Challenge

Our research suggests that there is a profound opportunity for payers and providers to influence the U.S. health care system through greater adoption of care management initiatives. As leaders of organizations that are jointly committed to advancing value in our system, we challenge payers and providers to come together to support this cause through more informed and cooperative arrangements. The current focus on care management is critical, yet opportunities remain to ensure these programs are the best they can be in serving complex patients.

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