The Department of Health and Human Services’ (HHS) recently announced goal of tying 90% of Medicare reimbursements to quality by 2018 has underscored the importance of pursuing alternative, value-driven payment methods for ancillary physicians.1

Although some specialists, emergency medicine physicians, radiologists, anesthesiologists and others remain wary of value-based reimbursement, a McKesson expert says the time has come to get involved in order to secure a place at the reimbursement table.

“Specialists and ancillary providers can no longer assume that their traditional roles are secure as ACOs, narrow networks and bundled payments continue to gain traction,” said Andrei Gonzales, MD, McKesson’s director of value-based reimbursement solutions. “Unless physicians proactively engage with referring doctors and payers about becoming a part of these new arrangements, they may find themselves on the outside looking in.”

A value proposition

Securing participation in value-based reimbursement models ultimately depends on a group’s ability to deliver and demonstrate quality care at lower costs, Gonzales said. As a result, practices should have a clear understanding of their cost and quality metrics relative to their peers. They should also identify marketplace trends and pilot study outcomes that can help illustrate the benefits of making the organization part of a value-based solution.

“You have to educate the accountable care physician or payer representative about why you’re the best choice for the referral,” he said. “This process is very similar to what doctors have always done to maintain and grow their referrals. What’s different now is that you really need to be able to show quality that is equal or superior to other groups, as well as with lower costs.”

Cost and quality comparisons can be developed by accessing provider data available from proprietary vendors, as well as through CMS databases, Gonzales said. Payers and accountable providers also may be willing to share limited cost and quality information to facilitate accurate evaluations, he added. Typically, quality metrics reported through the Physician Quality Reporting System (PQRS) and the Healthcare Effectiveness Data and Information Set (HEDIS) are used to assess performance against both process and outcome quality measures.

CMS payment categories

Because value-based purchasing models continue to evolve, maintaining collaborative relationships with payers and referring providers is critical to understanding whether a physician group will be a good fit for a particular approach. Payers can also play an important role in connecting physician groups with emerging or existing accountable care organizations and other organizations working to develop more integrated, cost-effective approaches to care.

The Centers for Medicare & Medicaid Services (CMS), has adopted a framework that defines categories of reimbursement, with the three highest categories reflecting progressively greater levels of value:2

  • Category 1: Fee-for-service with no link of payment to quality: The traditional approach wherein payments are based on volume of services and not linked to quality or efficiency.
  • Category 2: Fee-for-service with a link of payment to quality: At least a portion of payments vary based on the quality or efficiency of healthcare delivery. Examples include the Physician Value-Based Modifier and Hospital Value-Based Purchasing programs.
  • Category 3: Alternative payment models built on fee-for-service architecture: Some payment is linked to effective management of a population or episode of care. Payment is still triggered by delivery of service, but opportunities exist for shared savings or two-sided risk. Examples include accountable care organizations, medical homes, bundled payments, Comprehensive Primary Care Initiatives and the Medicare-Medicaid Financial Alignment Initiative Fee-for-Service Model.
  • Category 4: Population-based payment: Payment is not directly triggered by service delivery, so volume is not linked to payment. Clinicians and organizations are paid and responsible for the care of a beneficiary for a long period (e.g.> 1 yr.) Examples include eligible Pioneer accountable care organizations in years 3 to 5.

Spreading the word

In early 2015, HHS established targets for transitioning 30% of Medicare fee-for-service payments to Category 3 and 4 shared risk/savings payments by the end of 2016, and 50% by the end of 2018. At present, about 20% of Medicare payments are made via Category 3 and 4 models, according to HHS. When simpler, Category 2 alternatives to fee-for-service payment are included, HHS expects that 90% of all Medicare reimbursements will incorporate some type of quality component by 2018.3

In addition to establishing the transition objectives, HHS in January also announced the creation of the Health Care Payment Learning and Action Network. The agency-sponsored initiative will work with private payers, employers, consumer, providers and state Medicaid programs to expand alternative payment models throughout the health system.4

An IT backbone

Gonzales said that developing information technology capabilities that can scale with continued value-based growth represents a key element in successfully transitioning to value-based care. Also important are modifications to existing processes, as well as improved communication with stakeholders and partners about shared clinical and financial risks. Finally, analytics that support continual improvement by identifying problem areas and assessing trends will help organizations course-correct as they move ahead on the value-based continuum.

“It’s human nature to be resistant to change, but the reality is that value-based purchasing is here,” Gonzales said. “By looking for opportunities to develop and participate in value-based purchasing, ancillary groups will stand a much better chance of prospering in the years ahead.”

1Better Care. Smarter Spending. Healthier People: Paying Providers for Value, Not Volume,” Department of Health and Human Services press release,  Jan. 26, 2015.
2 Ibid.
3 Ibid.
4 Ibid.


About the author

McKesson Business Performance Services offers services and consulting to help hospitals, health systems, and physician practices improve business performance, boost margins and transition successfully to value-based care.