Value-based Arrangements

Primary care practitioners are working through dramatic change in the business of their profession: More PCPs than ever are working under capitation or risk-based reimbursement arrangements. That trend accelerated as physician employment increased during the worst years of the COVID-19 pandemic, with many doctors selling their independent practices to private equity, insurers or hospital systems.

Although risk-based reimbursement is well established in government books of business, the commercial market is adopting risk-based primary care payment using lessons learned in Medicare Advantage and Medicaid managed care. The transition to commercial risk-based compensation was the subject of a May 23 panel convened by the Primary Care Collaborative, a primary care policy group.

Although multiple states have set up some version of a public option — a government-established insurance plan — on their Affordable Care Act exchanges, two researchers are striving to convince policymakers to consider a public option program in California that they say will more effectively enhance competition and bring down premiums.

The “secret sauce” of the proposal is the state’s existing “delegated model,” in which provider organizations take on some or all the financial risk associated with delivering health care services, according to Stephen Shortell, Ph.D., a health policy professor at University of California, Berkeley.

A spate of deals and new initiatives from Kaiser Permanente, CareSource and Blue Cross Blue Shield of Michigan highlight the race for nonprofit insurers to expand and diversify in increasingly competitive markets, as well as the rise of value-based care.

Perhaps the most significant deal is Kaiser’s planned acquisition of Geisinger Health, a nonprofit health system of 10 hospitals in Pennsylvania that also operates the ninth-largest insurer in the state. If the deal gains regulatory approval, Geisinger will be the first member of Kaiser’s new Risant Health, a nonprofit alliance of health systems focused on value-based care. “Risant Health’s vision is to improve the health of millions of people by increasing access to value-based care and coverage and raising the bar for value-based approaches that prioritize patient quality outcomes,” Kaiser said in an April 26 press release. Kaiser aims to add “like-minded” regional or community-based health systems to Risant, which will operate “separately and distinctly” from Kaiser as a whole.

On May 3, Option Care Health, Inc., the largest independent provider of home and alternate site infusion services in the U.S., revealed that it was acquiring Amedisys, Inc., which provides home health, hospice and high-acuity care, for $3.6 billion. While opinions on the deal differed, one industry expert contends that the transaction offers multiple long-term benefits within the ever-evolving health care space, especially the home setting.

The deal comes less than a week after Option Care unveiled its wholly owned subsidiary Naven Health, Inc., a nationwide home infusion nursing network and platform employing more than 1,500 nurses and serving all 50 states.

While drugs are increasingly hitting the market that address unmet needs and even offer cures for some rare diseases, private insurers are highly concerned about such therapies’ eye-popping price tags, a recent survey indicated. But one prominent payer executive who spoke during AHIP’s Medicare, Medicaid, Duals & Commercial Markets Forum suggested that insurers are better off working collaboratively with drugmakers to ensure prices are tied to value — rather than engaging in an inter-industry war of words.

“More and more we’re seeing drugs come through with limited evidence through accelerated approval processes, which generally is a marker for an unmet need, which is a good thing. But the evidence can be thin,” said Michael Sherman, M.D., executive vice president and chief medical officer of Point32Health. During a March 14 panel at the AHIP forum, Sherman pointed to the example of Makena (hydroxyprogesterone caproate), a drug that aims to reduce preterm births but failed to prove clinical effectiveness in trials conducted after it received accelerated approval. With the FDA poised to make a final decision on the drug’s status, Clovis Pharma Group recently announced it would voluntarily pull Makena off the market.

In the space of less than a month, a health care technology company called Aledade has announced new alliances with two health insurers and expanded an existing partnership with another. Those insurers — CareFirst BlueCross BlueShield, Humana Inc. and Cigna Healthcare — say their goal in working with the company is two-fold: (1) to help physician practices remain independent rather than opting for corporate ownership, and (2) to hasten the move from fee-for-service to value-based payment models.

Aledade says it has a “proven, scalable model” aimed at bolstering independent primary care practices. That model includes data analytics, guided workflows, health care policy expertise and “integrated care solutions.” The company says it currently participates in risk-based arrangements with more than 1,500 practices in 45 states and the District of Columbia. Aledade’s CEO, Farzad Mostashari, M.D., is the former national coordinator for health information technology at HHS during the Obama administration.

Three publicly traded startup insurers all posted losses for the full year 2022, and one firm — Bright Health Group, Inc. — may be on its last legs. A managed care insider tells AIS Health, a division of MMIT, that while Oscar Health, Inc. may have righted the ship and Clover Health Investments Corp. didn't perform as poorly as expected, Bright is in bad shape.

Bright took in revenue of $551.4 million and posted a net loss of $188.2 million, or negative earnings before interest, taxes, depreciation and amortization (EBITDA) of $108.5 million over 2022, with a medical loss ratio (MLR) of 93.9%. Oscar took in revenue of $3.96 billion against operating expenses of $4.55 billion, posting a net loss of more than $609 million during 2022, with an 85.3% MLR. Clover took in $3.4 billion and reported $298.7 million in negative EBITDA during 2022, with MLR at 91.8%.

Blue Cross Blue Shield of Michigan this year launched full-risk reimbursement arrangements with six physician groups in the state. The deals cover members enrolled in the insurer’s Medicare Advantage PPO and Blue Care Network MA plans.

The provider organizations have worked with BCBS of Michigan since 2020 on shared-risk models, but this adds more risk and reward. The agreements tie the provider groups’ payments to how well the physicians manage the costs of treating their patients and improve clinical outcomes.

As part of a sweeping new Medicare Advantage rule, CMS recently proposed a policy aimed at reforming a reimbursement system that local pharmacies have long claimed is straining them to the breaking point. PBMs, on the other hand, argue that the proposal could hamper value-based contracting in Part D and potentially increase Medicare spending.

At issue are arrangements in which Part D plan sponsors can recoup money from pharmacies for dispensed drugs if the pharmacies do not meet certain metrics. Generally speaking, these payments to plan sponsors are known as price concessions, and when assessed retrospectively — as they currently are — they are counted as direct and indirect remuneration (DIR).

A group of Blue Cross and Blue Shield-affiliated companies recently unveiled a new medication contracting organization focused on medical benefit drugs. The new company, known as Synergie Medication Collective, will be successful in improving the affordability of these treatments and patients’ access to them, an industry expert says, but it also will need to show that patients are seeing those savings.

Unveiled Jan. 5, the company says it “is focused on improving affordability and access to costly medical benefit drugs — ones that are injected or infused by a health care professional in a clinical setting — for nearly 100 million Americans.” It will focus not only on infusible treatments for conditions such as cancer but also on multimillion dollar gene therapies. The company says its goal is to “significantly reduce medical benefit drug costs by establishing a more efficient contracting model based upon its collective reach and engagement with pharmaceutical manufacturers and other industry stakeholders.” It plans to “bring to market several new product offerings” this year, among them “transformative value-based models.”