Health Equity & Value-Based Payment Models: Addressing Current Challenges

With over a dozen current, reimagined, and emerging value-based payment (VBP) models available, including:  accountable care organizations (ACO), patient-centered medical home, bundled payment, and others, there are a host of population-based, episode-based, and advanced payment options for payers and providers.

VBP adoption has not kept pace with CMS's expectations; however, payers, providers, MCOs, and state-based plans have both an opportunity and a government directive to leverage value-based arrangements and programs to address health equity issues.

ACO REACH integrates health equity, but more significant VBP challenges must be addressed

A year ago, the ACO REACH model (Realizing Equity, Access, and Community Health) replaced the Global and Professional Direct Contracting Model (GPDC) model. Its reimagined goal is “to encourage healthcare providers to coordinate care to improve the care offered to people with Medicare–especially those from underserved communities." As the first value-based payment model with a specific orientation toward health equity, the first ACO REACH cohort began participation on January 1, 2023.

While ACO REACH focuses on traditional Medicare beneficiaries, orienting other VBP models toward health equity goals will require addressing existing adoption challenges that value-based or alternative payment programs (APMs) now face.

As the first in a 2-part series, this article will focus on those existing adoption challenges and MedPac's 2021 and 2022 recommendations to CMS to resolve them. Part 2 will dive deeper into the ACO REACH model and what can be learned and adapted for consolidated or new VBP programs.

Putting VBP programs into historical perspective

VBP models were developed out of the belief that the US relies too heavily on fee-for-service (FFS), creating problematic financial incentives by rewarding providers for maximizing the number and complexity of billable medical services. At the same time, providers who offer effective care for less cost are penalized.

Since the 1970s, CMS and CMMI had tested more than 50 payment alternatives. The list grew when the Affordable Care Act of 2010 (ACA) appropriated about $1 billion annually to test new payment and service delivery models.

The goal was to establish successful programs as permanent options nationally if the programs reduced spending without compromising quality or improved care quality without increased spending. Most are population-based, like ACO models. Some are episode-based and a few have focused on advanced primary care.

VBP model adoption has not kept pace with expectations

While CMS committed to a goal to have “every Medicare beneficiary in a value-based care relationship by 2030," VBP adoption is not keeping pace. Most payment models, according to MedPac, the Medicare Payment Advisory Commission, are not reaping the desired improvements in care quality and cost control.

The latest data on value-based program adoption relative to the 2030 goal:

• In 2015, 20% of Medicare payments were made through a VBP
• The 2016 goal was to convert 30% of Medicare payments to VBP
• The 2018 conversion goal was 50%
• As of 2019 data available, only 38.2% of healthcare payments were made through a VBP program

This growth pattern shows ~18% growth over 4 years. If value-based care payment programs are to flourish and track toward CMS's goals, significant changes must be made. Efforts are underway to benchmark success, scale programs with positive outcomes, and, in accordance with MedPac's 2021 recommendations and 2022 operational plan, consolidate and simplify programs to provide better incentives for clinicians.

Several VBP models have been much more successful than others

Almost all ACO and episode-based payment models generated gross savings before model payments, like performance bonuses, were considered. These models demonstrated that provider organizations could motivate physicians to adjust their care by shifting the quantity or the type of healthcare services they provided or referred.

A number of ACOs have created sufficiently promising results or insights that have been tuned and relaunched as new models. Two examples are ACO REACH (previously known as GPDC and Next Gen ACO before that) and the Oncology Care Model, which is now being retooled with an expected July 2023 launch date as the Enhancing Oncology Model.

The most successful CMS or CMMI VBPs

The most successful CMS- or CMMI-managed programs include the Medicare Shared Savings Program (MSSP), a track within the MSSP program called the ACO Investment Model (AIM), the Pioneer ACO model, the Physician Group Practice Demonstration, and the Comprehensive Care for Joint Replacement Model for hip and knee replacements.

MedPac's 2021 report to Congress on Medicare and the Healthcare Delivery System included an assessment of VBP models. Those with the most significant net savings and positive impacts on quality included the following:

Medicare Shared Savings Program: Originally the Physician Group Practice Demonstration, MSSP is CMS's largest program established as a permanent program by the ACA. One-third of traditional FFS Medicare beneficiaries with Part A and Part B is attributed to a provider participating in the MSSP, which serves 10.7 million beneficiaries.

While MSSP has not had a federally funded evaluation, MedPac reported gross savings of $171 and net savings of $69 per beneficiary per year (PBPY) between 2005-2010. These represented 2% and 1% of PBPY annual costs. The main impact on quality included reduced rates of hospital admissions and ED visits and increased delivery of diabetes tests and exams.

Providers in this program serve about 20% of all Medicare beneficiaries. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) provided additional incentives as well as some downside risk through advanced APMs (A–APMs).

Pioneer ACO Model: As an MSSP Track 3 program, this ACO saw gross $427 PBPY and net $134 savings in their first year and gross $134 PBPY and net $43 PBPY savings in the second year. The program continued until 2016 and reported improved hospital admission rates for COPD, older-adult asthma, and heart failure. Additionally, physician follow-up within a week of discharge improved.

ACO Investment Model (AIM): This population-based model saw gross savings over its 3-year span, ranging from $339 to $465 PBPY and net savings between $280 and $362 PBPY, as well as reduced hospitalizations, ED visits, and improved post-acute skilled nursing use.

Comprehensive Care for Joint Replacement Model: This program has continued since 2018 with results for the 13 most common hospital-initiated procedures. Gross savings were $646 per episode/procedure, with net savings of $536 (or 2%) of the total cost per episode. The program demonstrated improved quality care with reduced rates of unplanned readmissions and specific complications.

Across all VBP models, ACO programs have yielded the greatest financial savings. In 2015, HHS reported that ACO programs had saved $417 million for Medicare while reducing hospital readmissions by 8% for Medicare beneficiaries. In 2020, data indicated those savings had increased tenfold in 5 years, totaling $4.1 billion.

Building upon these successful programs is 1 step toward increasing the adoption of VBPs. Other efforts are going further to reimagine and improve existing models while consolidating and testing others.

What's being done to reimagine and reinvigorate VBP models?

In MedPac's 2021 report to Congress, the Commission recommended that CMS streamline its portfolio of alternative payment models, implementing a more “harmonized portfolio of fewer alternative payment models designed to work together to support the strategic objectives of reducing spending and improving quality."

In 2021, CMS operated 12 APMs with 25 distinct tracks involving various payment options and risk arrangements. MedPac's goal is to create a smaller, more harmonized portfolio that provides “more consistent parameters and clearer and more aligned incentives" that could better motivate providers to offer more efficient care while decreasing Medicare spending. MedPac's 2022 report to Congress suggested concrete steps toward streamlining and reducing VBP models and achieving the larger goal, including:

• Reduce the number of population-based payment model tracks
• Eliminate the periodic “rebasing" of ACO spending benchmarks to increase ACOs' incentives to lower spending
• Assess and choose from the best designs regarding attractive financial terms
• Determine which programs should move toward required participation (like with joint replacement)
• Revisit MACRA provisions for incentives
• Determine the best balance between population- and episode-based programs

Discussion, analysis, and changes are part of CMS's commitment to building attractive and productive VBPs. An example of CMS's willingness to respond to stakeholders' voiced pain points is their recent announcement of aligning quality measures across CMS called the "Universal Foundation."

Announced in February 2023, HHS responded to the Biden Administration's Executive Order on Drug Prices by engaging CMMI to test 3 prescription benefit-based value models tied to their health equity strategic objective and affordability goals.

In addition to modest gross spending and quality improvements, APMs enable CMS to investigate new approaches to how Medicare pays providers.

Adding to this complexity is CMS's recent commitment to health equity as a fundamental part of quality care. Beyond creating more robust incentives to control overall costs and maintaining or improving quality, VBP models must address health disparities caused by various inequitable practices and systems.

The Cell and Gene Therapy Access Model is another VBP example but with an inherent equity-focused hypothesis: “Does a CMS-led approach to administering outcomes-based agreements for certain cell and gene therapies improve beneficiary access and equity and reduce healthcare costs?" These cell and gene therapies are used for disorders like sickle-cell anemia and retinal dystrophy that disproportionately affect Black Americans.

Health equity goals are ramping up and VBP should be a natural fit

In 2022, CMS announced health equity as the first pillar of the CMS Strategic Plan. Their objective is to build this pillar into core functions across CMS.

At that time, they had already embarked on their vision through action across the organization, including:

• Developing expanded stratified reporting of Medicare Advantage (MA) and Part D Star Rating measures with a new health equity index
• Aligning health equity-related quality reporting with other CMS components
• Proposing a new supplemental payment for Indian Health Service and Tribal hospitals
• Improving access to continuous coverage and quality of care in the postpartum period
• Expanding access to home- and community-based services (HCBS) through the American Rescue Plan
• Widening outreach related to culturally competent and linguistically accessible education
• And many others

Integrating health equity priorities into VBP models was a logical, even natural, step. Beginning in 2023, the GPDC model launched as ACO REACH. The reimagined program enables CMS to test an MSSP with 3 pivotal changes:

1. Advancing health equity by bringing ACO benefits to underserved communities
2. Promoting provider leadership and governance through engagement and authority
3. Providing enhanced participant vetting, monitoring, and improved transparency

The ACO REACH model looks to take necessary leaps toward health equity while addressing historical healthcare disparities for underserved communities. In our next article, we look at the specifics that build the foundation for greater focus on equity within VBP models.

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