How Payers Can Support Population-Based Payment Model Uptake

Past population-based payment model uptake

In the most recent HCP-LAN survey of advanced payment model progress which was conducted in 2018, payers were not as prepared to adopt population-based payment models.

The study covered 62 health plans, seven states, and traditional Medicare coverage. At the time, merely 5.1 percent were pursuing a population-based payment model. Less than two percent of all participating health plans had condition-specific population-based models, 2.9 percent were comprehensive, and 0.4 percent were integrated finance and delivery systems.

In comparison, slightly fewer than four out of every ten health plan participants were engaged in strictly fee-for-service models. Nearly three out of every ten health plans was involved in an advanced payment model built on a fee-for-service structure—whether upside risk or a combination of upside and downside risk.

Payers also did not foresee a major shift towards population-based payment models at the time. When asked which payment models were likely to gain the most traction, 45 percent of payers said upside and downside appropriate care models built on fee-for-service structures and 31 percent answered upside rewards for appropriate care built on fee-for-service models.

If the healthcare industry intends to increase population-based payment model uptake, public and private payers will have to seize opportunities to pursue population-based payment model contracts.

Types of population-based payment models

Overall, Health Care Payment Learning and Action Network (HCP-LAN) has identified four categories of payment models: fee-for-service, fee-for-service with ties to value and quality, alternative payment models built on a fee-for-service structure with financial risk for providers, and population-based payment models that avoid limiting necessary care.

In general, population-based payment models require shifting the financial responsibility for care from payers to providers.

HCP-LAN recognizes three types of population-based payment models.

The first is condition-specific population-based payment. In a condition-specific model, payers may reimburse providers in per member per month payments for members with a particular health condition. They might also make payments based on specialty services, such as offering bundled payments for cancer care.

The second type of population-based payment model is the comprehensive population-based payment model. This category would cover all of the costs of a member’s care when that member falls under a member population with a specific condition. 

The amount of payment is based on expected costs of care for the member population and may take the form of a global payment or a full or percent premium payment for members in that member population. The payer and provider in these payment models are two separate organizations.

The final category of population-based payment models as established by HCP-LAN is the integrated finance and delivery systems model. This category applies the same approach as comprehensive population-based payment models to organizations that encompass both the provider and the payer entity.

Expand public payer adoption of population-based payment model

CMS will be key to expanding population-based payment uptake, according to a white paper from the Leonard Davis Institute of Health Economics at the University of Pennsylvania (Penn LDI).

In Medicare in 2020, most of the advancements in population-based payment models centered around the Medicare Shared Savings Program, although a Health Affairs article predicted a mass exodus from the program in 2019 if the program required that providers assume more downside risk.

The Penn LDI researchers recommended that CMS implement an overall strategy for advanced payment models that applies different types of models to provider contracts based on provider type. 

Medicare would contract with groups of providers using a population-based payment model under which providers would be responsible for the total cost of care. But for specialists, Medicare would form episode-based payment models. Population-based and episode-based payment models’ benchmarks would be market-based.

Primary care providers would be reimbursed through advanced primary care models.

The researchers noted that commercial payers often follow Medicare’s lead on advanced payment model adoption. By taking more aggressive steps towards population-based payment models in Medicare, CMS could blaze the path for the industry as a whole to commit to value-based care.

Leverage population-based payments for telehealth, virtual care

Telehealth is also an area ripe for advanced payment models that could help the healthcare industry overall progress towards population-based payment.

In a discussion paper published by the National Academy of Medicine, experts—including William Shrank, chief medical officer at Humana—suggested that payers should pursue population-based payment models as a method for supporting the expanding role of telehelath and virtual care in the healthcare system.

During the coronavirus pandemic, many payers made concessions on telehealth reimbursement policies while in-person care plummeted and telehealth and virtual care utilization exploded. Such concessions gave providers a large amount of flexibility in billing services as “telehealth” and may have contributed to higher telefraud.

“Payers may not have had time to build in claims edits to disallow services like chemotherapy or diagnostic imaging to be billed under ‘telehealth.’ Consequently, mechanisms for appropriate oversight will be necessary to ensure that telehealth does not replicate the existing challenges of waste within the health care system,” the researchers explained. 

The researchers argued that population-based payment models may provide a solution.

“One avenue for developing guardrails without replicating the administrative burdens associated with in-person care would be to leverage alternative payment models, as population-based financing strategies can naturally disincentivize against the unnecessary utilization of both in-person and virtual services,” the discussion paper explained.

Population-based payments impose checks on quality of care and value of care to support reimbursement.

Payers should be conscious of the ways in which telehealth and virtual care can perpetuate fee-for-service structures and should offer opportunities to enter into advanced payment models in order to avoid wasteful healthcare spending.

This strategy could take shape both among public payers and private payers, the researchers suggested. Medicare could implement meaningful use policies for telehealth as part of its advanced payment models. Private payers, as well as public payers, could incorporate advanced payment models into the National Quality Forum’s telehealth quality measures.

As the healthcare industry pursues value-based care, public and private payers can accelerate progress by finding opportunities like these to introduce population-based payment models.