Brooks Blog

Monday • December 04, 2017

The Road to Value in 2017-18: Two Steps Forward, One Step Back

Stakeholders across the healthcare industry wondering whether the road from volume to value is still open might notice a Road Work Ahead sign and possibly a detour or two. This is in lieu of leadership on this route from the Centers for Medicare and Medicaid (CMS) that payers and providers had been accustomed to since the Affordable Care Act. However, other stakeholders are paving the way forward despite the mysteries ahead.

Two Steps Forward

Payers do well. Humana recently released a report showing significant improvements in total costs for their Medicare Advantage covered lives in value-based contracts versus their fee-for-service covered lives. According to the report, “Total health care costs were 15% lower vs. original fee-for-service Medicare.”

The same report said–although it did not publish supporting data–that savings to the plan “can benefit plan members through reduced out-of-pocket costs, lower member premiums, and/or additional benefits.”

Pharmaceutical companies share risk. These reports may encourage wider adoption of value-based contracts among payers, but even more promising is the road to value for pharmaceutical companies.

Earlier this year Novartis paved the way for value-based contracting for KYMRIAH — the company’s innovative one-time treatment for a rare form of pediatric leukemia — with an interesting deal with CMS: if a patient has a response to this gene therapy within a month, the company will receive $475K; if there is no response, however, they get zilch:

“Novartis is collaborating with CMS to make an outcomes-based approach available to allow for payment only when pediatric and young adult ALL patients respond to Kymriah by the end of the first month.” – Novartis Press Release

Excluding providers for the most part, the road to value promises to be smoother thanks also to this year’s AMCP Partnership Forum: Advancing Value-Based Contracting involving over thirty health plans, integrated delivery systems, pharmacy benefit managers, employers, data and analytics companies, and biopharmaceutical companies. The forum defined value-based contracting and reviewed the hurdles as well as ideas of how to overcome them on the road to value.

One Step Back

As for providers at large, the reduction of mandatory participation in bundled episodic payments for certain procedures and in MACRA for many providers means Medicare will likely remain a fee-for-service world. Despite recent calls on CMS to maintain its leadership role, this void spells trouble for other payers that were hoping to capitalize on the value-based infrastructure and risk-sharing capacities providers would have developed if required to by CMS.

Brooks Insights: The move from volume to value began most dramatically with the Affordable Care Act and was reinforced by the bipartisan passage of MACRA in 2016 as a new model for incentivizing physicians to achieve health outcomes rather than increase the number of visits and cost of treatment. Its inception as part of the ACA may spell its political doom despite many stakeholders still advocating for this shift. Meanwhile, payers and pharmaceutical manufacturers are likely to continue testing these agreements to share risk on innovative and higher risk treatments.

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