Health insurers press gas on value-based payments

In tandem with the federal Medicare program, large private insurers such as Anthem Inc. are rapidly expanding the new ways they pay doctors and hospitals.

Those programs are accelerating the pace of change among health care providers in Indiana and across the country. Whereas before, doctors and hospitals could count on more money for doing more tests and procedures, now their financial future hinges on their ability to keep patients healthy and to slow the growth of the cost of their care.

Indianapolis-based Anthem is already paying out more than $11 billion of the $38 billion its commercial health plans spend each year on medical claims via alternative or “value-based” programs, the company told investors last month.

Adding in its Medicare and Medicaid health plans, Anthem is spending more than $25 billion in these new types of programs.

“I firmly believe that value-based payment models are absolutely going to be the new norm, if not already,” said Amy Cheslock, Anthem’s vice president of payment innovation. “This is not a fad, if you will."

In January, the Obamacare administration announced that Medicare program for seniors will make 30 percent of its spending hinge on these new payment programs by 2016, and 50 percent by 2018.

One type of these new payments is called a medical home, with insurers such as Anthem paying primary care doctors extra money to take some responsibility for all aspects of their patients’ care, in what is called a medical home.

In Indiana, nearly 2,900 primary care providers are participating in that program, covering nearly 454,000 patients. Anthem pays each doctor about $3.50 per patient per month to cover the cost of the extra services they provide to keep patients healthy.

Another type of value-based payment goes to doctors and hospitals that have formed accountable care organizations. Those ACOs can earn bonuses, also known as “shared savings” payments, for proving the quality of their care and slowing growth in the collective cost of care for a specific group of patients.

In Indiana, Anthem has entered ACO agreements with Franciscan Alliance’s hospitals statewide, the Indiana University Health hospital in Goshen and Saint Joseph Regional Medical Center in South Bend.

Also, Anthem has ACO-type shared savings agreements with 11 other health care providers, including the large physician practices of American Health Network, Community Physician Network and St. Vincent Health.

All told, Anthem’s medical home, ACO and shared savings agreements have nearly 454,000 patients assigned to them.

Nationwide, Anthem has 37,000 health care providers in either a medical home or one of its 139 ACO agreements, with about 3.8 million patients assigned to them. That’s equal to 13 percent of all of Anthem’s customers in commercial health plans.

“The nature of the value-based payment models is such that it is attractive for primary care physicians to participate in them,” Cheslock said. “The best example of that is the pace at which we’ve been able to move providers into these models.”

Other insurers are making similar progress, according to statistics compiled by Wedbush Securities.

Hartford-based Aetna Inc. has 62 ACO agreements covering 3.2 million patients or about 30 percent of all the claims it pays through its commercial health plans. Aetna has another 200 ACOs in the pipeline and wants 75 percent of its spending to go thorugh value-based programs by 2020.

Louisville-based Humana Inc. has 54 percent of its health plans’ members covered by accountable care organizations. It wants to push it to 75 percent by 2017.

Minnesota-based UnitedHealth Group Inc. is spending $40 billion a year through its 520 ACOs and other value-based contracts. It wants to boost that spending to $65 billion by 2018.

Lastly, Philadelphia-based Cigna Corp. is working to expand on the 122 ACOs it has already.

Anthem’s Cheslock said she expects these payment programs to keep evolving. Anthem has structured most of its shared-savings contracts so that in the third or fourth or fifth year of the contract, health care providers can actually lose money if they don’t keep costs down and quality up. But they can also earn even larger bonuses if they do.

Going even further, some health care providers are talking to Anthem about being paid a pre-set amount per patient per year—a concept known as capitation. Capitation encourages doctors to keep costs lows—because they get to keep whatever portion of the payment is left over at the end of the year. Or, if they spend more than the pre-set amount, the doctors take a loss.

Medicare has advanced a similar concept through its Medicare Advantage plans, which are managed by private insurers like Anthem. Medicare Advantage now covers roughly one-third of all seniors, and many think it will become the standard for insurance payment in the future.

“There is a warming sentiment toward capitation, and the opportunities it presents,” Cheslock said.

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