Value Based Purchasing
When we think of the word value, we often think of a thrifty consumer who is able to walk down the aisles of a store, comparing prices and quality of different goods to "get the best for their money." The same is true for our healthcare system. Value in our healthcare system is defined similarly — the highest quality of care delivered for the lowest total cost. Often in our healthcare system, it is payors (Medicaid, Medicare, commercial insurance carriers) that are paying for a large part of the care delivered to patients. Historically, providers have been paid for each service they perform without regard to how their patients fare. Value-based purchasing (VBP), in contrast, ties provider payments to patient outcomes, aligning incentives to improve care and reduce unnecessary costs.
In Pennsylvania, the largest amount of dollars that are spent by the commonwealth to pay for healthcare flow through Medical Assistance, our Medicaid program. In Medical Assistance, managed care organizations (MCOs) coordinate delivery and coordination of care and other supportive services for individuals enrolled in their program.
Physical Health MCOs (PH-MCOs) administer Pennsylvania's Physical HealthChoices system and are expected to facilitate access to and help coordinate care and services for members' physical health and well-being. In 2017, DHS began holding PH-MCOs accountable to use value-based contracting for a steadily increasing percentage of their provider payments. In 2020, this percentage was 50 percent, with at least half of this coming in the form of medium- or high-risk arrangements. A medium- or high-risk arrangement means that providers are incentivized both to improve quality and reduce costs, and in Pennsylvania the different types of these arrangements include shared savings, shared risk, bundled payments, and global payments.
In 2018, DHS expanded VBP requirements to include the Behavioral HealthChoices system. In Behavioral HealthChoices, the primary contractor is often county-based, and this county entity, in turn, usually holds the contract with a Behavioral Health MCO. Behavioral Health MCOs manage behavioral health services for members to treat their mental and/or substance use disorders. In 2020, the required percentage of provider payments in Behavioral HealthChoices linked to value is 20 percent, with at least half coming in the form of medium- or high-risk arrangements.
Finally, Community HealthChoices (CHC) MCOs coordinate physical health and long-term services and supports for Pennsylvanians who use both Medicaid and Medicare, as well as Pennsylvanians with physical disabilities who require long-term services and supports. There have not been historic VBP requirements for CHC-MCOs, although the department is looking towards this as part of the future move towards value, as an integral component of Whole Person Health.
These steadily increasing VBP requirements — 50 percent in Physical HealthChoices, 20 percent in Behavioral HealthChoices, and upcoming in Community HealthChoices — may be met by a wide variety of different types of arrangements with different types of providers. Allowing for flexible targets fosters innovative models. But simultaneously, we know that the vast array of VBP models can be disjointing for providers. Because any one provider may be paid by a multitude of different payors, alignment across arrangements is also important and can help providers focus their attention on key quality metrics, costs, and overall value. It is for this reason that it is important to align with other payors outside of Medicaid, like Medicare and commercial insurers.
As a result, DHS will continue to collect information about the types of VBP arrangements that are occurring between MCOs and providers. When a model has proven its success, the department will seek to require its use across MCOs, achieving better alignment. DHS will also explore with other agencies opportunities to align these arrangements with commercial insurers and Medicare. DHS has required certain models across payors, such as the Transitions to Community model in behavioral health, and the Maternity Care Bundle in physical health. The Roadmap will go into further depth, and how some of these aligned models move us closer to Whole Person Health services.