VBC Drivers Part 1
by Dr. Jon Hart
We’ve become very familiar with the revenue drivers in fee-for-service (FFS) healthcare delivery over the past 100 years. Find the highest priced visits, treatments, and procedures a doc can perform and run as many patients as possible through those visits, treatments, and procedures. Since reimbursement rates for medical services have been going down, net revenue increases have more recently been driven by adding new types of visits or procedures to a practice’s repertoire and constantly honing efficiencies in moving people from the front door, through the exam/treatment room, and back into the parking lot as quickly as possible.
Value-based care (VBC) takes an approach to revenue generation that is so different it can sometimes feel at odds with how we have been maintaining the machine of healthcare delivery. While volume of patients is still important (in a different way), simply moving widgets through the office becomes less of a priority. VBC is about longitudinal relationship, not episodic encounters. The work of healthcare extends beyond the walls and halls of the practice, not limited to only times a patient is on our turf. Attention gets paid to outcomes rather than output, so the work to be done changes.
In this 5-part series, I’d like to discuss the drivers of net revenue in value-based care (VBC) and make note of the areas where good VBC practices augment FFS workflows and processes, and vice versa. The tactics for financial success in VBC can be split into gross revenue drivers and medical expense drivers. Part 1 will look at the elements of gross revenue since that’s where most practices and organizations start … and, unfortunately, where most of them stop.
At least three determinants of gross revenue exist in the VBC world – attribution, risk adjustment coding, and activities-based bonuses.
Attribution is the process by which payers (Medicare, Medicaid, commercial insurers, etc.) determine how patients are assigned to a specific physician, and it represents the area of VBC where volume matters. Each payer has a different attribution formula, but the importance of this concept is the same throughout. Basically, attribution is determined by which physician is involved in the plurality of care – has had the most billed touches with a patient.
It is only when a patient (member) is attributed to a physician that the physician can get credit for the work done (or not done) for that member. Through the list of members attributed to a physician, all the aspects of VBC contracting play out.
Early in the VBC contracting process, the Pay-For-Quality or Pay-for-Performance metrics (discussed below) are measured by, and payments are made based on the members attributed to the physician. From a HEDIS perspective, those are the patients for which the practice is accountable to complete their breast cancer screening, control their diabetes, ensure medication adherence, and so on. The bonuses are based solely on what happened to the patients on the attribution list.
When the contracting matures to shared savings or expense risk, it is the medical costs of the attribution list that are contemplated in the math to determine if there was savings or loss compared to the benchmark set by the payer. For this reason, it’s good to have someone poring over the monthly attribution files sent by payers, so you can verify for which patients you, as the physician or practice, are accountable.
As noted, attribution is generally dictated by the plurality of care. See the patient more than other physicians do, and you’ll likely get attribution. Interestingly, Annual Wellness Visits (AWV) can also carry more weight in the attribution process than a typical 992- code for a regular office visit.
For traditional Medicare Advanced Payment Models (APM), like ACOs and Primary Care First, Voluntary Alignment is another way of ensuring attribution. Voluntary Alignment is a mechanism of attribution that uses a Medicare beneficiary’s selected primary care practitioner to attribute the beneficiary to a practice. This process can be done online with CMS performing an electronic retrieval of beneficiary selections, also known as attestations, and verifying the attested practitioner for applicable practitioner specialty type and active status on a traditional Medicare APM practitioner roster. Medicare beneficiaries must create an account on MyMedicare.gov and follow the instructions in the PCF voluntary alignment beneficiary fact sheet to complete this process.
Medicare Advantage plans are where the process can get murky. A practice needs to ask each payer for their attribution logic (good luck!) and work as best they can within that logic. The good thing is that it usually centers around AWV and plurality of care.
As mentioned above, the intersection with VBC in this instance is volume. All the efficiencies built to become a volume-driven machine are still helpful. A successful VBC practice will see its patients with chronic, fragile conditions more often than in FFS practices. Being proficient in workflows and processes will allow a practice to carry more members, increasing revenue opportunities.
The trick is concentrating on the work important to VBC (things needed to be done to optimize health and well-being) and have the team all work at the top of their licensure. Many practices and organizations stumble here because they don’t stop any of their other, non-value add processes. Instead of de-implementation of unnecessary workflows, more work is just heaped on top. This is a perfect recipe for cynicism, poor performance, and burnout, in other words, failure.
Each year, through an actuarial process, a payer estimates what it’s medical expenses will be based upon what they know of their population’s demographics, claims history, and known burden of illness. From there they set their rates in such a way as to make a positive margin after paying administrative and medical expenses.
Medicare goes through this same process, and it is through that (convoluted) process they determine the benchmark for what medical expenses will be for a beneficiary or a group of beneficiaries. This benchmark is the goal which practices try to beat (spend less than) in a Traditional Medicare APM to earn shared savings.
CMS calculates a similar benchmark when it determines the monthly premium it will pay to a Medicare Advantage plan to care for its cohort of Medicare beneficiaries. The plan, and any practice with whom they have a VBC risk contract, works to spend less than that benchmarked dollar amount for medical expenses. The amount left over accounts for either shared savings owed to, or the expense risk payment owed by practices.
There are numerous factors used in the calculation of the Medicare benchmark, including prior claims data, demographic data, dual eligibility with Medicaid, Disability, End-Stage Renal Disease, and others. An important, and influenceable component in the equation, though, is the accounting for the health risks of a population based on their documented burden of illness, the severity and case mix of the cohort.
To arrive at this risk adjustment factor, CMS relies on Hierarchical Condition Category (HCC) risk scores derived from claims and documentation. The assumption is that an average person of a particular age, gender, and geography would have a relative risk of 1.0. Diagnoses and conditions that increase one’s burden of illness beyond the average would add to that number – factors of risk. This risk is determined using categories of conditions, the HCC codes, which are fed from almost 10,000 different ICD codes. (Lots of good HCC mapping tables are available online through your favorite search engine.)
The conditions that feed the HCC codes represent both costly chronic health conditions, and some severe acute conditions. Commonly used HCC categories include major depressive and bipolar disorders, asthma and pulmonary disease, diabetes, specified heart arrhythmias, congestive heart failure, breast and prostate cancer, and rheumatoid arthritis.
Not only does a physician need to document and submit a claim for a medical condition to get HCC credit, it’s important that the specificity of illness is as accurate and detailed as possible.
For example, let’s look at a patient with diabetes complicated by retinal and kidney disease. If the clinician fails to document and bill for diabetes, the addition to the risk score is zero. If the documentation and claim show diabetes with no complications, HCC code 19, 0.105 is added to the risk factor. Should this get documented and coded as diabetes with chronic complications, HCC 18, the risk score increases by 0.302. If the patient has Stage 4 chronic kidney disease and the coding is for diabetes with chronic complications HCC 18 and HCC 137, Chronic Kidney Disease Stage 4, the risk score increases by 0.302 + 0.289, or 0.591.
I’ve heard experts in the field say that the Medicare per member per month (pmpm) benchmark increases between $6 and $9 for every 0.01 (basis point) increase in the risk score. With the above example, the change in the benchmark or payment based on precise documentation of the patient’s conditions is an additional $355 to $540 monthly or between $4,260 and $6,480 annually. By comparison, there would be no change in benchmark for forgetting to document diabetes at all, +$63 monthly for getting diabetes on the books, or $181 for diabetes with some level of complication.
When you have 5,000 members under that VBC contract, leaving even an average of $100 pmpm (risk adjustment of 0.11 to 0.16) on the table from poor risk coding means a loss of potential revenue of about $6 million. The ability to document with greater precision can dramatically impact payment amounts. Obviously, that’s why most organizations start here when transitioning to VBC and why commercial payers running MA plans are so interested in accurate and precise risk coding.
Important (and irritating) point: All conditions that add to a patient’s burden of illness must be documented in the EHR and on a claim (recaptured) every year to count for that year. The system works as if that patient who had Diabetes with Complications in 2022 is suddenly cured and no longer diabetic in 2023, at least until a substantiated claim is submitted.
In the spectrum of VBC contracting there are opportunities to receive revenue in the form of bonuses for activities and outcomes that impact quality and medical expense, without actually taking risk or enjoying the opportunity of shared savings.
The first of these is the Medicare Annual Wellness Visit (AWV). The AWV is a benefit of Medicare allowing a patient to see their physician or provider on a yearly basis to update their medical history, assess their overall health, ensure the medicine list is correct, and address any screenings or preventative measures they may need. Completion of AWVs can be incentivized by payers with bonuses paid for completion individually or once a certain percentage is reached in the attributed member panel.
An AWV can be both a revenue generator, paid at a higher rate than a typical office visit, and the Swiss Army Knife of VBC. It give the opportunity to appropriately capture and recapture a person’s burden of illness for risk adjustment, address open HEDIS measures for prevention and screening (see HEDIS ,below), perform a reconciliation of a patient’s medications to avoid confusion and possible adverse reactions, and assess any actionable needs a patient may have in the management of their chronic conditions (care management programming is discussed in Part 2). It can serve as a driver of attribution, as noted above.
Therefore, it attends to both the gross revenue and medical expense drivers in VBC and will be discussed again in Part 2.
The AWV intersection point for FFS and VBC is significant when looking at changing your practice style to value-based care. The visit is generously paid and generates RVUs, increasing billed revenue and measures of production. A well-done AWV also drives revenue from the other activities-based bonuses discussed below. For that reason, it’s a great place to start for a practice new to the VBC world, aiding in making the transition.
Another bonus opportunity in VBC contracting is in addressing HEDIS Measures, so-called Pay-for-Quality. Healthcare Effectiveness Data and Information Set (HEDIS) is a list of over 90 measures designed to help assess quality in the delivery of healthcare services. These were originally created in the 1990’s as measures of quality for HMOs (Health Maintenance Organizations). They now sit under the control of the National Committee for Quality Assurance (NCQA). Check out all the measures at https://www.ncqa.org/hedis/measures/.
The concept is that fulfillment of HEDIS Measures contribute to better outcomes for patients and improved quality of care. The most common measures involved in contracting for a Medicare population include colorectal cancer screening, breast cancer screening, depression screening, Care of Older Adults, controlling high blood pressure, Hemoglobin A1c control for patients with diabetes, retinal and kidney evaluations in patients with diabetes, and adherence to medications to treat diabetes and preventative treatment using lipid-lowering drugs.
There is debate about whether these measures truly assess quality or not. There is no debate, though, that Medicare Advantage Plans and Medicaid Managed Care Plans put a lot of stock in meeting these measures. The main reason Medicare Advantage payers track these is that HEDIS measures play a significant role in the Star ratings CMS applies to health plans. Because of their impact to plan revenue, meeting goals in closing HEDIS measures is often incentivized via bonuses for simple completion or completion at a certain rate based on one’s attribution of members.
The third general category of activities-based payments is pay-for-performance. This VBC contracting concept is designed to pay a practice a bonus, usually on a pmpm basis according to attribution, for meeting certain Cost and Use metrics that are components of the Total Cost of Medical Care. These metrics represent events or outcomes that are associated with improved or worsened medical expense.
The most common measures used are Emergency visits per 1,000 members (ED/K), Inpatient stays per 1,000 members (IP/K), and Readmission Rate (ReAd Rate), specifically the percent of patients discharged from the hospital who end up back in the hospital before 7, 30, or 90 days have passed. A payer will offer an incentive to the practice if they can keep ED visits and inpatient admission at or below a certain threshold and avoid quick readmissions to the hospital. Doing so decreases medical expense yielding more margin below the benchmark. (Oh, and it also makes for healthier, happier patients!)
The concepts of decreasing acute care visits, admissions, and readmissions will be discussed again in Part 2 as we explore the drivers of medical expense and how to address them.
Read more articles from our VBC Drivers series
