🔒Hospitals, insurers eye value-based care deals to cut costs, improve patient outcomes

Trinity Health Of New England in January announced a new contract agreement with Anthem Blue Cross and Blue Shield that prominently mentioned an increasingly common payment model for modern health care.

The organizations said they will collaborate on “value-based care models,” with the intent to both improve health outcomes and better control costs for Trinity Health patients who are covered by Anthem health plans.

Value-based care has been a much-talked about goal for the healthcare industry, and efforts to adopt it could have a significant impact on patients as well as employers that underwrite health insurance — typically at a significant and increasing cost — for their workers.

At its roots, value-based care aims to move away from the traditional fee-for-service model, and instead pay providers, including physicians and hospitals, based on the health outcomes of their patients and quality of care.

It represents a major potential shift in the industry’s economics, and has led to increasingly tough contract negotiations between insurers and providers, particularly hospitals, as both sides remain skittish about how to balance the financial risks.

Quality vs. quantity

Jeffrey Hogan, president of Upside Health Advisors in Farmington, is a healthcare consultant and promoter of value-based health care, which he said focuses on the quality of care patients receive.

That’s in contrast to the fee-for-service system — “what some might call a ‘sick’ system,” Hogan said — that is based on getting paid for treating as many patients as possible.

Under that system, there is little to no coordination of care. Patients “can go wherever they want, whenever they want. It’s fragmented care,” he said. “It’s not clinically integrated and coordinated. You may be going to five different doctors, and four of them don’t know that you’re going to different practitioners.”

Because of that, he added, it’s difficult to control costs.

Proof of those inefficiencies is reflected in the increased costs employers and the nation face on an annual basis for healthcare services.

U.S. healthcare spending grew 4.1% in 2022, reaching $4.5 trillion, which represented 17.3% of the nation’s gross domestic product, according to the Centers for Medicare & Medicaid Services.

On the other hand, value-based health care uses primary care physicians as “the tip of the spear” to manage each patient’s care, Hogan said.

Several advanced primary care organizations have moved into the state in recent years, seeing opportunities to improve upon Connecticut’s fragmented healthcare system that leads to “huge variation in cost and quality between and among” providers, Hogan said.

New entrants have included Walgreens-backed VillageMD, which last year acquired Starling Physicians, a 30-location medical group in central Connecticut; and Virginia-based Privia Health, which last year announced a partnership with New Haven-based Community Medical Group to launch Privia Quality Network of Connecticut, which consists of 1,100 multi-specialty providers, including 430 primary care providers.

“These primary care organizations are basically quarterbacks coordinating the total cost of care, and that includes coordinating care with specialists and ambulatory surgical centers — any of the things a patient might be involved with,” Hogan said.

The intent is “to optimize access to appropriate care and to create appropriate outcomes that are predictable,” he added.

‘Big change in the market’

Predictability is one reason for the growing popularity of the value-based care model, especially for employers that provide health insurance plans for their workers.

According to Hogan, finding affordable, predictable health care took on new meaning for employers in 2021, when Congress approved the Consolidated Appropriations Act.

The act, in part, imposed “huge new requirements” on any employer that sponsors a health plan, he said.

Under the new federal rules, employers have a fiduciary responsibility to provide health care, similar to the one imposed on companies providing retirement plans.

Employers that buy or self-fund employee health plans “must evaluate the cost of those services in the contract for the appropriateness to the needs of the people in your group,” Hogan said.

The new rules caused “a big, big change in the marketplace,” he said. “You must know what the cost is. You must know what you should be paying, and what you could be paying.”

That kind of predictability can be especially difficult in a fee-for-service system, whereas a value-based care contract allows employers “to contract with a health system to create predictability around the cost and the quality of care,” Hogan said.

Fragmented care

Controlling the cost of care isn’t easy in Connecticut.

Last year, Gov. Ned Lamont released the state’s first-ever healthcare spending benchmark report, which concluded that healthcare costs in the state increased by 6% between 2020 and 2021.

That topped Connecticut’s 3.4% growth benchmark.

Hogan said part of the reason for high healthcare costs in Connecticut is the lack of investment in primary care. He referenced data from the Primary Care Collaborative, a not-for-profit organization that promotes patient-centered primary care.

The collaborative published a study several years ago looking at primary care investment in all 50 states, and ranked Connecticut last in the nation. It also concluded that increased primary care spending leads to fewer emergency department visits and total hospitalizations, which are major cost drivers.

Part of the problem in Connecticut, Hogan said, is that many patients prefer to see specialists first, before a primary care doctor, which leads to fragmented care and higher costs.

“Your knee hurts, you go to the orthopedic surgeon. Your heart’s palpitating, you got to the cardiologist,” Hogan said.

Rewarding better outcomes

Trinity Health Of New England — which operates several Connecticut hospitals, including St. Francis in Hartford and Johnson Memorial in Stafford — and Anthem declined to share terms of their new contract.

But they did describe their efforts to adopt value-based care models.

Emily Brower, senior vice president for clinical integration and physician services at Trinity Health Of New England, said the value-based care model relies on bringing services closer to patients to improve access.

Trinity Health has done that, Brower said, by opening new ambulatory care centers in the state and investing in telemedicine.

Value-based care also puts more emphasis on the prevention and management of chronic health conditions, which can be major drivers of emergency room visits and hospital stays, she said.

“If we reduce the need for higher-cost emergent care, we actually return that savings … to our providers,” Brower said, in describing how a value-based care model works. “If we’re able to reduce the need for care, or deliver that care in a less-costly setting, then some of that savings returns to us. It’s shared between us and the payer.”

Wendy Polsinelli, Anthem’s regional vice president of healthcare networks in Connecticut, said hospitals and health systems have grown more open to value-based care models since the COVID-19 pandemic.

“I think at a high level, it’s really rewarding (hospitals) for keeping people healthier versus paying for appointment after appointment,” Polsinelli said.

Anthem’s value-based care program is called Enhanced Personal Health Care, or EPHC.

According to Polsinelli, the EPHC program has contracts in Connecticut with 14 accountable care organizations that represent 3,500 primary care physicians. Combined, those physicians treat more than 400,000 patients, she said.

She also stressed the important role primary care physicians play in value-based care programs.

“Our value-based care models really look to reward doctors and other providers for care coordination,” she said. “Primary care is one of the best places to start because we can really see the benefits of value-based care arrangements.”