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Value-based or Fee-For-Service Connected Health Reimbursement: Which Canoe Should We Put Our Feet In?

April 17, 2018

About 10 years ago, I and many others, started talking about how care delivery enabled by connected health should be an ideal strategy in the world of value-based (VB) reimbursement. To date, there have been just a few instances where this has come to pass. Most relevant is Kaiser Permanente, where > 50% of patient interactions are virtual.  Unfortunately, there are few other examples of organizations that have invested heavily in connected health and state publicly that it represents a strategy for success in a value-based world.

Image courtesy of National Telehealth Policy Resource Center

By contrast, in the past decade, there has been significant progress in payer reimbursement for telehealth as a service (fee-for-service [FFS] payments).  For example, 48 states now have Medicaid requirements for telehealth reimbursement (10 years ago it was about 25); 21 states have requirements for remote monitoring reimbursements; and 15 for store-and-forward telemedicine reimbursement.  Currently, 33 states have parity laws that mandate private payer reimbursement for telemedicine services.  This clearly reflects the growing mainstream adoption of connected health.  The ongoing work of the American Medical Association’s Digital Medicine Payment Advisory Group (DMPAG – which I have the privilege to co-chair) is also an important force in creating CPT codes which will enable even more fee-for-service payment activity.

For healthcare provider organizations experimenting with value-based payment scenarios (ACOs, bundles and various risk arrangements with local health plans), doing business in the last several years has been described as having “a foot in two canoes.”  The tools you use to optimize reimbursement in the two worlds (FFS and VB) are sometimes diametrically opposed.  As we look at the trends in connected health adoption, is it time to think in terms of FFS-driven business plans and declare which canoe we should put our feet in?

Before I disclose my opinion, it is worth looking at how value-based programs have been implemented, to see if there are any clues as to why connected health has not been the savior as I thought it would be.  I’ll try not to over-complicate this part, as there are multiple value-based models and they get pretty complicated pretty quick.

Medicare ACOs are based largely on a shared savings model.  For the population that Medicare defines as ours, providers get paid through the usual Medicare financial channels (i.e., fee-for-service billings), and try to manage various costs in such a way that we meet savings targets on a yearly basis.  Given that the basic transactional model hasn’t changed, it is probably not surprising that care delivery at the ground level has not changed that much.  If I am a doctor seeing Medicare patients, I still get paid for office visits and procedures.  It’s the job of the delivery system I work for to manage those costs and contain patient interactions so I don’t incur unnecessary costs by billing for services I perform.

With the exception of full capitation (after our experiments with this in the mid ‘90s, no provider has any stomach for this model), all value-based models are variations on this theme.  As a result, there is much hand waiving about providers getting paid for ‘outcomes and quality’ and, at the system, level we are.  But those individuals who are doing the work, day in and day out, are being paid for services rendered just like they used to.

There are many other nuances to talk about regarding value-based reimbursement strategies, but this is the fundamental reason that connected health has not become more of a critical component to success in these VB programs.  Whatever the payment model at the top of the food chain, if a provider can’t get paid for a service rendered, it is predictable that she won’t provide that service.

This realization hit me a year or two ago and I decided to put more personal energy into creating opportunities for ‘ground-level’ providers to adopt connected health. It was right after that that the AMA graciously asked if I would be willing to help with their DMPAG. It was a perfect fit for how my thinking was evolving.

I am not trying to make the case that value-based payments will go away. On the contrary, they are here to stay.  I am just as bullish on connected health as a strategy for success in the VB world as I was 10 years ago.  Our own examples of success at Partners HealthCare — such as using home monitoring to manage readmissions in patients with congestive heart failure, and to streamline management of patients with hypertension — are proof that connected health can provide value in these settings.

However, until we change how those providing care record that they provided a service and thus derive their income, we can’t expect providers to happily embrace connected health as a strategy, whatever the system-level incentives.

Another lens to view this through is the use of connected health in care delivery.  One of the fastest-growing segments is video-based, virtual visits.  This tool improves patient access but has minimal impact on efficiency of care delivery. Thus, the future of virtual visits, in the context of value-based programs, is not clear.  By  contrast, asynchronous telehealth (direct e-visits with patients and e-consults between providers) provides an opportunity for both efficiency and improved resource utilization.  As a dermatologist, if I am asked to review a short history and a couple of images generated by one of my primary care colleagues, in many cases, I can help that individual care for the patient without the patient seeing me.  The differential for what I get paid for the e-consult, versus an in-office visit, is significant and helps the organization with its top line resource management.

The case for remote monitoring is even stronger in this context.  One nurse in a call center can manage (by exception) 100 or so patients with congestive heart failure.  This is where efficiency really kicks in.

So, putting feet in the fee-for-service canoe makes sense for now. It is the only way to insure provider adoption.  However, we must keep in mind the big picture of how we fit into value-based arrangements.

What are your views?

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