A new topic we’ve been monitoring in the debate over healthcare spending has been the alarming shift from traditional cost centers such as inpatient care, pharmaceuticals and administration to outpatient care.
While outpatient settings appear on the surface as more cost-effective alternatives, the limitations of the healthcare system to establish incentives limiting utilization negates any potential for cost savings. Arguments in support of and against the shift have merit and must be considered as outpatient care is among largest and fastest growing healthcare spending categories.
In an attempt to limit the cost drivers of overutilization and overuse, various initiatives to balance care costs, quality and efficiency have been introduced. The most likely transition that will occur over the next few years will be the continued build-out of a provider capitation system designed to limit cost and utilization yet maintain quality. As the outpatient market braces for this shift, all eyes are on a few of the more progressive models where cost savings and outcome improvement under a provider capitation model are being demonstrated.
Over the past ten years, CareMorehas established itself as among the most vertically integrated Medicare Advantage plans in the country. Through its network of employed physicians and outpatient primary clinic care centers, they are essentially “at risk” and therefore incentivized to efficiently deliver care – thus shifting the risk from health plans as in traditional network models. Through a system of care coordination spearheaded by individual care managers who monitor primary and follow up care, Caremore has been able to generate outcomes far superior and more profitable than traditional Medicare Advantage plans. CareMore has validated that the provider capitation model has potential to generate cost savings if operated effectively.
Perhaps the most comprehensive example of a system that has implemented a provider capitation model is the Department of Veterans Affairs (VA) health system through its network of Community-Based Outpatient Clinics (CBOCs). Over the past 20 years, the VA system has transitioned away from a pure hospital-based system to an ambulatory and primary care based model. In doing so, the VA has established CBOCs in order to improve care access and control spending by minimizing instances where non-acute conditions are treated in an ambulatory setting. Over the course of this transition, the VA has begun a process of soliciting outside groups to provide primary care to veterans in non-VA facilities on an individual capitated basis through the CBOC program. Valor Healthcare (Valor) has established itself as the leader in the contract CBOC market, both in terms of market share and clinical excellence. Much like CareMore, key to the success of Valor has been their provider incentive system. Valor employs a robust pay-for-performance system for its physicians based on evidence-based guidelines and clinical performance. This program has driven clinical outcomes that exceed the benchmarks established by the VA. In addition to performance incentives, Valor’s use of several innovative care approaches to increase patient engagement and adoption contributed to consistent utilization levels.
With cost continuing to be a key issue across the healthcare system, it is likely that payers will continue to experiment with new incentive models aimed to improve the distribution of care yet maintain quality. As this occurs, innovative care models like CareMore and Valor will serve as building blocks as we continue to refine our delivery approaches to more effectively balance care quality, efficiency, safety, and cost.