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���������� Note: Below is an article that thoroughly reviews the complexities of moving toward a system that rewards positive health care outcomes and creates disincentives for poor care. Though the state legislature limited the ability of the Department of Health in this year to formulate specific methodologies in how to achieve these types of payments, it is clear that limiting regulation and consistency between projects toward payment reform may result in providers having to meet a broad set of expectations depending on which payer’s needs they are trying to satisfy. Passing down risk to small providers will take time and confidence within the system; if providers with limited capital try to move too quickly toward payment reform, they could be penalized heavily and not have sufficient reserves to recoup lost assets. Finding this balance is the responsibility of state policymakers and stakeholders, and will include figuring out the complexities of how all stakeholders communicate and how social determinants like housing, criminal justice, and cultural competence are addressed in understanding “value”. These issues and more are being worked out by the value-based payment workgroup on which ���������� sits, and will include sub-groups of experts that can identify meaningful ways forward. To learn more about the work of that group as we undertake this five-year long adventure, visit the workgroup website .

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Capital ����������; Dan Goldberg, 5/4/2015

New York State health officials are embracing a national move to value-based payment—the idea that doctors, hospitals, nursing homes and other providers should be compensated for the “value” of the care they provide, rather than the volume of services they render.

The movement is based on the uncontroversial idea that the current fee-for-service system is broken: that providers are constantly being incentivized to provide ever larger amounts of care, and they are being penalized for providing better care that keeps patients from repeatedly interacting with the health system.

“We feel strongly the current system of health care financing is no longer morally defensible,” said state Medicaid director Jason Helgerson during a Senate committee hearing held last month. “There are far too many communities across this state who rely on the fact the people are sicker than they should be in order for their health care providers to financially survive.”

But while there is broad agreement that the current system needs to change, and that paying for value makes sense, there is no broad agreement as to what “value” means, how it will be measured or how it will be audited.

Some of the state’s leading health care actors feel they’re racing toward a goal they don’t quite understand.

“People keep talking about how we’re going to get there,” said Stephen Berger, chairman and founder of Odyssey Investment Partners, L.L.C., a private equity firm, and chairman of the ���������� State Commission on Health Care Facilities in the 21st Century. “I don’t know where ‘there’ is. And I think there is not one ‘there.’ There is a lot of ‘theres,’ and I’m concerned that a great deal of what we are counting on depends upon being able to have some more clear discussable, understandable definitions of things like quality.”

“Things are moving at phenomenal speed,” he said, during a speech last week at the New York Academy of Medicine. “I’m not sure there are that many of us who can see around the corner let alone five years down the road.”

That five-year road is paved with a series of experiments the state’s Medicaid program is helping to administer, the largest of which is the Delivery System Reform Incentive Payment (DSRIP) program, the $6.4 billion transformation of ����������’s Medicaid delivery system, which is meant to reduce by 25 percent the number of avoidable hospitalizations over the next five years.

It’s an enormous undertaking: Medicaid, the insurance program for low-income residents, is used by one in three ����������ers, one in four families and 44 percent of children. A report from the Catalyst for Payment Reform, an independent nonprofit, showed that already one-third of Medicaid dollars are flowing through some sort of value-based payment arrangement.

“That is a great start,” Helgerson told Capital in an email. “We have heard from a number of providers who want to do even more.”

And the state is clearly pushing providers in that direction.

The Value Based Roadmap, which outlines how this transformation will occur, will push, Helgerson said, and “Medicaid will focus mostly on carrots but we will use sticks if necessary.”

Helgerson wants between 80 and 90 percent of Medicaid payments to flow through a value-based arrangement by the end of the five-year period because he believes this model will reduce costs while improving care. Further, he says, it will create a more sustainable health system in communities that need it most—low-income neighborhoods in which residents are likelier than in other neighborhoods to suffer from chronic conditions. They will be better taken care of if providers are rewarded for keeping them out of the hospital.

Berger said the idea is worth trying, but that there’s no way of knowing whether it will work.��

“I see no evidence that that will produce the kinds of dollars we need to support the safety-net network and the delivery of care to all the people we want to deliver it to at a higher level of quality,” he said. “That, at the moment, is more an issue of belief and hope than something I can see analytically.”

Yet Berger is also sure that this is necessary because so much of the health care system, he says, is failing the people who need it most.

“We have to take these chances and this is the way to go, but this is a series of high-wire acts and many of the acrobats have never been off the ground in their lives,” he said.

The state’s Department of Financial Services����of using its regulatory authority to force insurers into value-based payment arrangements, essentially limiting the amount insurers can charge for a fee-for-service model.

Governor Andrew Cuomo’s executive budget would have given the state health department broad authority to negotiate how a “value based payment” methodology would work, but that language was removed by Legislature.

It’s fairly clear how costs can be reduced in the Medicaid system. After years of unchecked growth, ����������’s program has reduced the rate of increase in part by simply paying less for certain services, instituting a global cap, and pushing patients into managed care providers.

What is less clear is whether these new payment models encourage better health outcomes.

“Hard to say [you’re] not for ‘value-based payments’—it’s like motherhood and apple pie,” said Valerie Grey, executive vice president of policy for Healthcare Association of ���������� State. “The challenge is about being thoughtful in how you get there. We don’t want to lose sight that some of the value-based arrangements are still largely experiments. I don’t know if they are really proven. There are mixed results.”

The Medicare shared-savings program, for example, has had mixed financial performance and varied in care quality, according to��.

����������’s Medicare Accountable Care Organizations��one year in to the program, with nine of sixteen participants reporting a total of $103 million in savings, and the rest reporting losses totaling $49.5 million on the program, according to two reports from the United Hospital Fund.

Patient satisfaction scores are now tied to reimbursements, a form of value. That’s led to an increase focus on hospitality, food quality and décor, without much evidence yet that it’s improved health outcomes.

��found that “satisfied patients are more adherent to physician recommendations and more loyal to physicians, but research suggests a tenuous link between patient satisfaction and health care quality and outcomes.”

��found antibiotic prescriptions are associated with increased overall patient satisfaction for patients with a urinary tract infection, even though quality performance measures emphasize nonantibiotic treatment.

On the positive side, there are plenty of real-world examples in which value-based payments appear to have lowered costs while improving quality. Late last month, Anthem, the nation’s second-largest insurer,����its year-old program that gave doctors more money if they lowered the cost of patients’ care and met quality requirements showed a 3.3 percent drop in overall costs, and drops in hospital admissions, outpatient surgery and emergency-room spending.

The federal government is embracing value as well.

Sylvia Mathews-Burwell, President Obama’s health secretary, came to Montefiore in March to tout value-based payment models, saying it was necessary to rein in government spending without sacrificing quality.

She repeated her call,����in late January, of tying 30 percent of traditional, or fee-for-service, Medicare payments to quality or value through alternative payment models, such as Accountable Care Organizations or bundled payment arrangements by the end of 2016, and tying 50 percent of payments to these models by the end of 2018.

But even in their shared enthusiasm for the model, there are differences in how to define the very term everyone is so enthusiastic about. In Medicare, a pay-for-performance incentive counts as a value-based payment. In ����������’s Medicaid program, it doesn’t.

Standardizing metrics across the many insurance plans, provider groups and communities throughout ���������� State could prove a tremendous challenge.

There has to be agreement on when the base year is, what benchmarks will be used to measure quality, what to do with outliers, how to attribute patients, what services should be covered, and whether there should be a floor or a cap on the dollars providers put at risk.

“It’s very difficult for providers to deal with 20 or 30 different insurers that are all measuring different things and looking at different things,” said Kathy Shure, a senior vice president at the Greater ���������� Hospital Association. “It’s hard to really incent something when you have so many different types of performance measurements out there.”

Dr. Neil Calman, president and C.E.O. of the Institute for Family Health,��, in an interview with the ���������� State Health Foundation, just how cumbersome this can become.

“One plan rewards our proficiency at maintaining diabetes composite scoring (including blood sugar levels, lipid levels, eye exams, and nephropathy screening) but does not give us credit for improvement in some measures if we have not improved in all of them, while another is more interested in increasing the nonuser rate for patients who have not been seen for 12 months or more,” he wrote. “Working to achieve these disparate goals is not helping us to achieve better outcomes … the danger is that a multiplicity of performance standards means that there are no real incentives. And these standards may not reflect how providers can better care for patients.”��

There is also concern over what the effect will be of these changes on safety-net hospitals where health outcomes are often well beyond the provider’s control.��Montefiore, for example, is presented by advocates of payment reform as a model of value-based payments. Its care management team, working in one of poorest and least healthy counties in the United States, is lauded for its effort to keep patients out of the hospital. But Montefiore has tremendous resources, and has more than two decades’ worth of trial and error under its belt. Its administration doesn’t hide from the fact that it made many mistakes along the way.

The state is now asking several far more financially fragile health systems to do in five years what took Montefiore two decades to accomplish.

“Moving to Value Based Payment along the timelines [suggested by the state] while incredibly ambitious is aspirational,” said Sean Doolan, chair of Hinnman Straub’s government relations department, during the Senate hearing.

And even if DSRIP is successful, it remains an open question whether the performing provider systems can, or will, hold together after there are no longer billions in incentives being dangled in front of them, and if they don’t, whether value-based payments work without that level of collaboration and coordination.

“I’m concerned about that,” Berger said. “Because I’m an old fart. And when you get to be an old fart you get concerned about how easy and how hard it is for people to change their behavior.”

Behavior changes aren’t just a must for providers. State health officials understand that for value-based payment models to work, they need to incentivize patients into taking ownership of their own health: to eat well, to exercise and to take their medications, a daunting proposition when it comes to six million of the state’s lowest income residents. This is a patient population that often sees the emergency room as its first line of defense, for reasons ranging from ease of access to cultural norms.

“It’s important to note, that Value Based Payment isn’t sufficient to address all the underlying causes of poor health,” Helgerson wrote, in the email to Capital. “A broader public health strategy is needed.�� We expect the Performing Provider Systems [which are running DSRIP’s programs] to pursue both better public health and better health care efficiency.”

To influence these patients, the state is proposing joint weight reduction programs, smoking cessation and programs to teach healthy and affordable cooking habits, though so-called wellness programs��when tried with healthy, insured and less financially stressed populations.

The state’s��recognizes the concern providers have that the goalposts will always be in flux. If you achieve savings in the first year, what’s to stop the insurers from simply offering less during the next contract or asking providers to save more?

There is also concern over how the state, which is funding much of this transformation with a variety of federal grants, will audit providers to know whether the money was appropriately spent.

It’s easy, said Jeffrey Thrope, a health care attorney at Foley & Lardner, to audit in a fee for service world—just check to see if the service was provided.

“If you’re in a value-based arrangement where the provider provides less care for the same amount of money, what does an auditor say,” Thrope said during the Senate hearing.

And if fee-for-service encourages too much medicine, could capitated payments, whereby providers receive a set fee per patient per year, result in too little medicine?

That’s what happened a generation ago when managed care companies tried to reduce costs by restricting services, said Anthony Shih, executive vice president at the ���������� Academy of Medicine.

Policy makers hope this change will be different because there is better quality measurement science, better tools for care management such as health information technology and providers are more directly responsible for managing risk.

But the issue of risk could prove the most divisive. Risk means providers—doctors and hospitals—would receive less money if they provided poor care, or be on the hook to treat patients without getting additional compensation. Insurance companies want to see this happen, as does the state, because they feel providers need both carrot and stick to change their practices.

“Health plans want to see risk payment proceed,” Paul Macielak, president and C.E.O. of the ���������� Health Plan Association, which represents insurers, said during a ���������� State Health Foundation forum last week.

“Shared savings, pay for performance, things along those lines are just steps on a spectrum toward an ultimate goal, from a plan perspective, of providers having skin in the game in terms of performance,” he said. “It’s probably the main chasm between providers and plans getting together on deals.”

Providers, obviously, are less inclined to take on any risk, and prefer relationships where they share savings or receive performance incentives. They worry there are too many outside factors that can cause ill health—not least of which is patients not following a doctor’s directions.

Providers have already taken plenty of risk, investing in new technologies and preparing for the delivery reforms the state says are necessary, Calman said, during the same forum.

“The plans are in the business of taking risk,” he said. “If they’re not going to take risk, they might as well not be a health plan. If they pass the risk on to somebody else, we don’t really need them as middle people. The risk we [providers] take has been in the redevelopment of our entire delivery systems, care management, IT. … When people come to us and say we want you to take financial risk, what I say is we have been … for the last two years. You [insurers] take the financial risk on the insurance side. That’s why you get paid the big bucks.”

Providers are also concerned they won’t have enough scale. If doctors are supposed to act like insurers, they need large patient populations—most of whom are well, and in age groups likely to remain well—to mitigate the risk of one or two patients overwhelming their costs. That’s no problem for large health systems such as Montefiore or North Shore-L.I.J., but it may be impossible for smaller providers in more rural parts of the state.

“Size and scope does matter,” Grey said. “You need to have scale in order to do it successfully. … When you look throughout the entire state, there are some areas where you really need to think about whether scale is there to do some of this successfully.”

Even provider groups that have lots of patients often have those patients spread across multiple plans, meaning their scale is somewhat diminished in any one plan. The size and reach of each provider group will influence how much risk they are able to take on and what types of alternative payments work.

Helgerson believes value-based arrangements can work even in the least populated parts of the state.

“In some ways it can be less complex because there are fewer providers and insurers,” he wrote. ” In addition, all the parties are able to meet around one table to discuss common patients.”

The state is loath to compel arrangements or contracts between provider and payer, certain that one size does not fit all.

Which means lots of trial and error over the next five years.

“We are not running a single experiment,” Berger said. “It would be a little scary if it was one program. We are implementing at least 25 programs in different communities around the state … We have different goals in different places and that is probably the right way to do it because there are different needs in different communities but we’re talking about an incredible amount of juggling and changing going on, much more than anybody has ever undertaken.”

“We have to understand how much chaos we are going to be creating to get to some place better,” he said.