Value-Based Care News Digest - January 2019 Edition

Every month, Evolent Health rounds up some of the latest value-based care news from the previous month spanning policy, research, innovations, payers and providers. 

2018 Year-End Review

1. Rhetoric turned to action as Washington accelerated the move to value, but the administration has unfinished business on its other priorities.
   • For example, the Centers for Medicare and Medicaid Services (CMS) reduced the length of time Medicare Shared Savings Program (MSSP) ACOs can "squat" in upside-only risk arrangements. CMS also launched a new voluntary payment model called Bundled Payments for Care Improvement Advanced, which is focused on managing the cost of episodes.
   • Progress was more elusive on reducing drug prices, alleviating the opioid epidemic and other priorities.
   • Takeaway: While the politics of health care continue to create noise, the long-term move to value remains undiminished.
2. Medicare Advantage (MA) continued to be a hot spot in 2018, with players raising significant capital and expanding into new regions.
   • The market has spoken: After many years in which it was unclear which lines of business and models would prevail in value-based care, 2018 revealed a high degree of investment capital in two areas—both related to full-risk Medicare Advantage. 
     • On the provider side, physicians, payers and investors are seeing outsized value created and captured by full-risk, high-touch, full MA panels built by independent physicians.
     • Investors are also projecting ample growth for MA payer start-ups, buoyed by favorable demographic and reimbursement trends. 
   • Additional capital is flowing to innovative provider models in other government programs, such as Medicaid/Duals and Program of All-Inclusive Care for the Elderly, as well as consumer-centric commercial models. However, the appetite for de novo health plans in the Medicaid or fully insured commercial space has been nearly non-existent.
   • Takeaway: Medicare Advantage primary care will likely continue to be hot in 2019 as players form new payer and provider partnerships and use the funding raised this year to expand geographically.

3. After last year's horizontal mergers were blocked, payers used vertical integration to grow.
   • UnitedHealthcare continues to be extremely aggressive in acquiring multiple segments of the health care value chain (except acute care), which is causing ripple effects across the payer industry. As a result, we saw multiple permutations of a theme in 2018:
     • With Optum acquiring risk-bearing physicians—who are mainly concentrated in MA, Humana's bread and butter—Humana created its Conviva entity to partner with independent physicians. Humana also moved to control parts of the value chain that support its MA book, namely home health. 
     • Anthem is also following a strategy similar to Optum's by creating a diversified business unit, including solutions for specialty care, pharmacy benefit management and end-of life-care services. 
   • Insurance + Pharmacy was also a big trend in 2018: Cigna/Express Scripts and CVS/Aetna as well as Humana/Walgreens showed us variations of payers building proprietary pharmacy and retail capabilities.
   • Takeaway: Payer development of proprietary network capabilities, broadly defined, with the aim of taking volume out of acute care is not good news for hospitals. Hospitals' fee-for-service livelihood will depend on maintaining local market power, further fueling their need to merge or adapt to value.

4. Tech giants made their bets in the health care industry clearer, but it is still too early to predict the impact of their potential disruption.
   • ​​Amazon made some of the biggest waves in health care news:
     • Amazon, Berkshire Hathaway and J.P. Morgan formed a new venture that will initially focus on providing efficient health care for their U.S. employees.
     • Amazon then announced that it will pilot clinics for select Seattle-based employees in 2019 before expanding more broadly.
     • Amazon also acquired PillPack, enabling it to move into the prescription drug business, since PillPack is licensed to ship prescriptions in 49 states.
   • Apple is also dabbling in care delivery. It opted to build, rather than acquire or partner, its own employee clinics via a subsidiary called AC Wellness. Apple also made a splash with a new watch that can detect cardiac arrhythmias.
   • Takeaway: Early signs suggest that tech giants seek to disrupt the industry by leveraging their technology expertise and potentially blending in aspects of care delivery.

December 2018 in Review

Industry Spotlight

Each month, we highlight new or novel steps being taken toward value-based care.

1. OhioHealth is partnering with ChenMed to build three primary care medical centers for seniors in underserved areas of Columbus, Ohio. The new centers will largely serve patients with Medicare Advantage plans or Medicare-Medicaid plans, and they will operate on a value-based care model rather than a fee-for-service model. The offices are expected to open in fall 2019 and serve up to 8,000 patients, but the goal is to eventually add more centers to reach about 20,000 patients and a total investment of more than $200 million.
2. Seven health systems joined the Medicaid Transformation Project, which now includes 24 health systems operating in 25 states. The project, launched by former CMS Acting Administrator Andy Slavitt and AVIA earlier this year, aims to share information and best practices among health systems to improve outcomes for vulnerable populations on Medicaid. The seven new health systems to join are BayCare Health System in Clearwater, Fla., Boston Medical Center in Boston, Mass., Cedars-Sinai in Los Angeles, Calif., Carilion Clinic in Roanoke, Va., Children's Hospital Colorado in Aurora, Colo., Jefferson Health in Philadelphia, Pa., and University Hospitals in Cleveland, Ohio.
3. Catalyst Health Network and UnitedHealthcare's ACO has improved the number of annual preventive screenings year over year for cervical cancer, breast cancer and colorectal cancer. It has also lowered health care costs in North Texas by more than $28 million in the last two years for more than 78,000 UnitedHealthcare plan participants. The accountable care relationship was established in 2015 for members enrolled in UnitedHealthcare employer-sponsored and individual health plans and has grown to include more than 500 care providers across North Texas.
4. Walgreens and FedEx are expanding their relationship to launch next-day prescription delivery nationwide. The relationship builds on a partnership Walgreens announced last year with FedEx to provide access to FedEx "drop off and pickup services" at more than 7,000 drugstores across the country. CVS Health has been rolling out home delivery as well, having announced same-day service in several cities last summer.

Government, Regulatory & Industry Pulse

CMS

1. Next Generation ACO performance is trending upward, according to results released by CMS for 2017.
   • The results reveal Medicare savings of more than $164 million across 44 ACOs and strong performance on quality metrics. About 73 percent of all Next Gens received bonuses for 2017, compared with 61 percent (11 of 18) in 2016.
   • The ACOs earned $3.3 million on average for controlling costs and meeting quality targets.
   • Evolent’s cohort of Next Generation ACO partners generated more than $35 million in shared savings for Medicare in 2017. This includes greater than $16 million generated by Deaconess Care Integration, ranking it as the second-best performing Next Gen in terms of earned shared savings.
2. CMS issued a final rule that largely encourages MSSP ACOs to take on greater risk.
   • The redesigned program, called "Pathways to Success," gives ACOs two participation options: basic and enhanced. The basic track allows ACOs to participate in an upside-only agreement for one to two years before gradually phasing in higher levels of risk. Before this rule, MSSP ACOs had been permitted to participate in the upside-only track for up to six years.
   • The shared savings rate will be set at 40 percent for ACOs that do not assume risk for costs and 50 percent for ACOs taking on downside financial risk.
   • What are the top takeaways from this announcement? Evolent’s Ashley Ridlon, Vice President Health Care Policy, shares her insights in this piece. The Next Gen ACO Coalition also weighed in with support of the move toward two-sided risk.
3. Beginning in 2019, the Trump administration will allow Medicare Advantage to reimburse for in-home services such as home-delivered meals, wheelchair ramps, bathroom grab bars and housekeeping. The Medicare Advantage program run by Humana, for instance, will be partnering with Meals on Wheels at the start of 2019 to deliver food in a handful of cities. The Trump administration also approved a pilot plan in North Carolina in October to let insurers screen people on Medicaid to see whether they lack access to food, housing or transportation. The program will refer patients to organizations that can help meet those needs and will then follow up with them.

Federal

1. The federal judge in Texas who struck down the Affordable Care Act in early December certified his ruling on Dec. 30, paving the way for an appeal. U.S. District Judge Reed O'Connor's Dec. 14 ruling held that the entire ACA is unconstitutional because of a change made to the individual mandate by Congress as part of the tax overhaul of 2017. Still, he wrote that the law should remain in place as the case winds through the courts. O'Connor's mid-December ruling was only a partial decision, which meant it could not be quickly appealed. California's Democratic attorney general, who is leading the coalition defending the ACA, asked O’Connor to clarify the status of the ACA and either grant a stay so the law can still be enforced by states and the federal government or to finalize the decision, so they could appeal. The case will next go to the 5th U.S. Circuit Court of Appeals.

Evolent in the News

1. Could the latest in medical treatment be…a roof? Medicaid says maybe. In this Health Affairs article, Evolent's Anita Cattrell, Chief Innovation Officer, explains how "social treatments," such as housing and health food, can help improve individuals' health.

Survey Says/Studies Show

1. An updated analysis of MSSP ACO savings from the National Association of ACOs (NAACOS) showed that MSSP ACOs saved Medicare nearly $2.7 billion to date, approximately $1 billion more than the savings estimated by CMS. CMS estimates that MSSP ACOs lost Medicare money, netting a financial loss of $384 million. Researchers explained that the updated analysis uncovered significantly more savings from MSSP ACOs to date because of how CMS estimated savings from the program. CMS calculates MSSP ACO savings using performance data based on benchmarks, or an ACO's annual, predetermined spending target. According to the researchers, using spending targets underestimates ACO performance on savings.
2. According to the new annual report by CMS' Office of the Actuary published in Health Affairs, the rate of health care spending growth slowed from 2016 to 2017 in the U.S., driven by reduced use and intensity of hospital care, physician services and prescription drugs. Total spending hit $3.5 trillion, up from $3.4 trillion in 2016. However, spending growth dropped to 3.9 percent last year, down from 4.8 percent the year before, despite a slight uptick in prices from 1.3 percent in 2016 to 1.6 percent in 2017. The share of gross domestic product spent on health care in 2017 was 17.9 percent, compared with 18 percent in 2016.
3. Nearly three-quarters of exchange plans for 2019 have narrow networks, according to a new analysis published by Avalere. Like last year, health maintenance organizations and exclusive provider organizations (EPOs) continue to make up 72 percent of the ACA market versus 60 percent three years ago. Much of the growth has come from EPOs, an approach that is favored by start-up plans such as Oscar Health, Devoted Health and Bright Health. Nearly 20 percent of plans have EPOs compared to 11 percent in 2016.
4. The degree of institutional investing in health care has accelerated, according to a McKinsey report. The number of deals has grown at a compound annual growth rate of 18 percent since 2012. Private equity, venture capital and hedge fund investors announced about 225 deals in 2012 but more than 510 in 2017. McKinsey believes that the investment focus in the next few years is likely to be on lowering the cost of care and reducing leakage in providers’ revenues.
5. This will be a big year for value-based care, population health management and total care management, according to Health Data Management’s list of 12 trends that will dominate health care IT.

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