Many organizations in healthcare are moving rapidly to adopt value-based reimbursement (VBR) models that reward value instead of volume. By shifting a significant percentage of clinical and financial risk from payers to providers, VBR programs can help reduce costs significantly, improve the quality of care, and increase efficiency. The experience of Banner Health Network (BHN) with VBR in commercial and government plans indicates that a large health system can transition to VBR with renewed focus on quality, cost efficiencies, population health management tactics, and member engagement.

In December 2011, BHN was selected in a competitive bid process as one of 32 organizations to participate in a Centers for Medicare & Medicaid Services (CMS) value-based demonstration initiative called the Pioneer accountable care organization (ACO). As a Pioneer ACO with consistent and positive results, BHN, based in Phoenix, Arizona, has demonstrated that VBR can lead to results that are beneficial to the member, the healthcare organization, and the community. BHN has been a top performer in returning shared savings to Medicare while improving appropriate service utilization and performance on quality metrics.

The development of simultaneous commercial ACO products was a requirement of the Pioneer agreement with CMS, as well as a clear goal for BHN. The initial period of ACO partnership formation revealed an uncomfortable reality: Payers and providers would need to collaborate and share information as never before. Further, many payers were uncertain about working closely with providers who were working simultaneously with other payers on similar partnerships. Before long, however, there were enough successful VBR arrangements to allay these initial payer anxieties. Today, BHN has high-value network arrangements with nearly every major payer in Arizona.

Becky Kuhn, FACHE, is executive vice president for com m un ity delivery at Banner Health
in Phoenix, Arizona. Chuck Lehn is executive vice president o f strategic growth at Banner Health.
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After moving steadily toward value- based reimbursement (VBR) for more than a decade, BHN has amassed a membership of about 350,000 covered lives. Moreover, 92 percent of BHNs membership is insured through a risk-bearing relationship.

BHNs strategies and tools for VBR range from clinical to technical. Engaged provider partners have been an essential component without whom success would not be possible. Banner Health care management teams working with our provid
ers are focused on the development and implementation of evidence- based clinical practices across the enterprise to make sure that members receive the most expedient and efficient care with the fewest complications.

Facility-based and community-based nurse case management allows members to receive the guidance, education, and clinical support they need to achieve the highest possible level of personal wellness and avoid unnecessary hospital admissions. Enabling technologies, such as telehealth, are showing great potential in creating virtual connections between patients and their caregivers. Claims data and an internal enterprise data warehouse drive population health tactics and feed electronic health records (EHRs) to enable provision of the best possible care. Finally, a new area of focus for BHN is a post-acute strategy to ensure that the continuum of care does not end abruptly when members transition to post-acute care providers in the community.

Although the move to VBR requires a commitment to meeting cost and quality benchmarks, integration of care at
Enabling technologies,
such as telehealth, are
showing great p o ten tia l in
creating v irtua l connections
between patients and the ir
caregivers.

all levels, and a significant information technology (IT) infrastructure, BHNs experience demonstrates a clear potential for organizations that successfully navigate the gap between a fee-for-service (FFS) world and VBR.
I n t r o d u c t i o n After several years of slow but steady adoption, VBR models appear to be on their way to replacing FFS as the predominant reimbursement system in US healthcare. McKesson (2014) estimates that VBR will overtake FFS by 2020, with 90 percent of payers and 81 percent of providers already using some mix of both. In the first score- card on payment reform released in March 2013 by the not-for-profit Catalyst for Payment Reform (2013), only 11 percent of payments to providers were not under an FFS model. One year later, the second report card (Catalyst for Payment Reform and Health Care Incentives Improvement Institute 2014) reported that 40 percent of commercial health plan payments were made through methods designed to improve quality and reduce waste (see Exhibit 1 for details about waste in the U S healthcare system).

The U S Department of Health & Human Services (HHS20i5)is encouraging the adoption of VBR by mandating that 30 percent of Medicare outlays by 2016 and half by 2018 be routed through alternative payment models such as ACOs and bundled payments. HHS (2015) also set a goal of tying 85 percent of all traditional Medicare payments to quality or value by 2016 and 90 percent by 2018 via programs such as the Hospital Value-Based Purchasing and the Hospital Readmissions Reduction Programs. This is the first time in the history of the Medicare program that HHS has set explicit goals

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Source: Health Affairs (2012). Health Policy Briefs: Reducing Waste in Health Care.
for alternative payment models and value- based payments.
The Affordable Care Act created a number of new quality-based payment models, including ACOs, patient-centered medical homes, and new methods of bundling payments for episodes of care. In each payment model, healthcare providers are held accountable for the quality and cost of the care they deliver to patients, giving them a financial incentive to better coordinate care for their patients and avoid unnecessary expenses. Pay for performance (P4P) is emerging as the most commonly used model. Also known as value-based pur chasing, P4P measures quality by monitoring process outcomes, such as lowering blood pressure and counseling patients to stop smoking. In a 2014 McKesson report, payers using a mix of reimbursement
models reported that the proportion of their business aligned with P4P would increase from 10 percent to 18 percent in five years. Providers using a mix of reimbursement models projected that their alignment with P4P would increase at an even greater rate from 9 percent to 21 percent in five years.
Adopting a VBR model requires organizations to take into account clinical markers and best practices to ultimately produce better population-based outcomes. Shifting focus to these long-range goals can be challenging and will require investment in contemporary healthcare IT and system-wide improvements in integration, such as a commitment to a common EHR platform that allows the dynamic exchange of patient data. BHN has moved toward VBR using several approaches.
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