Understanding Value-Based Enterprises 

Episode Overview

Transcript:

Daniel J. Marino : 

Welcome to Value-Based Care Insights. I'm your host, Daniel Marino. In today's episode, we're going to talk about value-based enterprises. It's an interesting concept, which has really gained more and more traction probably over the last year, year and a half or so, but still is a fairly unknown concept, if you will. How this really has developed it really has followed along what many provider organizations have done in creating their integrated provider networks, really trying to pull together their employed physicians with their independent providers and so forth. And as many health care leaders know, that could be a little touchy. And it's touchy because there's a lot of requirements around stark laws, around the anti-kickback statutes that really restrict how we can compensate providers in a sort of a non clinically integrated environment. As we move into value-based care, our ability to reward physicians based on their performance, their clinical performance, is going to absolutely be critical.  

 
Well, back in January, 2021, CMS recognized this and they put forth a new provision that allowed the creation of these value-based enterprises, which again, aligns our ability to reward physicians properly, but has to be done in a manner that meets a lot of these requirements. And if we're able to do that, then it allows us to relax even further some of the stark regulations and in, in some of the anti-kickback activities. Well, happy to introduce today, two gentlemen, extremely knowledgeable in value-based enterprises, Jim Carr and Luis Argueso. They are from InHealth Advisors, an advisory firm that specializes in developing compensation models and other strategies for providers in the value-based care world. Certainly an area that's near and dear to my heart. Luis. Jim, welcome to the program.  

Luis Argueso: 
 

Thank you for having us.  

Jim Carr: 
 

Hi, Dan. Thanks for having us.  

Daniel J. Marino: 
 

So, Luis, maybe we could start with you. , what is a value-based enterprise and sort of give us a little bit history. How did this come to be?  

Luis Argueso: 
 

Yeah, excellent question, Dan. So, one of the places I like to start is with three big statistics. , I think they really tell the story. The first is the life expectancy within the United States. If you look at how we rank internationally, the United States is around 54th when it comes to life expectancy. But given that life expectancy, the United States is by far spending more per capita on health care than any other country in the world. So it's clear that we have a lot of room for improvement when it comes to the value of the health care dollars we're spending. , in addition, you've got the fact that by 2028, the Medicare part, a trust fund is anticipated to be depleted. So we have limited time to kind of fix our problems. And then on top of that, if you look at surveys nowadays and you rank providers and how they feel about the work that they're doing, physicians and advanced practice professionals, a recent survey done by Bain indicated that 25% of clinicians were considering leaving the practice of medicine due to burnout. And so we have what is basically a lose- lose proposition where we're spending too much, patients aren't getting good health and providers are not happy with the care that they're providing. So the value-based enterprise, as you mentioned, was really the concept that CMS brought to the table to try to create a win-win health care system whereby patients were better off spending was contained, and providers were doing the types of things that they went to medical school to do to begin with.  

Daniel J. Marino: 
 

So Right, kind of gets them back to the core, right, as to, like you said, why they got into medical school and really focusing on patient care. So,  Jim, when we look at VBS, value-based enterprises, how does this differ with clinically integrated networks, the CINs that have been developed or even the ACOs that are out there? Is it one of the same? Is it a different type of a structure or an entity?  

Jim Carr: 
 

Great question, Dan. So the, the V B E is a different type of entity, but it could very well be one and the same as well. There is a tremendous amount of flexibility with the V B E. And so, you know, I think of ACOs and CINs and I think of large organizations structured around contracts, dozens of different providers, and a V B E can be that too, but a V B E also could be as simple as two providers entering into an arrangement that has value-based purpose. And so the, the V B E concept really is all encompassing of anything from just a provider to provider contract all the way up to a C I N.  

Daniel J. Marino: 

So when we think about moving forward with a V B E, how does it typically align with some type of, say, a, a value-based contract or some type of payer relationship?  

Luis Argueso: 
 

Great question, Dan. The building block to that is with the degree of risk that the value-based enterprise takes on, the provider side, the degree of risk that their compensation is exposed to and, the enterprise level, the degree of risk they're exposed to with payers. And so what Medicare did to attract people to the concept of the value-based enterprise is they afforded an increasing degree of flexibility and, essentially, protections against, existing regulatory frameworks by taking on more risk. So if an organization was willing to say, be at full risk with a payer, say take on a capitated contract, and the provider's compensation was aligned with that, they were paid, let's say based on the panel of size of patients that they managed, then the value-based enterprise would allow, for example, the organization to develop a compensation structure that, assuming the other conditions are met, did not have to, demonstrate that it was consistent with fair market value, which has been a constraint that's held back a lot of organizations with developing compensation plans that really incentivize providers to deliver value rather than vole.  

Daniel J. Marino: 
 

Oh yeah, you're absolutely right. This has been a major issue, especially when you think about the compensation, the incentive plans ,to compensated providers and how it relates to fair market value. I can remember about four or five years ago I was working with the primary care group and they did an extremely good job on managing their outcomes and actually received about 110, 120% of their incentive bonus coming back from the providers while when that incorporated it into their incentive plan and what they were paying the providers, it actually put them over the top of what was considered fair market value. And so of course you could imagine the leadership team that they were concerned about this last thing you want is the O A G knocking on your door saying, oh my God, you're paying your providers too much. How does the V B E structure then help kind of guide it? Get us past that?  

Jim Carr: 
 

So Dan, if you structure a V B E correctly, and you are accomplishing a value-based purpose, , CMS and OIG concluded that effectively what you're doing is removing the incentives to over refer or overutilize, if you will. And they felt like that a sufficient safeguard to remove some of the protections that had historically existed in the Stark Law and the anti-Kickback statute, and they felt like the way that that stark and anti-kickback had been constructed were really based around a fee for service environment.  

Daniel J. Marino: 
 

I think it was too. Right? Absolutely. I mean, you absolutely saw that in the late nineties, early two thousands, where a lot of hospitals were providing these incentives to the physicians, you know, particularly in surgery areas, right. To recruit them back to into their organization. And they paid for their referrals. Exactly. So clearly that was something that was going on.  

Jim Carr: 
 

Yep. The idea was, hey, if we remove those incentives, then we don't need these protections anymore. And so that opened up the flexibility and the more risk that a V B E is willing to take on, the more flexibility it has, as Luis mentioned. And so that's sort of the beauty of the framework.  

Daniel J. Marino: 
 

Right. So, Luis, when we think about this, then clearly you have to be able to have some type of clinical guidelines in place. You have to be able to measure the outcomes you have to be able to hold your physicians accountable, right? Are are you seeing all of those same elements included in in incentive design, compensation model, for VBS as you would include in a CIN or, or within an ACO?  

Luis Argueso: 
 

Yeah, absolutely. The framework that they used for the value-based enterprise was informed by their experience with CS and ACOs. I'll use the terminology that they used for VBE. Essentially what the VBE has to do is demonstrate that it's achieving a value-based purpose. And you demonstrate that by requiring the providers to engage in what are called value-based activities. Value-based purposes include things like, controlling the increase or overall cost of care, improving quality, coordinating and managing care. And you do that by having the providers take actions, for example, providing an item, a service, taking an action or refraining from taking an action. That's how they define it within the VB construct. Those terms are all pretty vague. They're not very specific. They afford a lot of flexibility. And so as long as you can demonstrate that you're engaging in bonafide value-based purposes and, and doing so through value-based activities, then you've kind of laid the foundation for, , an arrangement that meets the, that that corrects for the perverse incentives and, and fee for service that Jim mentioned.  

Daniel J. Marino: 
 

When you really think about that value-based purpose, right? And, and it's really aligned with the triple aim, if you will, right? Yes. Or in some cases, the quadruple aim where you talk about improved or better outcomes for patients, better patient experience, lower cost. And if you include the fourth one in there, then a better situation, better experience for the physicians. But what I'm hearing you say is that's fine and good, but where the rubber hits the road is really around those clinical protocols and your ability to be able to measure that, right? So measure the performance, track and measure the performance of say, you know, the patients with chronic diseases such as diabetes mm-hmm. <affirmative>, and how they're performing with that. And if they're able to meet some of those standards, and if they are aligned with the contract, then that's how you build some financial incentive,  

Luis Argueso: 
 

Correct. And there really is just an immense amount of flexibility. So while there are existing excellent metrics out there, clinically supported, some explicitly promoted by CMS, say your MIPS metrics, there is flexibility where if an organization feels like they've stabled on what they think is the right way to measure quality or value of care for a patient, if they can show that it's achieving those value-based purposes that it mentioned, then that can certainly be a component of how the payment is structured within the value-based enterprise. They really made the value-based enterprises very flexible, and we see that kind of as a, as a hurdle for adoption because people, , can be overwhelmed and say, can I really be doing this? But, , but the intent behind that flexibility was to be, to allow for the private industry to really step up and say, look, you've given us this framework and here's how we're going to put it to use to really create that win-win health care system.  

Daniel J. Marino: 
 

If you're just tuning in, you're listening to Value-Based Care Insights. I'm your host, Daniel Marino. I'm talking today with Jim Carr and Luis Argueso from InHealth Advisors and we're discussing value-based enterprises and really the opportunities they afford to health care providers. So Jim, when we're thinking about setting up these VBS, is it focused on just independent providers and building that independent network and aligning with, say, the hospital entity? Or is there greater than that? Is it the ability to really integrate both employed physicians and the employed physician network and the independent network?  

Jim Carr: 
 

Yeah, Dan, this is another area where I feel like the flexibility really shines through the construct really isn't targeted at any one particular group. And so you could have a V B E composed entirely of employed physicians. You could have a VBE composed entirely of independent physicians or a mix of the two. And so mm-hmm. <affirmative>, t's a really, broad-based, unifying concept. I think that really allows you to target very specific conditions, very specific groups or very specific alignment problems that you're trying to solve.  

Daniel J. Marino: 
 

Do you need to create, I'm very familiar with ACOs, and of course that that needs to be a separate legal entity and SEP governance structure as is clinically integrated networks, right? It's a separate entity and typically a separate legal structure, although they could be a hundred percent owned by a hospital, they need to be a hundred percent led by, by physicians and have a, a governance model that supports it. What is the structure for VBS look like? Hmm.  

Jim Carr: 
 

So this is an area where I think I would applaud the folks at C M S and OIG  for all the flexibility they have allowed. There is not a defined construct that has to be met. There has to be a governing docent for the V B E, but that could be as simple as a contract, or it could be as complex as a governing docent for A C I N or an A C O. There has to be an accountable person or an accountable body. And again, that could be a single person that oversees that contract, or it could be a governing body like you have for an A C O. So, again, the gamut of flexibility allowed is tremendous. And a V B E can be morphed to be something very simple to something very complex.  

Daniel J. Marino: 

But the V B E does hold the contract with the payer, though. Right. So when you think about a fund flow that the flow of funds, the incentives that come from the payer, does it flow into the V V E and then it's distributed to the participating providers based on their performance? Or is the VB just a network that then has to align with some other entity in order to support the flow of funds and the contracting?  

Jim Carr: 
 

So in <laugh>, a continuing theme that we've had going on today ou could actually structure it so that the V B E is the contracting entity, much like you would do with an A C O or CIN,  but you could also have a V B E where just a hospital or just a single provider is contracted with the payer, and that particular provider is in a value-based arrangement and in a value-based enterprise with another provider or another group of providers. Does that make sense? Right.  

Daniel J. Marino: 
 

Yeah. I always find it interesting how either CMS or even the FTC is very vague in defining what it is per say. 

Luis Argueso: 
 

I add a caveat to that, Dan. If you read through the actual commentary to that C M S and OIG put forth, regarding these entities, they were very deliberate in not being very explicit about how these types of entities could be structured because they did not want to be a hindrance to innovation in the industry. So definitely your point stands, there's, because there aren't clear rules that can oftentimes act as a deterrent, but I think it was helpful that if you look at the regulatory record, what they're saying is, we are allowing these flexibilities, and we are intentionally doing it because we know that to innovate in health care, we cannot handcuff organizations too to substantially. 

Daniel J. Marino: 
 

Right. So if I'm following correctly, there's a progression that, that health care leaders need to take, right? If they're going to be thinking about moving forward with a value-based enterprise. And, and to your point, Luis, I think the first is really defining the purpose, right? Why do you want to do this? And what is the population to a certain extent that your V B E is, is really going to, to address, right? To manage, you know, in terms of that care and really what the end goal is, right? So I think the end goal should be around achieving the goals of, of the triple aim, but I think it also has to go further than that. I think it has to really focus on making efficiencies in the care delivery model and changing that care delivery model, frankly, and then creating that right financial incentive so you're able to really align your providers around the end goal.  

Luis Argueso: 
 

Yeah. Let's take an example in the fee for service world, you've got a provider that traditionally is going to be paid based on work our views, but there are a lot of specialties out there where providers need to be spending more time with their patients. They want to be spending more time with their patients, but they know if they do that, they're going to be missing out on compensation. And so what the value-based enterprise was introduced to do was give a lot of those specialties, the ability to have compensation arrangements that rewarded them for spending that extra time with those patients, , that really wanted them to focus on delivering that better value care to those patients. And the, the carrot that they, that they used as a result of that was they said, look, we understand that if you've structured this appropriately and you are really trying to improve the value of care for your patient, we're not going to, limit you and say, because this provider earned, you know, above the 90th percentile compensation because they saw a lot of patients, they provided high value care to those patients.  
 
They saved money on the side of payers. They're not going to say, no, that's not allowed. They're recognizing that that provider's being rewarded for doing what we want providers in the health care industry to do, which is to deliver health care efficiently and of high quality.  

Daniel J. Marino: 
 

Right? And, I think you do that to your point by looking at certainly the compensation model, right? Mm-hmm. <affirmative>, I say all the time, form follows function. You need to have the right structure in place that creates the right behaviors that we want to achieve. That becomes really important, but I keep getting back to the fact that you also need to have some level of a contract, right? Something has to fund the financial incentives so you, you're able to, that that level of performance that you really want. So if provider organizations are interested in establishing a V B, what are some of the initial steps? Jim, what have you seen as, as you're, as you're working with organizations to kind of launch them into a a V B E situation?  

Jim Carr: 
 

You know, really the first thing that we see, Dan, is sort of this decision to say, we need to do something different. And it's because I've got different contracts coming down the path. I have a group of providers that is dissatisfied with the way they're practicing medicine and the constraints around that we're not doing a good job of providing equitable care to the community or some combination of all of those factors and kind of recognizing that you need to solve those factors and the ability of the V B E to kind of help you do all of those things at once. Mm-hmm. <affirmative> is a beautiful construct. And so, that's really the impetus that we're, we're seeing amongst providers who are reaching out and starting to think about how to develop a V B E is how do we do things differently to position ourselves to succeed health care in the future?  

Daniel J. Marino: 
 

Yeah. Kind of creating that new vision, right? How do we want to change things? So, Luis, when you're talking to physicians about participating in this what's required for them, or as I say all the time, you know, what's in it for me principle for physicians?  

Luis Argueso: 
 

Yeah. It's a great question. Me personally,  my dad's a surgeon, so of the physician specialty types, you know, I grew up hearing from someone that worked very much in that.  

Daniel J. Marino: 
 

Yeah, you're speaking from the heart on this one, <laugh>.  

Luis Argueso: 
 

Absolutely, but at the same time, I've always worked with health systems, so I've always been flopped in the middle and had to kind of negotiate both perspectives. But I think there's a lot in it for the physician, in addition to, obviously the flexibilities that an organization has, if they don't have to demonstrate fair market value, what this does for a physician is it also creates a construct for delivering medicine that aligns with, as I mentioned earlier, what they've got into the specialties that they get into to begin with. They want to deliver good care for patients, and physicians need to be able to see how that good care that they're doing is going to translate to, you know, financial reward to them. And the V B E structure is one that because of the flexibilities that it allows, there's a lot of different ways that you can do it, do that, and you can cater to a lot of different types of physician populations in terms of their preferences for practice in terms of their preferences for work-life balance, that sort of thing.  

 
So, the what's in it for them is the overall model is aligned to practicing medicine in a way that you're spending more time with patients not having to focus on that fee for service churn that can really burn out providers, and especially given kind of constraints with physician workforce. It's a model that really allows you to leverage care team models, really allows you to pull in nonmedical providers to really augment what you're doing and reward you for how effectively you're deploying that type of staff. So there's really a lot in it for physicians.  

Daniel J. Marino: 
 

Yeah. Well, Luis, Jim, this has been fantastic. Again, I'm here with Luis Argueso and Jim Carr from InHealth Advisors and I want to thank you both for your time today, really appreciate the time that you've given and helping to explain and discuss this with our audience. I know that this is an area of big importance, especially as organizations continue to move into value-based care and really align with their providers a critically important concept. If any of our listeners today are interested in learning more or connecting with the both of you, provide your email address or maybe a contact information or how would they get ahold of you?  

Luis Argueso: 
 

Sure. They're free to visit our website. We have a very handy contact form on our front page. The website is www.inhealthadvisors.com, or people can feel free to reach out to us via our emails. It's our first names Luis, l u i s, and Jim, j i m at inhealthadvisors.com.  

Daniel J. Marino: 
 

Great. Thanks, Jim. Thank you, Dan. Really enjoyed being with you today. Thanks for the conversation. I want to, again, thank you both. I appreciate it and I want to thank our listeners for again listening to another episode of Value-Based Care Insights. Until the next insight, I'm your host, Daniel Marino, bringing you 30 minutes of value to your day. Take care.  

About Value-Based Care Insights Podcast

Value-Based Care Insights is a podcast that explores how to optimize the performance of programs to meet the demands of an increasingly value-based care payment environment. Hosted by Daniel J. Marino, the VBCI podcast highlights recognized experts in the field and within Lumina Health Partners