Managing the Transition to Transformation: Expanding the Health Care Paradigm


McDermott’s Managing the Transition to Transformation series is designed to help health systems and other health care industry leaders address the many challenges presented by the transformation in payment and care delivery models. The goal of this series is to help organizations prepare so that they are not only competitive, but can also thrive under alternative payment models (APMs) and quality-based reimbursement models (QBRs). This article explores our shifting understanding of what fits within the bucket of “reimbursable health care” in today’s value-based market.

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As reimbursement systems evolve to incentivize higher quality services, lower costs and expand access to health care, our understanding of what constitutes a reimbursable health care service is likewise evolving and expanding. Payors and providers are recognizing the value of services that previously may have been considered ancillary to the provision of health care services—such as social services and technological tools that help individuals manage their own health conditions. These services and tools can help to, for example, reduce costs and avoid unnecessary medical care, which can result in success under any number of alternative payment models (APMs). In short, the health care industry is recognizing that expanding our vision of what constitutes “reimbursable health care” can help achieve the goals of improved quality and greater efficiency.

Examples of the Shifting Paradigm

This expanding notion of health care can be seen in a variety of contexts, particularly given the shift away from fee-for-service reimbursement and toward value-based, quality-based and population-based reimbursement models. In some cases, reimbursement models are explicitly premised on provider responsibility for providing or connecting patients to social services. One longstanding example of this is in the context of the Medicare Programs of All-Inclusive Care for the Elderly (PACE). PACE providers are reimbursed for health care and social services designed to help Medicare beneficiaries maintain independence and avoid institutional care. PACE reimbursement covers traditional health care services such as preventative and primary care, but also covers services that are not typically recognized as reimbursable “health care services” such as meals, nutritional counseling, caregiver training, support groups, social work counseling and transportation. Also in the context of Medicare coverage, legislation recently introduced in the Senate (the CHRONIC Care Act, S.B. 3504) proposes to expand the scope of permitted supplemental benefits offered by Medicare Advantage plans to chronically ill enrollees to include benefits that are “not primarily health related benefits.” Another example arises in states that have implemented Medicaid “Health Homes” pursuant to the Affordable Care Act (ACA). Providers participating in the Health Home model are explicitly required to provide referrals to non-clinical community and social support services as part of their “whole-person” approach to health care for individuals with chronic conditions.

In other cases, reimbursement structures do not require providers to provide non-traditional “health care” services but provide direct or indirect financial incentives for them to do so. Medicare Shared Savings Program Accountable Care Organizations (ACOs), for example, reward providers through shared savings based on health care cost reductions achieved year on year across a population. If adoption of non-traditional health care services assists the ACO in achieving such savings, then adoption and implementation may be worth the cost. Similarly, under the Maryland All-Payer Model, almost all hospital inpatient services are paid on the basis of an annual revenue budget set in advance. Because of this, Maryland hospitals have an incentive to ensure efficiency, patient adherence to treatment plans and high quality clinical care. In such an environment, hospitals may be financially incentivized to implement non-traditional health care services that maintain the health of patients and reduce overall inpatient admissions.

The scope of reimbursable health care is also expanding to include technology and social media tools that extend physician resources and improve health outcomes. Innovative health insurers, ACOs, health systems and state Medicaid agencies are embracing technology as a new way to engage patients in their own health care and enhance their awareness and understanding of their own health conditions. For example, one health insurer now provides members with fitness trackers and financially rewards members who meet their daily step goals. This financial incentive aligns the interests of the insurer and the member in driving healthy behavior. As another example, multiple health care systems have partnered with popular ride-hailing apps to coordinate patient transportation (and in some cases, coordinate reimbursement available under Medicaid or other insurance) in an effort to reduce short- and long-term costs associated with missed medical appointments. One health system has implemented a patient portal that integrates an individual’s medical records (e.g., appointment times and special accessibility needs) with this transportation-booking capability. While coordination of and payment for patient transportation is not a new phenomenon, the use of integrated technology to interact more closely with patients and address the social needs underlying poor appointment adherence highlights the expansion of the provider’s role beyond the four corners of traditional health care services.

It is worth noting that providing non-traditional services to certain individuals, such as beneficiaries of government programs, can raise beneficiary inducement issues under the federal civil monetary penalties law and the Anti-Kickback Statute. In recognition of this concern, and that fact that these laws could impede the development of innovative approaches to improving quality and controlling costs, the Department of Health and Human Services issues waivers for certain arrangements, such as those involving Medicare Shared Savings Program ACOs. In this case, the beneficiary inducement waiver permits an ACO to provide beneficiaries with free or below fair market value items and services that advance preventive care or treatment plan adherence goals, such as providing a blood pressure cuff to a hypertensive patient. Providers considering initiatives in this area will need to consider the potential beneficiary inducement and other legal issues such programs may raise.

Spending More to Spend Less

At first blush, there appears to be an inherent inconsistency in expanding the scope of reimbursable health care services in an effort to decrease overall health care costs. But innovative payors and providers, including the federal and state governments, are recognizing that social determinants of health and a lack of meaningful patient engagement impose real health care costs on the system. Bringing a broader array of services within the “health care” umbrella can create incentives, both direct and indirect, for patients, providers and payors to address these factors and ultimately reduce costs. While it is unlikely that every experiment in this area will bear fruit, some are proving to be viable strategies for reducing health care costs. Only time will tell which of these efforts will prove their worth.