Using a value-based enterprise to effectively provide value-based care

Reimbursement reform is a continuing effort by the Center for Medicare Services (CMS) to transition payments from fee-for-service to value-based payment mechanisms. CMS aims to move 100% of traditional Medicare beneficiaries and most Medicaid beneficiaries to some form of value-based payment arrangement by 2030. A value-based payment reflects the concept of the payment for a medical service being determined based on the quality and efficiency of the service rendered by a provider.

More and more financial incentives are arising to draw providers to value-based payment arrangements. The lure to providers is to make more money when they provide high-quality services at lower costs. The ultimate transition from fee-for-service payments requires the providers to be responsible for delivering higher quality, more efficient services, making the payments they receive dependent on the outcomes they achieve.

Regulatory requirements governing Medicare and other government payment programs can be harsh and dangerous for providers that violate prohibitions concerning the government’s payment for medical services. These prohibitions include prohibiting payment to a party referring Medicare beneficiaries (the so-called Anti-Kickback Statute), and prohibiting physicians from maintaining certain financial relationships with entities to which they refer Medicare beneficiaries (the so-called Stark Law). The penalties for violating the Anti-Kickback Statute and Stark Law are draconian. They can put providers out of business if they do not comply with these legal requirements.

In addition, these regulatory requirements inhibit models and arrangements that facilitate value-based payment arrangements. For value-based payment systems to succeed, providers must aggregate in models where they collaborate around patient service protocols and care pathways designed to develop high-quality and efficient outcomes. Financial incentives are necessary to encourage providers to refer to high-quality providers to achieve these outcomes and allow them to reap the rewards of participating in a system that encourages high-quality care. These needed financial incentives can be problematic under or outright violate the Anti-kickback Statute and the Stark Law.

Recently, the regulations administering the Anti-kickback Statute and the Stark Law were modified to accelerate the development of value-based payment arrangements. These regulations now allow for the payment of financial incentives in ways previously prohibited under the Anti-kickback Statute and the Stark Law. These new rules are revolutionary in eliminating the classic prohibitions when providers are working towards value-based purposes (i.e., the quality and efficiency standards). The advent of these new regulations is designed to accelerate the transformation towards value-based payment arrangements and allow providers to equip themselves to become effective at value-based contracting and bear responsibility for the outcomes they help produce.

At the center of these new regulations is the “value-based enterprise,” a mechanism providers can use to aggregate to work on quality and efficiency objectives and avail themselves of these new rules. The value-based enterprise is a hub that contracts with independent providers and monitors and administers the protocols and the achievement of quality and efficiency standards that the providers are implementing to achieve higher-quality outcomes. The new regulations allow the value-based enterprise to innovate and create the protocols and processes to collectively bring about high-quality outcomes in pursuit of higher profits from value-based contracting.

The model of the value-based enterprise can envelop many of the traditional ways that providers have tried to aggregate to achieve quality and efficiency standards through networks such as a clinical integration network (CIN), independent practice associations (IPA) or other networking models. However, by contracting with the value-based enterprise, providers will step into the protections of the new regulations. This new regulatory regime reduces compliance risks and gives providers more flexibility in contracting and receiving rewards for referring to other providers in the same value-based enterprise network working to achieve the same value-based initiatives.

To be effective, value-based enterprise needs to have the right operational components to provide the necessary oversight and develop the protocols and pathways to create higher quality services. This is an important consideration in successfully launching and implementing a value-based enterprise.

Related: Primary care doctors: The ‘quarterbacks’ in a value-based care playbook

Additionally, a value-based enterprise needs to learn how to integrate specialty care and primary care in value-based contracting arrangements. Most of the push to date has been focused on primary care models and generating shared savings as primary care providers help to initiate the efforts toward higher quality outcomes. This make sense because primary care is typically a patient’s first encounter with health care providers and primary care physicians help patients navigate to the specialty care needed.

However, specialty care payments make up a substantial majority of the total expenditures in health care. Effectively integrating primary care and specialty care into interdependent payment mechanisms to create higher quality more efficient care is essential in the long-term journey toward value-based payment arrangements and will be an increased focus in the future.

Author’s Note: Nelson Mullins is reviewing the value-based enterprise and these topics at the Nov. 2 Value-Based Care Conference that it is hosting simultaneously in person at Fort Lauderdale’s Tower Club and online. To learn more about this conference and register, visit here.

Edward K. White, a partner with Nelson Mullins, practices in the areas of corporate, partnership, health care, taxation and nonprofit law. Mike Segal, a partner with the firm, is chair of firm’s value based care group.