The coronavirus pandemic has torn through the global economy, suppressing consumer demand and industrial production. As countries look to an eventual recovery, but in a very different environment characterized by continuing distancing measures and loss of public confidence, businesses in many sectors, such as hospitality and retail, are asking how they can adapt to survive these new economic conditions. Yet perhaps surprisingly, those feeling threatened include independent primary care practices in the United States. Despite the USA being one of the most expensive healthcare systems in the world, many primary care practices are now facing financial collapse. Some estimates suggest that primary care practices will lose up to $15 billion during 2020 as a consequence of the coronavirus pandemic.
Covid-19 has highlighted a fundamental weakness in how primary care is paid for in the USA. Many practices are financed by fee-for-service (FFS) reimbursement. Put bluntly, providers make money from office visits, diagnostic tests, and procedures. This has long been criticized for encouraging an expansion of what is considered disease and overtreatment, contributing to the high cost of the American health system. However, it can only work as long as patients keep coming, and they are no longer doing so, at least not in sufficient numbers for many primary care practices to remain viable. The imposition of social distancing policies has seen a severe reduction in office visits, and with it a substantial decline in revenue. The pandemic has taught Americans that the financial model that underpins primary care needs to be reformed. It needs to move from a per-visit reimbursement to a per-patient reimbursement, in other words primary care capitation, as used in many other countries, including the UK.
If the existing reimbursement model is not reformed, the clinical and financial implications for struggling primary care practices, which could play a key role in the continuing coronavirus pandemic, will be far-ranging. From a clinical standpoint, primary care practices that need to lay off staff or close will not be able to respond effectively to an influx of patients who have been delaying care since the pandemic began. Given that primary care is often the entry point into the healthcare system, this could lead to severe reductions in access to routine health care as well as referrals to specialty providers for advanced complaints. From a financial standpoint, many of these independent practices may consider consolidation with larger health systems, something that has been shown to increase prices without improving quality in the long run.
To overcome these issues, insurers and primary care practices could work together to construct capitated payment models. In capitated contracts, providers are paid a risk-adjusted sum for each patient enrolled in the practice. Payment to providers is not reliant on volume of office visits, but rather delivering cost-effective care focused on the health of primary care patients.
As we noted above, this system is already widely used internationally, but there are also good examples in the USA. For example, Iora Health is a venture-backed primary care company that partners with insurers to obtain a flat $150 per-member-per-month (PMPM) fee for taking care of its patients. They also receive bonuses for reducing total cost of care (TCOC). As a result, they have been able to use their dollars for health-related interventions, such as hiring health coaches. They have also demonstrated significant reductions in hospitalizations and health spending along with high patient satisfaction scores. Most importantly, they were able to quickly adapt to the needs of their patient population in the pandemic using alternative models of care, such as online consultations, without the added stress of losing revenue.
There are also many other promising examples of both public and private payers designing capitated contracts for independent primary care practices. In the public sector, the Centers for Medicare and Medicaid Services (CMS) introduced the multi-payer Primary Care First (PCF) Model. Under PCF, primary care practices will receive a risk-adjusted population-based payment for patients as well as a flat fee for any office visits performed. In addition, there are bonuses for practices to limit hospitalizations, an expensive component of delivering care. However, this is still an experimental program that is supposed to begin in 2021, which may be too late for primary care practices that are already facing financial strain from the pandemic.
In the private sector, Blue Cross Blue Shield of North Carolina (BCBS NC) has created the Accelerate to Value program for independent primary care practices. Through this program, BCBS NC is offering independent primary care practices a supplemental stabilization payment, based on the number of members a particular practice serves. In return, it is asking them to remain open for patients and deliver care appropriate to the circumstances created by the pandemic. In the longer term, it also asks them to join an accountable care organization (ACO) and consider accepting capitation for future reimbursement.
While CMS and BCBS can offer blueprints for a path towards primary care capitation, there will be challenges to implement capitation at scale across the nation’s primary care system. A key defining aspect of the US healthcare system is its multitude of payers, from commercial to Medicaid to Medicare. For primary care capitation to succeed, practices will need to pursue multi-payer contracts that cover a critical mass of the patients they serve. Independent practices will also have to adapt to a fixed budget model where excess healthcare utilization could actually lead to financial losses, unlike in fee-for-service.
Ultimately, it is important to recognize that no payment model will be a panacea for healthcare providers during the pandemic and afterwards. However, the coronavirus pandemic has highlighted clear deficiencies in the American fee for service system that have existed for almost a century. Covid-19 has created an opportunity for policymakers and providers to look anew at a model that is already implemented widely in other countries, and in parts of the US. At some point there will have to be an inquiry into the many failures that have characterized the American response to covid-19. Given the magnitude of the catastrophe that has befallen the US, in stark contrast to the relative successes achieved in many other countries, it will be essential to challenge many things once taken for granted. One must be the fee for service system that has so clearly undermined the resilience of the US health system. Covid-19 has provided an almost unprecedented opportunity to create a healthcare system that rewards providers caring for patients in a coordinated manner, rather than prioritizing expensive and often wasteful healthcare provision.
With the acceleration of consumer and provider adoption of telehealth, a quarter of a trillion dollars in current U.S. healthcare spend could be done virtually, according to a new report.
During the COVID-19 pandemic, consumer adoption of telehealth has skyrocketed, from 11% of U.S. consumers using telehealth in 2019 to 46% of consumers now using telehealth to replace canceled healthcare visit, according to consulting firm McKinsey & Company’s COVID-19 consumer survey conducted in April.
McKinsey’s survey also found that about 76% of consumers say they are highly or moderately likely to use telehealth in the future. Seventy-four percent of people who had used telehealth reported high satisfaction.
Health systems, independent practices, behavioral health providers, and other healthcare organizations rapidly scaled telehealth offerings to fill the gap between need and canceled in-person care. Providers are ready for the shift to virtual care: 57% view telehealth more favorably than they did before COVID-19 and 64% are more comfortable using it, according to McKinsey’s recent provider surveys.
Pre-COVID-19, the total annual revenues of U.S. telehealth players were an estimated $3 billion, with the largest vendors focused on virtual urgent care.
Telehealth is now poised to take a bigger share of the healthcare market as McKinsey estimates that up to $250 billion, or 20% of all Medicare, Medicaid, and commercial outpatient, office, and home health spend could be done virtually.
The consulting firm looked at anonymized claims data representative of commercial, Medicare, and Medicaid utilization.
The company’s claims-based analysis suggests that approximately 20% of all emergency room visits could potentially be avoided via virtual urgent care offerings, 24% of healthcare office visits and outpatient volume could be delivered virtually, and an additional 9% “near-virtually.”
Up to 35% of regular home health attendant services could be virtualized, and 2% of all outpatient volume could be shifted to the home setting, with tech-enabled medication administration.
Many of the dynamics that have helped to expand telehealth adoption are likely to be in place for at least the next 12 to 18 months, as concerns about COVID-19 remain until a vaccine is widely available.
Going forward, telehealth can increase access to necessary care in areas with shortages, such as behavioral health, improve the patient experience, and improve health outcomes, McKinsey reported.
Providers and patients are concerned that recent federal and state policies expanding access to telehealth will be rolled back once the emergency period ends.
Industry groups, including the College of Healthcare Information Management Executives (CHIME), are calling on lawmakers to ensure the changes enacted by Congress and the administration become permanent.
McKinsey’s research indicates providers’ concerns about telehealth include security, workflow integration, effectiveness compared with in-person visits, and the future for reimbursement.
“We call on Medicare and all other insurers to continue to fund telehealth programs and work collaboratively on coverage and coding to lessen provider burden. We cannot go back to pre-COVID telehealth; instead, we must go forward. Patients will demand it and providers will expect it,” CHIME CEO and President Russell Branzell said in a recent statement.
Telehealth also is drawing bipartisan support. Senator Marsha Blackburn, R-Tenn., urged Congress to “continue to support this expansion and codify the administration’s changes to support the health needs of the American people,” in a recent news release.
Rep. Robin Kelly, D-Illinois, is introducing a bill directing HHS Secretary Alex Azar to oversee a telehealth study looking at the technology’s impact on health and costs, Politico reported in its newsletter today.
Healthcare providers and payers will need to take action to ensure the full potential of telehealth is realized after the crisis has passed, according to McKinsey.
There continue to be challenges as providers cite concerns about telehealth include security, workflow integration, effectiveness compared with in-person visits, and the future for reimbursement. There also is a gap between consumers’ interest in telehealth (76%) and actual usage (46%). Factors such as lack of awareness of telehealth offerings and understanding of insurance coverage are some of the drivers of this gap.
“The current crisis has demonstrated the relevance of telehealth and created an opening to modernize the care delivery system,” McKinsey consultants wrote. “Healthcare systems that come out ahead will be those who act decisively, invest to build capabilities at scale, work hard to rewire the care delivery model, and deliver distinctive high-quality care to consumers.”
McKinsey outlined steps industry stakeholders should take to drive the growth of telehealth.
Payers: Health plans should look to optimize provider networks and accelerate value-based contracting to incentivize telehealth. Align incentives for using telehealth, particularly for chronic patients, with the shift to risk-based payment models.
Payers also should build virtual health into new product designs to meet changing consumer preferences, This new design may include virtual-first networks, digital front-door features (for example, e-triage), seamless “plug-and-play” capabilities to offer innovative digital solutions, and benefit coverage for at-home diagnostic kits.
Health systems: Hospitals and health systems should accelerate the development of an overall consumer-integrated “front door.” Consider what the integrated product will initially cover beyond what currently exists and integrate with what may have been put in place in response to COVID-19, for example, e-triage, scheduling, clinic visits, record access.
Providers also should build the capabilities and incentives of the provider workforce to support virtual care, including, workflow design, centralized scheduling, and continuing education. And, health systems need to take steps to measure the value of virtual care by quantifying clinical outcomes, access improvement, and patient/provider satisfaction. Include the potential value from telehealth when contracting with payers for risk models to manage chronic patients, McKinsey said.
Investors and health technology firms: These players also can support the new reality of expanded telehealth services. Technology firms should consider developing scenarios on how virtual health will evolve and when, including how usage evolved post-COVID-19, based on expected consumer preferences, reimbursement, CMS and other regulations.
Investors also should develop potential options and define investment strategies based on the expected virtual health future. For example, combinations of existing players/platforms, linkages between in-person and virtual care offerings and create sustainable value. Investors and technology companies also can identify the assets and capabilities to implement these options, including specific assets or capabilities to best enable the play, and business models that will deliver attractive returns.