Podcast - The Private Payer's Perspective on Value-Based Care

Morgan Ribeiro: Welcome to Counsel That Cares. This is Morgan Ribeiro, the host of the podcast and a director in the firm's Healthcare Section. On today's episode, we will be continuing our value-based care series. And I'm actually going to be turning it over to Daniel Patten, who is a partner in the firm's healthcare regulatory and enforcement group.

We have a guest joining us today, Brendan McDonald, who is a Vice President of Provider Reimbursement and Network Optimization with Highmark Health. For those who aren't familiar, Highmark is a nonprofit health and wellness organization and an integrated delivery network located in Pittsburgh with operations and health insurance plans in Pennsylvania, Delaware, West Virginia and parts of New York. I think Brendan has a lot of insight and experience to share as it relates to this ongoing conversation that we're having around risk-based, reimbursement and value-based care.

So, with that introduction, I would like to turn it over to Daniel.

Daniel Patten: All right, let's get going. We got a great guest today, Brendan McDonald from Highmark. He's the VP of Provider Reimbursement and Network Optimization. How are you doing today, Brendan?

Brendan McDonald: Good. Excited to be here with you this afternoon.

Daniel Patten: Absolutely. Full disclosure: I've known Brendan for a little while, but as I've entered the value-based space more and more, I've been reaching out to Brendan. And he's always really provided really great insight, practical approach and great perspective on the industry and its current state, thoughts on where it's going and really helped me frame my understanding of a lot of issues. So as we're doing some of these podcasts, it made sense to put him on here and hopefully be a resource to any listeners as well. So, Brendan, I appreciate you jumping on, man.

Can you give a little background on yourself and Highmark?

Brendan McDonald: Yeah, definitely. I kind of cut my teeth in healthcare on the consulting side, working across the healthcare ecosystem, payers, providers and investors before joining Highmark Health. Currently at Highmark, as Daniel mentioned, I lead our provider reimbursement network optimization team. What does that mean? It really encompasses the full spectrum of payment, fee-for-service to value-based, as well as a number of network management functions that help support the overall success in the space. Highmark, I would say, is very much more than an insurance company. It's a large, diversified healthcare business. While we started as a Blue Cross plan, we have nearly 40,000 employees at this point, north of $25 billion in revenue. We insure 6 million lives across the country, across commercial Medicare, Medicaid, Affordable Care Act products.

Highmark Health has a care delivery arm centered in western Pennsylvania around Allegheny Health Network, which is a $4 billion health system with 14 hospitals and 300 different clinical care sites. We have a dental solutions company, which covers 9 million lives including the TRICARE dependents and service members. We have a reinsurance company, technology solutions platform and company, as well as a number of interesting partnerships and joint ventures with organizations like Penn State Health and ChristianaCare in Delaware.

Daniel Patten: Very good. So it sounds like Highmark is a large institution, to say the least. What sets Highmark apart from maybe other payers? What do you guys do differently?

Brendan McDonald: I think there are a number of things. To start, in terms of framing this, we can all, I think, agree that healthcare is very reactive, overly complicated and expensive. Highmark has put a stake in the ground and really wants to move to a much more predictive, frictionless, cost-effective model built around the people and those who care for them, the clinicians. We have deemed this our living health model and really want to fundamentally change the relationship between people and their clinicians. The approach that Highmark is taking here is really to combine technology, our deep understanding of customer behavior, clinician best practices and our ability to see the journey of a customer and their clinician across the care continuum. We are thinking about, one, how do we simplify it? We're doing this in a number of ways, from serving clinicians key insights and the data at the right time and place to making the member digital experience much more seamless than it is today. We're spending a lot of time thinking about how do we personalize care delivery and meet our members where they are, whether that's through the digital experiences I just mentioned or things like benefit design. And we're doing this in what we call a very blended way, getting the right people to work together at the right time. And there are a number of examples of the blending that we're doing around care delivery, the member experience, the way in which the financing or payer arm is working to really bring all of this together. It's a very bold goal, but given Highmark's unique assets, we're very well positioned to do this.

Daniel Patten: Super helpful. All right, let's jump in. So what is value-based care? Brendan, I'll give you the floor.

Brendan McDonald: There are a lot of various terms that are used to describe what I think is something that is very similar, but at the end of the day has the same goal. We talk about value-based care. We talk about value-based reimbursement or payment. We talk about alternative payment models. And I think at the end of the day, from my perspective, it's really an intervention that's meant to address shortcomings in the current business model and historic payment structure.

If you look at the current system, the incentives are upside down. Often providers and clinicians are paid to treat sick and treat more sick versus really thinking about how do you holistically manage health and manage to a healthier population. I think at the same time it is also meant to address the excess wasteful spending, but also pull levers around quality and equity issues by realigning and redefining how services are purchased and how they're valued.

Daniel Patten: Brendan, on my end, I hear a lot, spending less money equals less to the patient, right? This is problematic for the patient, helping line payers' or providers' pockets. Obviously, that's a pretty doom and gloom perspective and attitude. But how would you address folks that say this is just to capture savings and could be detrimental to the patient?

Brendan McDonald: I think it has to be a win-win-win, right? It has to be a win for the patient or the member, it has to be a win for the clinician, and it has to be a win for the person financing this, right? If it only works for one or two of those, we're going to fail. And that is something we spend a lot of time thinking about on a daily basis. How do we really ensure that we're meeting the members' needs, that we're making it a better experience for the clinicians and that we are really thinking and driving that total cost of care.

Daniel Patten: That's great. And I always point to the fact that the concepts — these reimbursement cost containment mechanisms, like prior authorization, right? It takes some of the rigidity and just traditional care delivery, right, and really frees it up and makes it more patient focused. I agree 100 percent with you there. And it really needs to be a win across payer, provider, and patient.

All right, Brendan, let's move on to kind of where are we now? What's driving value-based care, and how does CMS fit in?

Brendan McDonald: Yeah, I think there are a lot of forces behind this: market inefficiencies, policy, regulation and what you mentioned, the largest purchaser of care, and that is the federal government. What we've seen from a private payer perspective over — call it the last five to seven years — is very much an acceleration in the adoption of these alternative payment models. If you look at industry information, these have nearly doubled since 2015, and there's a reason for that. When I think about CMS being the largest purchaser of care, and the strategies that they have outlined... yes, that is one of the major drivers. I would say there is a large focus on this across the board, and that is really driving the growth and the adoption of these models.

Specific to CMS, so the Center for Medicare and Medicaid Innovation... in their name, I would say they are a very innovative group. And what they have going for them is really the ability to test and learn at scale, a scale that no other private payer has. When you look at what they have done since their inception, they have deployed over 50 models, I think, at this point.

There are arguments on both sides around the success of these alternative payment arrangements that they've deployed. There was a recent CBO study that estimated CMMI actually increased costs versus cut them, to the tune of about $5.4 billion. What I will say is there are very bright spots in what they've done. When you look at specific programs that they've deployed, I can point to one, the oncology care model — but what I would say is more important is the halo effect that CMS and CMMI have driven across the industry.

Daniel Patten: Brendan, what about the private payer's perspective on the refresh?

Brendan McDonald: Yeah, I think it was very thoughtfully designed. And there are a few things that stick out to me and also hit home from that private payer perspective. The first is a streamlined portfolio. The count and the complexity of programs has to be reduced. Providers need to understand the incentives and how to win. This is something that we're internally spending a lot of time thinking about. How do we cut some of that complexity out? How do we streamline the incentives and that portfolio of programs that we're delivering to the market in a much more meaningful and thoughtful way?

The second thing that stuck out to me was the health equity focus. We've been hearing about this for years, and I would draw a parallel to behavioral health. Health equity is absolutely paramount for us to be able to fundamentally change the care, delivery, the quality, the experience and the cost. There has to be a focus on the inequity that occurs today.

Third thing that stuck out to me was their focus on high-value services — care coordination, primary care, behavioral health integration — really thinking through how to define those and set the right structures in place.

And I'll give you a very tangible example. I was talking to an MFN recently, and this hit home, when he said he actually gets paid more to read an ultrasound than to actually spend time with a patient who is high-risk developing a care plan, making the connections to the services and the benefits that they need to have a very successful pregnancy. And to me— especially in the role that I fit in — drawing that connection back to high-value services, we'd much rather have somebody spending time making those types of care plans, those types of connections to the right resources, than sitting behind a computer screen reading an ultrasound. Obviously, that's very important too, but if you start to think about where are we spending time and money today versus where should we be spending time and money tomorrow, I do think that that's a key example there.

And then lastly, specialty care and the integration and the coordination of specialty care within their models. ACO models, the MSSP models, private payer shared savings and shared risk models have really focused on primary care. I think it's really exciting to see the focus that they want to put on the specialty integration into that.

Daniel Patten: Yeah, that's really well said. Brendan, how do you approach value-based care for different plans? For instance, a Medicare Advantage Plan versus a commercial plan versus a Medicaid plan. Is it different?

Brendan McDonald: The simple answer there is yes. I'll take a step back because I think it is very important to understand the business and the economics of the payer side, which for private payers versus CMS, is very different.

If you think about a private payer, and this is variable, but on the commercial side of things, self-funded plans represent about 60 percent of the covered lives. And when I say self-funded plans, these are the large independent employers who are self-insuring their members, their employees, their beneficiaries. The economics of that and the disease states and the cost for the commercial line of business is much different than that of MA or Medicaid, but the way in which we think about the value equation is very different, right? There are customers who are self-funded plans, basically acting as the insuring entity, who are paying the claims dollars, who are funding the incentives. There has to be a value story not only to the member and the clinician but also to the payer here, who is actually the employer in more cases than not. Very different from Medicare Advantage or Medicaid, where MCOs or health plans are basically acting as that delegated entity, managing the risk, managing the member experience and managing the provider side of things. That's really important to understand for a few reasons. The structures that you put in place have to be really designed to pull on different levers of value, which is different between a Medicaid plan and an MA plan, a commercial ACA plan, a fully insured or an ASO account.

The second thing I'd mention there that's really important to understand is the drivers of cost and the disease burden is highly variable. When we look at our commercial line of business versus our MA versus our Medicaid, yes, there are common themes. Oncology care is expensive no matter what card you are carrying or what's in your pocket. But things like maternity care — very good example — it's important to Medicaid, it's really important to commercial payers, it's almost not applicable on the Medicare Advantage side of things. When we think not only about the types of models that we're deploying but also what is driving the cost, where does the opportunity sit, we do really have to look by line of business within the broader population.

Daniel Patten: Brendan, that's super helpful.

So, we talked where we are currently. Where are we headed, right? What does the value-based payment look like beyond today? The Biden Administration talking about APMs across the board by 2030 — times are ticking. So, I imagine there's going to be a lot of evolution, a lot of change.

Brendan McDonald: I agree with the statement that's included in that question. It's only going to become more material, more important to the members, the customers and definitely the providers. I can tell you we've seen that across the last five years, not only the interest in these types of models but also the success in these models. Providers are starting to understand the inner workings of these and how to win at them, and that's really exciting, especially from the health plan perspective. These are meant to drive the outcomes that are identified as important to the members, again, putting that member in the middle there. We've seen that both in the breadth and the depth, and I think that is only going to continue for the coming years, and it's really exciting to see and be a part of.

Daniel Patten: Yeah, that's well said. Brendan, one thing I'm excited about as a patient or potentially under a value-based or risk-based contract is seeing more and more opportunities and benefits, right? The focus on giving the patient new experiences, new benefits, technologies, right?

Before value-based care, the focus of providers is what is reimbursed as opposed to how do you make the patient healthier. That could be new wearables, that could be new apps for tracking and just integration across the board, which is exciting for me. Do you see the continued push to really tech-driven, but also patient-centered experiences? Is that picking up steam? Is that really a focus in the industry?

Brendan McDonald: Yeah. Yes. And it is core to some of the work that we're doing at Highmark.

I mentioned earlier on, the living health strategy and really bringing together the digital experience, the technology platform and underpinning to help support that. I think where you were going with the question — it's very true and exciting. We're starting to see these benefits and products built around the consumer needs, which historically healthcare has not been great at. You can point to supplemental benefits on the MA side and/or interesting benefit designs in commercial products. What I think this will help drive as it relates to value-based care, frankly, is success, right? The providers are going to be able to meet the members' needs in a differentiated way, which they historically have not either been able to or had the incentive to.

There are really interesting benefits that CMS is letting payers deploy into the market. There are really interesting technology solutions and benefit structures that we are thinking about. The commercial side of things that will, again, meet the member where they are and really help drive that whole person's health. At the end of the day, what that means is providers will become more successful at managing health holistically — delivering kind of that aim of value-based care — but also winning in new economic models.

Daniel Patten: Brendan, when I think about risk-based contracts specifically, I think there's two main categories. The first is the population level contract and attributed pool, which is generally run by primary care, right? The PCPs. The other is disease-specific. You mentioned oncology earlier, chronic kidney disease, those are common risk-based contracts.

Can you give us your perspective on why it's divided right now, really, in those two categories? And do you see additional categories coming down the line? And if not, what's it going to take to find different categories or different models?

Brendan McDonald: So, to directly answer your question, Daniel, I think there is still work to be done. Thinking through the integration and interaction between those population-based models or contracts and the disease-specific ones, before we can ever start thinking about the next two iterations of that, whether that is bringing ancillary providers or other support clinicians into the actual core contract — and I'll unpack that here momentarily — but if you think about these primary care focus models, really looking at the aggregate population level quality, outcomes, and cost... That's not going to go away. That is something that is going to be core to providers succeeding in this and thus members and beneficiaries succeeding and really changing and course-correcting the overall outcome.

What I will say is there is a very specific place for those disease-specific models. Take oncology care as an example. In talking with primary care docs, they do not want to be the quarterback of oncology care, right? They look to oncologists, really, to drive the care coordination, the experience and the outcomes there. That is their expertise. But going back to that PCP, what they should be thinking about — and we're seeing this in the industry and a lot of the providers that we work with — is how are we managing this at scale and across the needs of our population? How are we making referrals to the highest quality, most efficient specialists? Whether that is somebody who needs oncology care or if that is somebody who needs a knee replacement, a more procedural episode. And when you can start to make those connections between the population level needs and the very disease-specific or acute needs of a population and doing that in a very thoughtful, integrated and coordinated way, you're going to start to see those two models come together and be very successful.

Daniel Patten: That's well said. Yeah, I agree. That's great. All right, let's shift to the last segment: some practical discussions. I'm going to put you on the hot seat a little bit — I need to come up with some name or get some sponsor for a hot seat — but I put some questions together that I get a lot from clients and I think people want to hear your thoughts on.

So, first question. What's one thing that a provider, a vendor — any service provider — maybe doesn't understand on the payer end? What do you want them to know?

Brendan McDonald: So, I mentioned the economics earlier. Talking about the different segments or lines of business, I would say the service and or product fit with the market there is critical because those needs are very different.

I think there are a couple of other things that come to mind, in terms of things to be aware of. ROI, return on investment, no different than any other industry. We are doing those calculations, and we have that calculus applied. It's a little bit different for a health plan in certain respects. One, yes, there needs to be that fit strategically. But the value equation is a little bit different than just revenues and costs. Quality, experience, administrative cost savings, return to the customer are all kind of key aspects of that value calculation. And yes, some of them exist in other industries transparently, but I think it's a little bit different when we think about the fact that there is care getting delivered at the end of the day. And that equation and that ROI is really critical in thinking about what that return to the customer looks like.

Secondly, or I guess third, I would say the clinical aspect of things. Health plans do this in a very different way than providers do. Highmark is working very closely with providers to think about care delivery and the clinical transformation that's needed in a different way. Being able to understand the health plan side of clinical services, the provider care delivery, the intersection there, is very critical, I think, to the value proposition to the members and to the customers.

And then lastly, I would say, pretty straightforward, but a proven track record and demonstrable outcomes. To make this a little bit more specific, we hear from providers and vendors and consultants, "We'll reduce readmissions." We all agree that this is a good thing. How do I know that this model, this care delivery asset, this specific intervention was the driver of that? That's a really complex equation. We work with very good actuarial teams. That's a hard thing to unlock. If you can make that easy for us to understand, replicate and scale, it makes the integration of these types of services — these types of care models — into the payor ecosystem much more straightforward.

Daniel Patten: I ask for one, I get four. That's a good hot seat, Brendan. Well done.

Moving on, we talked earlier about those two categories, the population-level risk contracts, the disease-specific risk contracts. That kind of leaves out the non-specialist providers, right? The dieticians, the physical therapists, are critical to care and critical to patient quality and outcomes, but they're not really driving those risk contracts. Do you see that changing? What has to happen for that to change?

Brendan McDonald: Interestingly, I've had some recent conversations on this topic and very much agree with the point you made there. They are absolutely critical to the care delivery aspect. It's very difficult for an orthopedic provider to be successful without physical therapy as part of that care delivery and that care model. Same thing with dieticians. It's very difficult for a nephrologist to be successful in delivering care to a patient that has chronic kidney disease or an endocrinologist delivering care to somebody who has complex diabetic needs. And I think their role is going to evolve over time.

What we've really seen to date is their integration into the care models to help support that high-end, complex care, managing those chronic diseases, managing those procedural episodes and really helping to drive the efficiency and overall outcomes that are needed for the member to be successful, the payer to be successful and that clinical care delivery model to deliver the quality, the cost and the overall outcome.

Daniel Patten: That makes sense.

All right, let's wrap it up. One final question. As an attorney, right, I'm not really an active participant in the healthcare delivery space. I'm not a payer. I'm not a provider. I guess I'm a patient, but not when I'm at my desk. So, what I see a lot from my point of view is sometimes wires cross between payers and providers. Misunderstanding, both trying to work together, sometimes they're just not in sync. I get the question a lot, why can't I get a new contract? How do I work differently with that payer? And wanting to essentially say, I want value-based now, and just kind of skip to the happy ending, right? It's hard to get everybody in line and in step.

So, from your perspective, what's some advice for working with payers? Answering those questions of how does a relationship with the provider evolve and do a different type of contract or a new contract, things like that. What advice would you give to maybe the provider/vendor side of the house?

Brendan McDonald: It's a really good question, Daniel.

I think I'll start with framing it up around data. It's critical to how all organizations, but also payers, make decisions. Being able to measure outcomes, understand care delivery patterns, measure the efficacy and the efficiency of the network is always the starting point, and that means you've got to be in network with a payer. That said, I think value-based payment is very much in the early innings, and it's a journey. We are always in the market for new, innovative, thoughtful ideas. I think I'm humble enough to say that we don't know it all. We are often surprised by what our network brings to us, and we're always willing to entertain those types of conversations.

Daniel Patten: So it sounds like starting a relationship, right? Baby steps. You need to walk before you can run. That makes sense. Makes a lot of sense.

Brendan, I appreciate your time, man. This is very helpful. I feel like I learned a little bit. As always, really good practical take, and I appreciate you spending a little time with me this afternoon.

Brendan McDonald: Awesome.

Thanks so much, Daniel. Thank you all.