Dr. Kara Odom Walker, secretary of the Delaware Department of Health and Social Services, last month announced an initiative to better prioritize patient outcomes in the state’s health care system. The agency will now give additional weight to what’s called value-based care when determining payment to Medicaid managed care partners. These providers receive Medicaid payments through the state to serve low-income patients.
Their payments are currently based on the volume of care, such as the number of procedures, hospital stays and tests, rather than quality, impact or efficiency. We asked Secretary Walker about how she developed the program and what it could mean for health care in Delaware.
When did you become aware of the value-based care movement? What appealed to you about it?
I became aware of the value-based movement as a practicing family physician and while studying health policy. During my residency in a safety-net hospital, we very cautiously managed costs for our patients and chose tests and consults carefully. After residency, I was in new settings where I was trained on how to document the right level of care to get the highest levels of reimbursement. There was a focus on ordering “more” instead of the “right” amount. During that time, I realized that much of the care provided was not tied to any value to me or to the patient. You simply were encouraged to have a diagnosis and bill various codes. I also saw that the incentives to coordinate care across practices, specialties and sites was not coordinated and became fractured mostly due to this code-by-code approach.
This initiative is limited to providers in the Medicaid Managed Care Program. What impact do you anticipate on the state’s larger health care system?
We believe this will accelerate the acceptance and adoption of value-based reimbursement across all health care markets. As this develops in the Medicaid program, I believe we will see similar adoption of accountable care organizations (ACOs). In these models, providers are paid for the total cost of care across the population. They can gain rewards if cost and quality targets are met, but may be subject to penalties if targets are missed.
What role does enforcement play more broadly in your view?
Without a strong enforcement mechanism, we have no leverage to ensure that we make progress in improving our quality metrics and promoting value-based contracting. My hope is that penalties will not need to be applied and we will work collaboratively with our partners to ensure success. Penalties create both an incentive and a disincentive to change the way we do business. Simple encouragement is not enough. We have to build the value model into the business proposition. Putting in penalties will call attention to the need to examine waste and unnecessary care.
What barriers exist to the wider adoption of value-based care?
We recognize there are barriers in moving away from the traditional business model. If it were easy, the entire country would have adopted new models. If the usual method of revenue involves increased hospital stays and encouraging more tests and procedures, then some in the system of care will have to be reoriented to keep patients healthy and out of the hospital. That requires tracking health rather than use of care. It also means that everyone needs to be better coordinated with real-time data.
Delaware has some of the highest health care costs in the country. How will this initiative affect costs?
I believe our health care costs, when compared to health status indicators, suggest that opportunities exist for Delaware to provide services to citizens in more effective ways. We must use every lever available to drive value-based care. Estimates suggest that 30 percent to 50 percent of all health care costs are unnecessary or wasted care. If we can trim just some of that waste out of the system, we can provide predictable budgets for hospitals, providers and caregivers, and greater flexibility to focus on health outcomes.
