Supporting the Future of Primary Care in California Through Aligned Hybrid Payment Models

Health Highlights

Editor’s Note: The vision of primary care as the foundation for all health care is one shared by many who work in and around the U.S. health care system. Patients, policymakers, providers, payers and purchasers generally agree that primary care promotes better health for populations through care that is built on trusted relationships. In the past two years, the COVID-19 pandemic has made the gap between vision and reality all too clear. In the spring of 2020, the California Health Care Foundation reported that one-third of California primary care practices felt in danger of permanent closure because of the financial consequences of the pandemic.1

In a new white paper, funded by Blue Shield of California, Manatt Health makes the case for widespread adoption of “hybrid” payment models as an immediate action to support primary care’s future in California. The paper, summarized below, calls on California payers and purchasers to work together on implementation through strong coalitions that have already been established by the Purchaser Business Group on Health’s (PBGH’s) California Quality Collaborative (CQC), the Integrated Healthcare Association (IHA) and others. Click here to download a free copy of the full white paper and here to register free for our new webinar based on the paper.


Strong Primary Care Is Best Supported by Payment Models With Clear Upfront Investment in Population Health

In the decade following the passing of the Affordable Care Act (ACA), payers in every state launched new payment models aimed at improving population health, including accountable care organizations (ACOs) and incentives for primary care practices to take on advanced care delivery models known as “patient-centered medical homes.”

More recently, a handful of payers and purchasers around the United States have taken the payment models a step further into hybrid designs for primary care that decrease the level of fees paid on a fee-for-service basis while increasing the level of population-based fees, performance-based incentives and overall investment. Under the hybrid model, the level of overall reimbursement that is rolled into the population-based fees can be increased over time, providing a bridge between fee-for-service and payment that is predominantly capitated at the practice level in a way that reflects value to patients.

Well-designed hybrid models provide predictable revenue for practices that are tied to the populations they serve while allowing them the opportunity to increase overall revenue when they achieve positive health outcomes for those populations. With revenue largely decoupled from volume—with important exceptions such as immunizations and well-child visits—practices can organize their teams more rationally around patient needs. They can design their teams and workflows to serve the needs of their populations and build teams of licensed and nonlicensed care providers to meet these needs.

There is new momentum around hybrid primary care models, hastened by COVID-19 and the report by the National Academies of Science, Engineering and Medicine (NASEM) earlier this year. NASEM’s report squarely and specifically recommended hybrid payment for primary care as the default payment methodology.2

In California, Blue Shield of California unveiled its Primary Care Pay-for-Value Hybrid Payment Model earlier this year, having accelerated development and scale due to the impact of COVID-19 on independent practices. The model follows the NASEM recommendations by reimbursing through a mixture of traditional fee-for-service and per member per month (PMPM) payments. Under the model, the PMPM primary care service payments are based on expected service patterns and utilization for the average size of the practice population, and payments are adjusted monthly to account for expected utilization differences based on gender, age and health conditions.

In addition to this predictable base, Blue Shield makes a “pay for value PMPM payment” for each attributed PPO member to further support a broad range of care coordination activities, such as proactive outreach to patients and families, coordination with specialists and labs, and medication reconciliation and review. A “performance incentive” element—paid biannually—allows practices to earn additional revenue based on population outcomes.

The Value of Harnessing Alignment Across Multiple Payers

Under the vision of primary care as the foundation of all health care, primary care is a public good with greater value than the sum of its parts. Primary care providers offer the best care at the lowest cost to all when they can take a practice-wide approach to care that is as payer-agnostic as possible. Practices are also most likely to adopt and succeed in a value-based payment environment when a critical mass of their patient panels are included in value-based payment arrangements. To progress toward more hybrid models that work for primary care practices, payers and purchasers should work on the following priorities:

1. Aligned Measures

The California Quality Collaborative (CQC) has been working since 2019 to create a unified measure set for supporting high-quality, high-value “advanced” primary care, employing a multistakeholder process that included purchasers, health plans, providers and patients. The resulting set of 12 measures, which itself was based on pre-existing state and national measures, is able to be implemented across populations and payer types and can be clearly cross-walked to a set of agreed-upon Attributes of Advanced Primary Care.3 Wide adoption of this measure set, whether or not as part of hybrid models, will help practices maintain focus and decrease low-value administration of multiple measure sets.

2. Aligned Data Sharing Approaches

Strong primary care practices use multiple data sources to guide care. While much of that data resides in the practice’s own electronic health records, data about the care patients received outside of the four walls of the practice can be equally or more important. It must be transmitted to the care team through payers’ claims data, through health information exchanges with other providers or through a combination of the two. Newer payment models, such as the hybrid primary care approach, require integration of data from multiple sources to accomplish risk adjustment of the population-based payments that better reflects clinical reality.

California already has strengths on which to build. The IHA’s “Align. Measure. Perform.” (AMP) program has long aggregated results across plans when measuring provider organization performance for incentive payments and public reporting. AMP aggregates information at the level of larger health organizations, not at the level of each primary care practice. More recently, California passed legislation to enable a new approach to data sharing called the Health Care Payments Data (HPD) Program, for which the IHA will provide the infrastructure in partnership with OnPoint Health Data. The HPD Program is scheduled to go live in 2023 and will be an all-payer claims database with multiple use cases, including making information on health care spending more publicly available.4

3. Aligned Hybrid Payment Structure for Primary Care

When practices are paid multiple ways under multiple contracts, operating a business becomes unnecessarily complicated. It takes multiple payers willing to invest and pay upfront population-based fees in a similar fashion to be able to create and sustain services such as dedicated care managers, pharmacists for medication reconciliation, telehealth, remote monitoring and integrated behavioral health.

California already has strong existing work to build on and extend. In 2022, the CQC will pilot the use of its aligned measure set across multiple payers and purchasers, and the PBGH has been engaging purchasers on principles for reforming payment for advanced primary care, including through a new “Common Purchaser Agreement.”5 Aligned with these principles, the IHA has been facilitating discussions for nearly a year to explore the development of a standard hybrid primary care payment model to be available for voluntary adoption by its providers with health plans. Finally, California has been a selected testing ground for the federally led Primary Care First payment model since the beginning of 2021. Under Primary Care First, traditional Medicare pays participating practices under a hybrid model, consisting of a population-based fee plus a performance-based element, with supplementary fee-for-service payments.

Barriers to Scale and Spread of Value-Based Primary Care Payments in California

All payers and purchasers in California should swiftly move to a hybrid model for primary care payment. However, at least three major barriers exist that must be overcome.

Barrier 1: Operations and Cost

Operationally, payment systems are set up either for fee-for-service payments or for global capitation payments. Value-based payment models, including the hybrid primary care approach, require different operational processes, including continuous adjustment of payments using data flowing back and forth with practices. Even within health plans, new levels of coordination across lines of business are required to create an enterprise approach to the new payment models. Additionally, intersections with other existing APMs, such as ACOs, can further complicate the work. Payers and purchasers should not expect the cost of the hybrid approach to be lower than the status quo in the short term. Rather, the incremental cost and effort should be understood as an investment in better care for better outcomes as well as a more rewarding role for primary care teams.

Barrier 2: Competition Concerns

U.S. health care is competitive for both payers and providers, both of which understand that they must not discuss prices with one another. A culture of concern about anticompetitive activities can spill over into a reticence to discuss payment models even in a general way. Fortunately, California has a strong foundation of competitors working together to address industry pain points through the CQC, the IHA and others in a spirit of “co-opetition.”6 Through the detailed work that has already been done on quality and model attributes, California already has developed a culture of information sharing that builds value across competitors without crossing into pricing or other legally sensitive subject matter.

Barrier 3: Not Enough National Momentum

The vast majority of U.S. primary care practices are still being paid purely fee-for-service for their patients covered by traditional Medicare. For state Medicaid programs around the country, the progress has been slower still, with less than 25% of all Medicaid payments tied to APMs that move beyond pay for performance,7 despite federal guidance that encourages states to accelerate the adoption of new payment models, including for primary care.

States cannot wait for a national impetus to act, although federal activities will undoubtedly accelerate change in states and localities. There are promising signs in the California state legislature. Proposals were recently considered—and are expected to be taken up again next year—to establish a new statewide framework for measuring and pushing up total health care spend on primary care and behavioral health through a new Office of Affordability, following a strategy pursued in recent years by other states, including Rhode Island, Delaware, Colorado and Oregon.

A Call to Action

To make meaningful progress, the health care sector must work together in the following areas:

Call to Action

1. Payers and Purchasers: Double Down on Alignment at Existing ‘Tables.’ 2. State Government: Make a Commitment to Primary Care Payment Reform. 3. Payers, Purchasers, Providers and Patient Groups: Launch Pilots, Refine and Scale.
  • Through existing modes of collaboration and building on significant work already done, payers and purchasers should accelerate work on payment for advanced primary care, focusing on hybrid models that combine stable population-based payments, performance incentives and reduced fee-for-service payments.
  • Following this year’s NASEM recommendations, these groups can and should set explicit targets for how such models will become the default mode of payment, with a focus on common measure sets and effective data exchange.
  • California should continue to use its levers as a purchaser through Covered California, CalPERS and Medi-Cal to promote value-based payments for primary care in general and, where possible, the hybrid model specifically.
  • California can help the market make progress through legislation. The state should adopt the recent proposals for an Office of Affordability that would monitor and set benchmarks for the proportion of total spending to be directed to primary and behavioral health care.
  • Payers and purchasers should proceed with testing models that implement the CQC’s common quality metrics.
  • Blue Shield and other payers and purchasers should test the hybrid model, starting on a small scale with committed early-adopter practices.
  • Primary Care First is a promising medium for testing the hybrid model alongside traditional Medicare. More payers may consider joining the test over time.

1 “COVID-19 Tracking Poll: One-Third of California Primary Care Doctors Worry Their Practices Won’t Survive,” California Health Care Foundation, May 2020. Available at https://www.chcf.org/blog/covid-19-tracking-poll-one-third-california-primary-care-doctors-worry-their-practices-wont-survive/.

2 “High-Quality Primary Care Should Be Available to Every Individual in the U.S., Says New Report; Payment Reform, Telehealth Expansion, State and Federal Policy Changes Recommended,” NASEM, May 2021. Available at https://www.nationalacademies.org/news/2021/05/high-quality-primary-care-should-be-available-to-every-individual-in-the-u-s-says-new-report-payment-reform-telehealth-expansion-state-and-federal-policy-changes-recommended.

3 “Advanced Primary Care Measure Set: Alignment with Attributes,” PBGH and CQC, June 2021. Available at https://www.pbgh.org/wp-content/uploads/2021/06/CQC-Standards-SlidesFINAL.pdf.

4 “HPD Program Advisory Committee,” California Department of Health Care Access and Information (HCAI). Available at https://hcai.ca.gov/data-and-reports/cost-transparency/hpd-program-advisory-committee/. Accessed Sept. 2021.

5 “Employer Health Plan Common Purchasing Agreement for Advanced Primary Care,” PBGH, Oct. 2021. Available at https://www.pbgh.org/wp-content/uploads/2021/10/PBGH-Common-Purchaser-Agreement.pdf.

6 “The Rules of Co-opetition,” Harvard Business Review, Feb. 2021. Available at https://hbr.org/2021/01/the-rules-of-co-opetition.

7 “APM Measurement Effort,” 2019, HCP-LAN. Available at https://hcp-lan.org/workproducts/apm-infographic-2019.pdf.

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