Ohio Implements Value-Based Payment Reform to Improve Population Health

Greg Moody, director of Ohio’s Office of Health Transformation, has quietly spearheaded one of the most effective redesigns of a state health care payment system in the country, generating cost savings and improving public health by showing providers how the cost and quality of their care compares with their peers.

This value-based cost-savings and quality improvement approach, embraced by Ohio’s employers, insurers, and Medicaid managed care plans, pays for health care value instead of volume by analyzing two factors — how much it costs a provider:

  • To provide high-quality comprehensive primary care, and
  • To treat an “episode of care,” such as treating an acute asthma episode.

Providers are given a report card that assesses their charges, quality of care, and patient outcomes. If they deliver value-based care, they are financially rewarded with a $4 per patient per month bonus. If their care is over-priced and poor quality, compared to their peers, they get bad reviews and no rewards.

Greg Moody, Director of Ohio’s Office of Health Transformation
Greg Moody, Director of Ohio’s Office of Health Transformation

This value-based payment approach with its financial inducements has reduced acute asthma treatment costs by 21 percent and acute COPD treatment costs by 18 percent in 1 million Medicaid enrollees over a two-year period. Not only are the state’s Medicaid and employer plans saving money, patients are healthier because doctors are doing more to keep them well, which benefits overall population health.

“We can spend time fighting about health care coverage, like the federal government has for the last few years, or we can address the underlying health care costs,” observed Moody, a member of the National Academy for State Health Policy’s executive committee. “Today, I think it’s up to states to experiment and explore how to create sustainable health care costs.”

How Ohio Launched Value-Based Payment Reform

Ohio, which has been conducting its health care payment delivery reform experiment for eight years, is finding success with a value-based approach that replaces a pay-per-visit system with one that promotes comprehensive primary care and rewards providers who deliver efficient episodes of care. The state focused on improving care coordination, integrating physical and behavioral health, rebuilding behavioral health system capacity, strengthening home- and community-based services, improving community services for the disabled, and modernizing its Medicaid administration.

To date, a handful of states have taken small steps to develop a value-based payment system, but early results have not yielded dramatic, financial successes and many state policy makers are still casting about for a system that quickly delivers cost savings and quality care. According to Moody, Ohio found it and has spent more years implementing and refining it than any other states.

Moody, who worked for then-Congressman John R. Kasich researching Medicaid funding while staffing the US House Budget Committee, was appointed by newly-elected Governor Kasich to Ohio’s new Office of Health Transformation in 2011.

“Governor Kasich did something I never saw anyone do and it is key to how we got it done,” he explained. “About 18 months before he became governor, he assembled a health care team and told us, ‘I’m not running for governor unless we have ideas to propose.’ Now normally, you start recruiting and developing policy proposals after you get elected, but on his third day in office in January 2011, we had already done our homework and released our strategic plan. Now, eight years later, we are using the same plan.”

Ohio modernized its Medicaid system by creating a stand-alone Medicaid department with a new claims payment system and it provided an online eligibility tool to residents who no longer had to travel to county offices to apply. It also consolidated mental health and addiction services as the state’s opioid epidemic exploded and expanded Medicaid.

State leaders also began engaging partners, including provider groups, health plans, and Medicaid managed care organizations, to identify public health priorities that their payment reforms – in this case applying the episodes-of-care payment system – could support. “The starting point,” Moody explains, “is to be clear about our population health priorities – or in payment terms, define what we want to buy.’”

Ohio decided it wanted to prioritize improvements in three main health care areas:

  • Mental health and addiction, addressing depression, suicide, drug dependency, and drug overdoses;
  • Three chronic diseases: heart disease, diabetes, and asthma; and
  • Maternal and infant health.

Shaping Physician Reimbursements to Improve Population Health

Next, Moody’s office asked high-performing primary care practices what they did to keep patients well. “The problem is none of these activities [recommended by doctors] are properly reimbursed under fee-for-service – for example, holding time for same-day appointments, providing 24/7 access to care, risk stratification of patients, and scheduling based on risk.” Moody knew that a new value-based care system had to reward providers who delivered those successful — though uncompensated — services.

To achieve these goals, Ohio created a Comprehensive Primary Care Model that enrolled 161 primary care practices to serve 1 million patients. Ohio collected and evaluated 1,800 performance reports that included patient cost and care quality measures. It also provided $3 million in “enhanced payments” to providers who delivered value-based care. To qualify for the $4 PMPM bonus, providers had to keep patients well by meeting the new quality requirements, including the same-day appointments, team-based care, patient outcomes, and reduced hospitalizations and emergency department use.

In December 2014, Ohio won a federal State Innovation Model test grant to implement an episode-based payment model statewide. The timing of the grant was perfect, Moody noted. It allowed Ohio to expand the state’s limited data analytic capacity, and create new insights about how best to improve health outcomes while holding down the total cost of care. Ohio could now pull in all insurance claims related to certain episodes of care for its value-based analysis.

For example, to assess a joint replacement episode of care cost, Ohio combined the total cost of the surgeon, implanted device, hospitalization, medication, and rehabilitation, and used the data to compare providers’ cost-effectiveness across the state. “We then take back money from the rates of the high-cost providers (in red) and share savings with the high-value providers (in green),” Moody explained.

To qualify for bonuses, providers had to meet both cost and quality targets. “This creates a powerful incentive for the principal accountable provider to pay attention to the total cost of the episode,” Moody explained, “[which is] very different from fee-for-service, which pays the surgeon the same regardless of other costs.”

In January, 2018, Ohio started paying the 161 practices that participated in Ohio’s comprehensive primary care pilot program $4 PMPM for meeting the basic efficiency and quality targets. “In addition, practices that meet quality targets while holding down the total costs of care compared to peers and based on self-improvement earn a significant annual performance bonus,” Moody explained.

Similar initiatives in other states are starting to yield substantial savings and care improvements. Minnesota achieved cost savings and an 89 percent improvement in quality measures and one regional initiative in northeast Pennsylvania achieved an 83 percent improvement in quality measures.

With this performance data, primary care providers are able to make value-based recommendations when referring patients to specialists, and insurance plans can also promote providers who receive high value-based rankings to their members.

Using Episodes of Care Costs to Tackle the Opioid Epidemic

By breaking down costs within each episode of care, Ohio has also been able to address another population health-related problem – opioid over-prescribing – by analyzing claims information to see which providers over-prescribe. The analysis, for example, revealed a provider who prescribed opioid painkillers 100 percent of the time for ankle sprains — meanwhile the state average hovered below 18 percent. More careful opioid prescribing data collections and oversight has produced a 28.4 percent decline in the number of opioid doses prescribed in Ohio between 2012 and 2017.

While the cost-savings opportunities generated by this value-based system appear tailor-made for simple procedures like joint replacement, its application to more complex care, such as perinatal episodes of care, is not currently clear. While acute COPD and asthma episodes of care costs dropped markedly 2014 and 2016, perinatal costs increased 3 percent, about what Moody would have expected in a conventional fee-for-service environment. “At this stage, these results create new questions,” he said, “for example, how do we make complex episodes more sensitive to value-based results? How do we identify the greatest sources of value in complex care and share that information with providers who can use it to improve?”

Ohio recently expanded its episodes of care data collection from three episodes to 43, which include many opioid clinical and quality measures. “Eventually, all of this needs to be transparent to the public and easily available online — it’s what we need everyone to see to make real progress on population health priorities,” he said.

Moody considers his work in Ohio as the pinnacle of his professional experience. He encourages other states to replicate Ohio’s approach. “You don’t wake up one morning and do this, it took years for us to get buy-in to make this happen,” he said. “This is something any state can do, but it takes time. We spent a lot of time defining the key health care delivery problems in Ohio, inventorying existing resources, and identifying the two to three policy changes that would leverage change, it’s a fairly rigorous process.

“There are now more than 30 states with gubernatorial elections in November, those candidates should start now to develop their policies and approaches,” said Moody, who will step down from his job in December when Gov. Kasich leaves office. “Ohio has created a blueprint to make these reforms. There are other ways to do this and be successful, but it’s critical that candidates start thinking and planning now.”

Read Ohio’s Health Transformation report, Moving Ohio’s Health Care Payment System Upstream.