Invest Now to Save More Later: An Alternative Payment Model Based on Enhanced Home-Based Care

For years, the health care industry as a whole has been working toward smarter ways to price and pay for the services we provide. It’s now widely understood that the old fee-for-service approach, by incentivizing services and procedures regardless of need, drives up spending without making patients healthier. Health systems, payers and providers are busy coming up with alternative payment models that reward better patient outcomes rather than simply more activity, and the results generally are great — healthier patients and money saved.

At OCHCH and OCHN, we believe that home care can be the linchpin of better outcomes and significant savings for many patients, through a care delivery system and alternative payment model that emphasize keeping patients out of expensive acute-care settings in a very logical way: by spending more up front to keep them healthy. We’re excited about what this model, currently in a pilot phase, can achieve.

What drives the concept is what you might call the secret sauce of home care: We are professional eyes and ears in the patient’s home. We know how patients are progressing — or not — sooner than any other provider. We know more about their lives and circumstances than even the best care coordinator. While a nurse or social worker at the hospital is at a computer assessing a patient’s records, we’re looking in her refrigerator to see whether she has enough healthy food. We can see firsthand whether she’s able to manage her medications.

Our partners in the pilot are one health plan and selected hospitals and home health agencies. For the period of the pilot, all of that health plan’s patients who are discharged from the participating hospitals and need home care will be assigned to one of the participating home health agencies. The agency will assess the patients’ needs and call in whatever services are indicated, from physical therapy to nutrition support to a home visit by a physician. An emphasis on virtual care where appropriate will maximize convenience and minimize cost.

We’re convinced that allowing home care professionals the autonomy to give patients what they need, when they need it, will keep patients out of acute-care settings, with all the benefits that entails for their quality of life as well as the bottom line.

The central innovation of our model is that participating home health agencies will be paid the same set amount for every patient, regardless of the case circumstances and whether the patient is covered by Medicaid, Medicare or a private plan. That set amount will be similar to what Medicare generally would provide, but will be 50 to 60% higher than a typical Medicaid allotment and 70 to 80% more than most plans would pay for home-based care.

Naturally, some patients will require more than the set amount and some will require much less. It’s an exercise in risk-sharing similar to any insurance risk pool. The home health agencies will be free to allocate funding where it’s needed most, with no incentive to provide services that aren’t needed.

For the health plan, a predetermined spend amount for this group of patients will provide some financial predictability. And our projections suggest that the overall spend will be cut by 40 to 50%. Those savings have the potential to continue into the future: Investing in care for patients while they are younger likely would reduce the spending need when they become Medicare beneficiaries.

For home health providers like our members, this payment model at long last ends the severe underfunding of our services. To put it bluntly: Paying us more now allows the health system to save much more later, because members won’t be readmitted to the hospital as frequently and won’t have the need to seek expensive emergency-department care for minor care needs.

Most important of all, patients will see their health and quality of life improve.

OCHCH has seen the need for payment reform for a long time, and we’re no longer sitting back and waiting for it to happen. This pilot is our attempt to set change in motion and we’re very excited to see the results.