The Impact of Covid-19 on Value Based Care Programs


With the advent of the COVID-19 pandemic, many ACOs who had enrolled in program models prior to the pandemic were stuck feeling uncertain about the savings goals they’d be able to achieve. In a survey of ACOs across the country conducted in 2020, the majority of respondents reported they were considering leaving the program due to unforeseen risk. 

The transition to coordinated care models, such as NGACOs, requires systematic changes across infrastructure, personnel, and the operations of an organization. Not only do real changes have to be made internally, this paradigmatic shift towards value-based care requires a concordant rethinking by physicians and organizational leaders alike. 

For many ACOs though, this sense of uncertainty was not warranted: Pre-pandemic estimates ballpark the impact of COVID-19 on Medicare spending between $38.5 billion and $114 billion for the 2020 calendar year. However, in reality Medicare spending was ~7% lower, across the board, between 2019 and 2020. These decreases are not to indicate that patients were not getting sick, but rather, the sheer volume of routine medical checkups, procedures, and ambulatory health services that patients postponed offset the costs of care precipitated by COVID-19. 

While it remains unclear the extent to which forgone health services during the pandemic impacted overall spending, one thing is certain: just because people stop seeing their PCP does not mean they do not need to. There will therefore likely be a long-term impact of ‘pent up demand’ and deteriorated health due inconsistent health management during the pandemic. Countless studies emphasize the direct connection between routine primary care visits and lower health costs. Large portions of the population are getting by on a bad ankle or another health ailment because they would rather not risk catching COVID-19 from a trip to the clinic. Unfortunately, this drop in utilization results in PCPs missing out on revenue that comes from volume-oriented Medicare fee-for-service. 

However, as vaccination rates rise, and the impact of the pandemic hopefully abates in the coming months, much of the healthcare system will have to shift its focus away from management of COVID care and towards managing the world of other health issues that patients continue to face. With so many people forgoing care during 2020/21, the pent up demand will place strain on the healthcare system, primarily for PCPs. We recently wrote about the challenges that Primary Care Physicians will face in the coming years, in recognition of the growing gap between demand and supply of primary care services. Whether we have fully turned the corner regarding COVID-19 recovery is yet to be determined, but what is clear is that the impact of the pandemic will exacerbate these trends.

Though healthcare spending during the pandemic did not surge as was anticipated by some ACO participants, these organizations rightfully were concerned about unknown risk. Some ACOs have spent money and time on the paradigmatic shift towards value-based primary care. Such a shift in processes is necessary for any organization to succeed under a new healthcare model, but it is not automatic, nor costless. Rather than revert back to old practices, organizations should consider new and emerging models that can suit organizational needs.

As the bad ankle turns into a chronic joint condition, and other minor health problems cascade into bigger ones, models that focus on preventative care will seize the day. Direct Contracting is well equipped to handle all of this uncertainty. With the capitated payments of DC, physicians are not penalized for a drop in utilization–they receive the full cost of patients’ care as a lump sum and are given the directive to maximize efficacy and quality within patient care. The same wisdom that guides investment bankers to diversify their portfolios based on risk can be applied to a physician’s patient panel. Taking on a mix of risk exposure across one’s patient panel can allow the flexibility for shifting focus towards preventative care. This diversified approach can provide some certainty via capitating a portion of a provider’s panel, while maintaining the bulk of revenue streams from fee-for-service payments–thereby allowing providers to hedge their exposure to the unknowns of the pandemic, while moving forward into more advanced forms of value-based care.

The NGACO chapter in the value-based care book is rapidly nearing its end. The program was granted an extension by CMS due to the unforeseen changes brought about by COVID-19, however, NGACOs will have to progress to the Direct Contracting model or else sunset their Medicare model participation. 

There were important lessons learned from the participants in the earlier performance years of NGACOs, and those lessons manifest themselves in the methodologies and options present within Direct Contracting. Direct Contracting has different models to account for the variance in risk between Standard and High-Needs populations. For those organizations that made the paradigmatic shift to participate in the NGACO program, Direct Contracting has an option: Standard. For organizations new to models in Value-Based Care, the New Entrant option might present a model with palatable risk and performance metrics.

The primary objective of Direct Contracting and other similar models is to generate savings on care. However, the forces affecting medical costs are not limited to clinical adeptness. External factors, such as the advent of COVID-19, have had inescapable effects on providers and practices. Program directors want organizations to participate in this model, but in a climate of uncertainty such as this, providers and regulators will need to maintain an active dialogue to ensure that participants in Direct Contracting and other novel models will not suffer from unavoidable externalities and can have the confidence that reasonable adjustments will be made as we all learn more.

Michael Raji

Marketing Intern