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Exploring Alternative Payment Models to Fund Health Equity Programs

Rural communities addressing health equity in healthcare should explore alternative payment models. These programs may fund services that address upstream factors affecting health, such as food access or housing, to achieve improved healthcare outcomes.

Payment reform is a complex topic. As healthcare costs increase, interest is moving from fee-for-service care to value-based payment (VBP) models of care. For the past several years, healthcare organizations have been piloting VBP models to evaluate impacts on cost, patient experience, and population health. Healthcare organizations are still in the early stages of determining how to design these models and what impact they may have on health equity.

The Centers for Medicare & Medicaid Services (CMS) funds several demonstration programs that address payment and service delivery models through the Innovation Center. Demonstration models focus on incentivizing healthcare providers to provide high-quality care, improving access to primary care, and integrating cost-effective systems of care.

One model being tested by CMS is the Pennsylvania Rural Health Model. This model uses an annual global budget based on patient volume, revenue, and services instead of payment for each service provided. Having a predictable annual budget allows rural hospitals to focus on the specific needs of their communities. These needs may include food access, transportation, or health literacy. The findings from the model will inform CMS's efforts to address the unique challenges of other rural healthcare providers.

In 2014, the Robert Wood Johnson Foundation funded a national program to test what payment reform initiatives work to reduce health disparities. Researchers compiled the following key lessons from their findings:

  • There is no one-size-fits-all answer to payment reform. Instead, initiatives should be tailored to the specific patient population, community, organization, and setting.
  • Initiatives should offer team-based incentives and not reward just the practitioners within the organization.
  • The collection and management of key demographic data — such as race, ethnicity, and language — are critical.
  • Data should be shared with all team members. Discovering disparities in patient care can be highly motivating to mobilize change.
  • Healthcare teams can be moved to act by factors other than financial incentives. For example, seeing positive advancement in quality of care and health-related measures may be a greater motivator than financial incentives.
  • VBP should consider funding peer-based staff. For example, patient navigators and community health workers who share characteristics with groups that experience health inequities can make a big difference in engaging patients.
  • Collaborators at all levels of the organization — leaders, team members, and patients — should be involved in designing programs to increase buy-in.

Public and private payers can be key partners in health equity programs. Payers may help access data, make changes in clinical practices, and assist with funding program costs by making expenses reimbursable. Consider developing early partnerships with state Medicaid providers, state health plans, and local health systems.

Resources to Learn More

Enhance Team-Based Primary Care Approaches: Advancing Primary Care Innovation in Medicaid Managed Care
Toolkit outlining strategies to provide high-quality, comprehensive primary care through team-based strategies.
Author(s): Crumley, D., Matulis, R., Brykman, K., Lee, B., & Conway, M.
Organization(s): Center for Health Care Strategies, Inc.
Date: 8/2019

Guidance for Structuring Team-Based Incentives in Health Care
Defines teamwork in healthcare and how each staff person impacts the outcome of work performed by others. Discusses the shared accountability for health outcomes and healthcare spending. Identifies the challenges associated with designing and implementing team-based incentives and performance measures.
Author(s): Blumenthal, D. M., Song, Z., Anupam, B. J., & Ferris, T.
Citation: American Journal of Managed Care, 19(2), e64-e70
Date: 2/2013

Investing in Rural Communities to Achieve Health Equity
An overview of best practices to achieve health equity in rural Georgia identified by The Two Georgias Initiative, a grantmaking program supporting local partnerships to advance health disparities and improve health equity.
Author(s): Medellin, L. & Tucker, S. B.
Organization(s): Grantmakers in Health
Date: 7/2020

Leveraging Value-Based Payment Approaches to Promote Health Equity: Key Strategies for Health Care Payers
Identifies six strategies and other factors to guide payers, in collaboration with healthcare organizations, when developing equity-focused payment approaches that support and encourage the transformation of healthcare delivery.
Author(s): Patel, S., Smithey, A., Tuck, K., & McGinnis, T.
Organization(s): Center for Health Care Strategies, Institute for Medicaid Innovation
Date: 1/2021

Solving Disparities Through Payment And Delivery System Reform: A Program To Achieve Health Equity
An analysis of the Robert Wood Johnson Foundation's Finding Answers: Solving Disparities through Payment and Delivery System Reform program to determine if alternative payment models can encourage a reduction in healthcare disparities and promote health equity.
Author(s): DeMeester, R. H., Xu, L. J., Nocon, R. S., et al.
Organization(s): Health Affairs, 36(6)
Date: 6/2017

Systems Practices for the Care of Socially At-Risk Populations
A comprehensive review of best practices among providers, hospitals, and health plans — serving a higher share of socioeconomically disadvantaged populations — that have been shown to improve healthcare quality and healthcare outcomes.
Organization(s): National Academies of Sciences, Engineering, and Medicine
Date: 2016