Written by Kyle Spears and Jen Johnson, CFA

The value-based care reimbursement environment has emphasized the evaluation of quality by measuring performance with metrics. As a result, hospital executives, management, providers, and legal counsel all share a fundamental question: what are the guidelines to selecting metrics that properly measure the quality of care and are consistent with what is being paid for in the market? VMG Health has seen a growing trend in this question as quality metrics are now found in employment agreements, medical director contracts, co-management arrangements, and other innovative alignment models.

This question has been further highlighted across the industry with the new stark law and anti-kickback statute final rules which were released December 2020 and effective January 2021. Specifically, the rules provide important guidelines and support payments for quality metrics tied to measurable outcomes that are backed by credible medical evidence.

In addition to regulatory commentary addressing paying for quality, it is important to understand how the market is paying for quality to support payments as fair market value. From a valuation perspective, based on analyses of quality payments to physicians in the market from both government and commercial programs, the most valuable metrics (in terms of attaching dollars to the improvement in quality) include the following components:

  1. The metrics are nationally benchmarked and/or supported by credible medical evidence, rather than internally established and/or created to meet a facility-specific objective.
  2. The metric performance for maximum payment is representative of superior performance (typically consistent with top decile performance for the industry).
  3. The metric performance for maximum payment is difficult to achieve compared to historical performance, rather than payment for maintaining historical performance.
  4. The metrics require high physician impact/involvement, rather than other support staff having a high impact/involvement.

Types of Metrics

In addition, the type of metric is instrumental to determining its value. If you have followed the value-based care movement, you have seen the transition from paying for reporting, to paying for process, and now paying for outcomes. This trend has been led by CMS and from a FMV perspective, supports rewarding more value when outcomes are achieved, such as higher patient satisfaction. However, not all specialties share the same definition for a strong outcome metric.  Below you will find some of the more common specialties that reward for quality and the nuances to their respective metrics.

  • Surgical Specialties – outcomes-based metrics are most often utilized in surgical specialties in which surgical site infections, readmission rates, and surgical mortality rates can be objectively measured. As a general rule, the clinical procedures and interventions that objectively improve the overall health of a patient are often considered strong metric types for surgical specialties.
  • Gastroenterology – minimally invasive procedures such as endoscopies and colonoscopies and chronic care management for conditions such as inflammatory bowel disease are common for gastroenterology care. Therefore, the available metrics are process-based and efficiency-based, which ensure that appropriate screening, appropriate follow-ups, and proper utilization of resources occur according to patient-level factors such as age and medical history.
  • Oncology – clinical outcomes improving patient health are difficult to determine and standardize for oncology care due to the variety of cancer conditions and stages. Subsequentially, the vast majority of available metrics observed in the market are related to the clinical process of care and care coordination (such as hospital vs hospice care).
  • Primary Care – the nature of primary care emphasizes the importance of preventive care, care coordination, and the overall wellness of patients, and therefore the available metrics are centered around the process of care and often focused on overall cost savings.
  • Hospitalists – similar to primary care physicians, hospitalists primarily direct a patient’s experience of care rather than perform acute care procedures. Accordingly, it is difficult to tie back specific clinical outcomes to a hospitalist, so quality metrics available to hospitalists include timely and accurate documentation, processes, and adherence to best practices that ensure the proper care is ultimately provided.

Key Takeaway

It is important to understand the fundamental guidelines and variations by specialty when selecting the metrics included in any type of arrangement with providers to ensure they are consistent with the market. VMG has extensive experience valuing fair market value payments for the achievement of quality metrics across every specialty in addition to offering consulting services that help clients align their metrics and quality programs with the market.