Reduce the risk of moving toward risk

Experienced partners can help guide organizations through the quality contract options that best match their strengths and goals.

Reduce the risk of moving toward risk

By Joe Nicholson, DO

Health care providers tend to refer to value-based Alternative Payment Models (APMs) as "risk contracts." If the COVID-19 pandemic has taught the industry anything about financial stability, though, it's that there is more than one kind of financial risk. We also must consider both the short- and long-term risks of remaining in the inherently flawed fee-for-service (FFS) model. The fact is, value-based contracts are not just about taking on risk; they also give providers the flexibility and financial stability to care for patients in whatever manner they think is most appropriate.

First and foremost, value-based APM contracts help lead providers to financial stability. The monthly reimbursement that organizations receive from more advanced APM contracts, like capitation, offers a steady, dependable revenue stream that evens out routine revenue cycle ups and downs. Financial fears no longer guide care decisions because so-called "risk" contracts give providers the ability to treat patients in ways not typically reimbursed by payers—whether through telehealth, care coordination, care management, or addressing social determinants of health (SDOH).

Long before the pandemic became a "proof point" for APMs, organizations reached substantial bottom-line results after making the transition from FFS to value-based care. Among our clients, for example, we have had practices average 140%-150% of Medicare reimbursement. We have even seen twice the Medicare rate—but every organization's journey to value-based care is different.

With so many payers offering value-based arrangements, health care organizations must understand their options. Those that do—and that put suitable support systems in place—can achieve significant revenue and care quality benefits.

The pathway to progress

The APM Framework developed by the Health Care Payment Learning & Action Network is a good starting point for understanding the variety of APMs available. It also illustrates the continuum of clinical and financial risk as organizations evolve from FFS to quality incentives, shared savings arrangements, and full-risk capitation.

What's clear is that advancing down the value-based road involves more than just different payment mechanisms. Successful evolution entails realigning governance, systems and providers to deliver more proactive, preventive care. That's no small feat, given that factors other than clinical care—such as health behaviors, physical environment and SDOH—can account for over 80% of health outcomes.

Transforming an organization into one that can move smoothly through the APM continuum must be done in phases and take a collaborative approach to data sharing, infrastructure and provider engagement. Start small and build one step at a time:

Step 1: From FFS to quality

The value-based journey typically starts when providers team up with payers to add quality bonuses to existing FFS agreements. There is little to no financial risk tied to performance. In fact, organizations that hit their quality metrics can enjoy an extra bit of financial stability. However, two steps are crucial:

  1. Choosing the right quality metrics to pursue.
  2. Laying an effective data-sharing foundation

Step 2: From quality to shared savings

For many organizations, the most significant change presented by shared savings models is the need to work in aggregate—such as joining an independent physician association (IPA), accountable care organization (ACO), or clinically integrated network (CIN)—to reach a variety of patient populations.

Fostering a mindset shift is especially important from this stage onward. That's because shared savings arrangements start to swing the focus toward balancing both quality and cost metrics. Utilization management emerges, and care coordination reimbursement starts coming into play. Therefore, it's imperative to build a community of high-performing and well-aligned physicians.

Step 3: From shared savings to capitation

Successfully managing full upside and downside risk entails even deeper provider and staff engagement and connectivity. To meet cost and quality performance expectations, organizations must build care models that support the distinctive health needs of specific patient populations. Innovative data and communication strategies can identify ways to optimize care delivery and improve medical loss ratio (MLR).

Capitation models blend both data and strategy. Data reveals each organization's challenges in its quest to improve care quality and costs. But determining the most effective methods to address those challenges requires strategies built on each organization's unique needs, market and patient population.

Successful APM transformation

Successful value-based APMs require collaboration, data sharing and expertise. Every health care organization must advance along its own gradual path towards attaining this goal. This can be achieved through the guidance of trusted partners in helping your organization advance along the APM continuum to achieve flexibility and financial stability.

Experienced partners can help guide organizations through the quality contract options that best match their strengths and goals. In addition, they can help identify, track and manage against the metrics that matter. A genuinely engaged partner supplies more than just data; they convert it into actionable insights that organizations can put into use.

Nicholson is chief medical officer of CareAllies