Strategies to manage risk in the value-based payment environment

August 13, 2018

In the value-based payment era, the opportunity for greater financial rewards comes with greater risks.

Health systems and provider organizations are evaluating the best ways to take advantage of new care models in the value-based payment era. Value-based care models like Alternative Payment Models (APMs) reward outcomes and quality, requiring previously volume-focused organizations to adapt in order to succeed.

An APM is a payment model that differs from the traditional fee-for-service model, where, for example, physicians are reimbursed according to a set fee schedule. Healthcare providers in an APM align themselves with the goal of taking better care of a certain population of patients, usually within a targeted geographic area. If an organization adopts an APM, all participating providers agree to be paid according to the payment model’s rules. APMs can be one-sided (including upside financial risk only) or two-sided (including both upside and downside financial risk). Upside risk models allow providers to share in healthcare savings if their services make care delivery more efficient. Under downside risk models, providers must refund a payer if the actual care costs exceed financial benchmarks. However, greater financial rewards are available to providers who perform well under risk-based models and bear financial risk.

As the payer mix expands in publicly funded programs, providers should position themselves to take on risk in managing certain patient populations through, for example, participation in Medicare’s one- or two-sided risk APMs. Further, as state Medicaid programs, commercial health plans, and large employers also adopt similar APMs, providers need to prepare to assume greater levels of risk, align incentives, and share savings. With appropriate strategies, providers ultimately can reap the benefits of early participation in APMs and prepare for additional risk-sharing in the future.

To mitigate risks associated with APMs, organizations should engage in strategic partnerships and initiatives that help them to:

• Reduce variations in care delivery. Benchmark performance and quality measures and provide access to that data.

• Determine the true cost of care from a clinical activity to episode level. Determine the cost of providing services, taking into account direct/indirect personnel and overhead costs and the value and care coordination role provided by each care provider.

• Redesign data management and clinical service delivery models as necessary to better manage patient care and care transitions within and outside of an acute care setting. Where capital or infrastructure is lacking, consider partnerships and opportunities that support these changes.

• Develop targeted plans to manage high-risk patient populations and reduce emergency department visits as well as preventable hospital admissions and readmissions.

The following are three strategies that can help organizations achieve the above goals.

1. Telehealth Monitoring for High-Risk Patients

Understanding the need to conduct outreach between visits and engage in structured follow-up care for high-risk patient populations, many providers are considering telehealth initiatives. For example, one acute-care hospital experiencing challenges in managing patients with conditions such as heart failure, chronic obstructive pulmonary disease, diabetes, and pneumonia recently engaged a vendor to provide daily remote monitoring, support, and care coordination in exchange for a care management fee that is refunded or withheld in the event of a patient readmission for reasons related to the monitored condition. Key components of this care management relationship are the agreement on clinical care protocols; provider access to reports containing aggregated patient health data, counts of enrolled patients, and utilization information by geographic location; analysis of device effectiveness; and general suggestions for care coordination improvement. The partnership helps to determine the true cost of care and reduces variations in care by providing insight into the hospital’s metrics, quality/outcomes, and internal resources. This data better positions the hospital to assume risk for total cost of care for the relevant patient population.

2. Post-Acute Provider Network Design and Expansion

Many providers are focused on developing a committed and high-quality provider network that innovates and effectively manages post-acute services. These preferred post-acute care networks utilize performance measurements that can be used to meet financial and quality incentives under two-sided risk models. One health system with a regional accountable care organization (ACO) model has established consulting provider relationships among its ACOs, acute care facilities, and area skilled nursing facilities (SNFs) as a strategy to build its SNF network. When evaluating potential SNFs, the health system focuses on key quality and performance metrics, defined minimum service levels required for network participation, availability of the services, and adequate geographic coverage. Further, the health system requires that affiliated post-acute care providers collaborate on standard clinical pathways and increase family engagement and community support. The framework created by the consulting provider relationship promotes communication and the sharing of best practices among acute and post-acute providers, provides educational opportunities, and results in the development of improved protocols across the care continuum.

3. Non-Traditional Care Management Partners

Emerging technologies and remote monitoring services, combined with patient preference to remain at home, are particularly supportive of providers’ efforts to expand care in alternative or home care settings and reduce costs via the use of telemedicine. One ACO recently entered into a partnership with a non-traditional mobile and virtual health care provider that provides on-demand urgent care at patients’ homes. Patients can connect to providers via phone, website, or mobile app. An essential component to this relationship is the commitment to share information between the ACO and the on-demand urgent care provider to improve clinical decision-making and care transitions. The ACO anticipates that this partnership will help reduce costly hospital readmissions, provide access to better data analytics to assess the care pathway and improve quality, and help develop its value-based and bundled payment strategy with other post- and non-acute care providers.

While each of these strategies required evaluation of unique regulatory and operational considerations, the arrangements all transformed the care delivered. Through these partnerships, the providers gained a better understanding of their core capabilities and a chance to build their provider networks to manage high-risk patient populations and control costs, which will allow them to take advantage of new care models and better manage risk over time.                                   

Jeanna Palmer Gunville is a senior associate in Drinker Biddle’s Health Care Group. Her practice focuses on corporate transactional work and regulatory matters for healthcare providers across the care continuum. She is a frequent author on healthcare cost-saving initiatives and strategic partnerships that support success in the changing payment environment.