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Health System Management • January 2017

FINANCE HEALTH SYSTEM MANAGEMENT | JANUARY | 2017 Accelerating Risk is Key to Value-Based Care Accepting a possible downside can cut costs while preserving quality 14 If the healthcare industry is going to curb the WWW.HEALTHSYSTEMMGMT.COM constant rise in overall health spending, it needs to hold itself accountable for both costs and quality. Some providers and payers have started doing this in a variety of ways, but few methods are more promising than models in which providers accept significant financial downside risk. The concept of downside risk isn’t new. In theory, downside risk arrangements are a way to reduce the cost of care while preserving quality and emphasizing preventative care. Payments for healthcare are structured so that if a patient has poor outcomes, the risk-bearing institution stands to lose money. For example, in bundled payment models, a hospital may get a lump sum for the treatment of a hip fracture. The patient is treated and discharged with all services paid for out of that lump sum — including individual doctor’s visits, hospital fees, labs and post-acute care (PAC). Under a traditional fee-for-service model, all of these services would be charged to the patient individually (or the patient’s insurance company). And if a patient were readmitted to the hospital, that, too, would be charged to the insurance company instead of the hospital. A new study in the American Journal of Managed Care1 shows how much further the industry has to go. In a survey of the prevalence of risk-based contracting experiences at 33 large group practices, researchers from the Heller School of Social Policy and Management at Brandeis University found that less than one-third of these practice groups received the majority of their revenue from riskbased payment models. The study1 also found that the pace of adoption has been slow. While nine of the groups reported increasing risk-based revenue by more than 15% between 2011 and 2013, two-thirds of BY BRIAN FULLER Fuller is vice president of Value-Based Care at naviHealth the groups reported few changes to their contracting mix. The results are a strong indication that the broad adoption of risk-based compensation arrangements might take longer than hoped. So what can the Centers for Medicare & Medicaid Services (CMS) do to accelerate risk-based adoption and meet the federal government’s stated goal of moving 50% of Medicare payments into risk models by 2018? TAIL WAGS DOG There is a mix of incentives that could prompt providers to accept more downside risk. To begin, CMS could adjust its baseline methodology for measuring provider improvement away from self-benchmarking. Previously, already high-performing facilities didn’t share in the gains of overall improvement, simply because they didn’t have as much low-hanging fruit to pick compared to less efficient providers. By spreading the baseline out across regions, high-quality providers would be much more likely to accept downside risk. On the other hand, regional benchmarking only strikes the right balance when both high-performing and less efficient providers are included such as in mandatory bundled payment models. That’s a double edged sword, because high-spending hospitals tend to do poorly with regional benchmarks. There has also been a lag in a piece of simple information: Hospitals don’t often know that a patient is a member of an Accountable Care Organization or bundled payment arrangement until after he or she is discharged. And lags in claims data often result in months passing by before hospitals know everywhere their patients received care and what it cost. If one believes that incentives impact care, then providers can’t be expected to make decisions in an information vacuum. At the same time, CMS and private payers hav- THINKSTOCK


Health System Management • January 2017
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