3 Key Steps for Payers to Succeed in Value-Based Care Payment

October 06, 2016 - Commercial health insurance companies have little reason to remain attached to fee-for-service payment systems since the rate of healthcare costs continues growing and the healthcare industry as a whole is moving toward value-based care reimbursement. However, transitioning to value-based care payment models may not be a simple maneuver.

As such, there are specific steps that health payers can take to succeed in the value-based care payment world. Payers operating a value-based care contract would benefit from incorporating risk in their payment model, investing in information technology (IT) infrastructure, and provider education and accountability.

Incorporating risk in value-based care

According to a report from IDC Health Insights, health payers can implement shared risk, and capitation full risk when creating payment contracts linked to value instead of volume. Risk-based contracting will put more responsibility on providers to manage their revenue and could potentially improve care coordination. Bringing more focus on risk could improve healthcare quality performance and cost efficiency, said Jeff Rivkin, Research Director for Healthcare Payer IT Strategies at IDC Health Insights.

“A portion of the provider's total potential payment is tied to the provider's performance on cost efficiency and quality performance measures,” Rivkin told HealthPayerIntelligence.com. “While providers may still be paid a fee for service for a portion of their payments, they may also be paid a bonus or have payments withheld. For value-based contracts, this bonus is not paid unless the providers meet cost efficiency and/or quality targets.”

“Clinical integration fees paid to providers are contingent on the providers engaging in practice transformation to adopt technology and processes that alter the manner in which they deliver care. Provider goals include accountability to their patients, creation of advanced care teams to include nurse care managers and pharmacists, and implementation of automated processes to address prevention and wellness,” concluded Rivkin.

Health IT systems matter for value-based care payment

The Healthcare Financial Management Association (HFMA) emphasizes the need for a strong health IT infrastructure before pursuing alternative payment models such as bundled payments or accountable care organizations.

Many payers may think that this means investing heavily in expensive IT systems, but most value-based care payment programs can start out without extremely complicated contractual arrangements and increase in complexity over the coming years. This would give providers and payers more time to invest in health IT infrastructure.

Payers will need to work with their provider network to more effectively capture healthcare data in a way that strengthens their population health management programs. Using population data to find where gaps in care could be filled is essential. For instance, diabetes patients could be assisted with medication management so that their chronic conditions do not get worse over time.

Provider education and accountability

When it comes to value-based care payment models, health payers can take the reigns by educating their provider network in best practices and ways to achieve quality improvement benchmarks. This summer, Deloitte Center for Health Solutions released a survey that showed half of 600 polled physicians have not heard of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which is a major piece of legislation that will push the healthcare industry toward adopting alternative payment models.

Providers who serve Medicare beneficiaries in the coming years will need to utilize value-based care payment models and take on financial risk-sharing. This lack of knowledge shows that commercial payers investing in value-based care will need to educate their provider network on these alternative payment models.

Chip Howard, Vice President of Payment Innovation at Humana, also told HealthPayerIntelligence.com about partnering with providers and adopting provider full-accountability when creating bundled payment contracts, which are value-based care reimbursement models with a focus on episodic care payment.

“It is important to make sure that you’re partnering with providers when doing a bundled payment arrangement.” Howard explained. “It is not going to be successful unless both the payers and providers are successful. From a contract perspective, I would suggest  looking at a glide path to what I would term provider full-accountability.”

“In other words, this would mean the provider sharing in the ups and downs of the financial results. I think you should take a measured approach to that and not go immediately to a full-value accountability type of arrangement with a provider,” he continued. “Also, [it is important to] make sure that the responsibility of the payer and the provider are clearly outlined in the bundled payment contract so that there aren’t any hiccups down the road that are unanticipated.”

Dig Deeper:

How to Overcome the Challenges of Bundled Payment Models

How Payers Should Prepare for Value-Based Reimbursement