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How to Favorably Manage Risk in Value-Based Care Reimbursement

Mitch Morris from Deloitte Consulting LLP discussed how payers and providers could successfully manage financial risk in a value-based care reimbursement model.

By Vera Gruessner

While downside risk does not incentivize providers to take part in value-based care reimbursement policies, data-driven technology and a combination of financial motivations may encourage physicians to transition to alternative payment models, according to a survey from the Deloitte Center for Health Solutions.

Value-Based Care Reimbursement

The survey finds that the move to value-based care reimbursement is progressing relatively slowly between commercial payers and providers, but plenty of physicians do support quality improvement programs and “resource utilization measurement,” a company press release stated.

When it comes to value-based care reimbursement, the Deloitte report covers steps that the healthcare industry can take to improve the rate of adoption among providers. First, 20 percent of physician compensation should be linked to quality performance. Also, medical practices will need to adopt the right tools specifically ones that align with clinical protocols.

“Physicians should change their behavior to make implementation of value-based care models effective,” said Mitch Morris, Principal at Deloitte Consulting LLP and leader for the healthcare industry at Deloitte. “But today there is little incentive for them to change; many are still being paid under fee-for-service models and they’re not equipped with tools that could help them deliver high-value care.”

Morris spoke with and discussed some of the most interesting survey findings Deloitte discovered as well as how payers and providers could successfully transition to value-based care reimbursement.

READ MORE: CMS Extends Pediatric Alternative Payment Model Comment Period

“Physicians understand that we’re moving towards risk-based contracting and they’re not particularly happy about it. We found that there is significant concern with going with risk especially if there is more downside risk,” Morris explained. “They’re more willing to take upside risk such as getting a bonus. There is a belief that it will be difficult to measure quality and outcomes in a fair way, so they worry about the potentially capricious nature of this.”

“They worry about bias in some of those measurements. Another interesting finding is that providers believe that value-based payment plus MACRA legislation will drive more physicians away from private practice into very large groups where they believe their income will be more insulated from risk,” Morris continued.

Currently, there has been more consolidation throughout the healthcare industry such as the health insurance mergers that Aetna, Humana, Cigna, and Anthem attempted to pursue before the Department of Justice filed their lawsuit. The ability to manage the financial risk of value-based care reimbursement models is one of the main reasons behind the consolidation taking place.

“Small groups and independent physicians really don’t have the infrastructure and management skills necessary to manage clinical and financial risk,” he pointed out. “The larger the entity, in theory, the better they would be able to manage financial and clinical risk and also buffer against unforeseen variation. Of course, we know that from health plans, if you have a small risk pool, random events can adversely impact medical loss ratios. If you’re very large and have scale, you can drive down your unit cost.”

Morris also discussed how commercial health payers can help providers in managing financial risk within value-based care reimbursement by improving education and outreach.

READ MORE: Humana Expands Orthopedic Bundled Payment Program to NC, VA

“Health payers can play a role in improving education and awareness. Many physicians especially the ones in smaller independent practice don’t have a good understanding of what it means to manage clinical and financial risk,” Morris noted. “Health plans can help them do that certainly when there are financial incentives.”

“Payers would create financial incentives with education and outreach, which can help physicians take on risk. Also, there is a role with payers working with larger health systems that increasingly manage that risk. A good example is payment bundles. Some bundles can be loosely on the physician side. Most payment bundles are not so single-threaded. A good example is a knee replacement payment bundle. Being able to understand as a physician where to sit in the ecosystem and make sure that I’m being fairly measured and fairly compensated will require lots of education.”

Morris spoke about how payers and providers should work together and share data. The exchange of information offering both clinical, claims, and cost data would paint a clearer picture for better managing patient care and reducing healthcare spending, he said.

“Cost and claims data are useful,” he continued. “Some of the most successful uses of information are when payers and providers work together in alignment to share both sides of the equation - the more detailed clinical data that a provider has as well as the cost and claims data that the payer has. That gives a really rich and full picture.”

“Some organizations in our country that by their nature are payer and provider like Kaiser Permanente and Geisinger have been mixing that information together for many years and sharing that with physicians to help them see where they stand in the mix,” he noted. “Physicians are competitive by their nature and fairly data-driven. When you share information with them and they see an opportunity to do a better job, they will often take that opportunity on their own.”

READ MORE: Humana Expands Medicare Orthopedic Bundled Payment Programs

Morris continued to explain how claims data on its own is rather incomplete while clinical data apart from cost and claims is also inadequate. When cost and clinical data are combined, providers are able to see the “big picture,” said Morris. Transparency and communication is also key when it comes to improving the payer-provider relationship.

“Communication is the first step,” Morris concluded. “There is a history of a lack of transparency and mistrust between payers and providers. Going forward into the future, the financial success for everyone is going to be dependent on payers and providers working together effectively to manage clinical and financial risk. Taking an adversarial position is not going to get them there, so transparency, effective communication, educational outreach, and shared risk will align payers and providers in a more meaningful way.”


Dig Deeper:

How Payers Should Prepare for Value-Based Reimbursement

How to Overcome the Challenges of Bundled Payment Models


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