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The Role Risk Plays in Value-Based Care Reimbursement Models

Payers will need to incorporate new strategies when negotiating contracts with providers using a value-based care reimbursement model.

By Vera Gruessner

The expansion of value-based care reimbursement is making headway across US hospitals and clinics. To better prepare for the transition to value-based care reimbursement, IDC Health Insights, a healthcare IT consulting company, offers advice in a new report called IDC Planscape: Value-Based Reimbursement Demands Payers Execute an Exchanges-Like Level of Effort, according to a company press release.

Healthcare Bundled Payments

Payers will need to incorporate new strategies when negotiating contracts with providers using a value-based care reimbursement model. There are multiple systems of payment associated with value including pay-for-performance reimbursement, patient-centered medical homes, bundled payments, shared savings, shared risk, and capitation full risk.

The report outlines that health payers will need to have greater access to quality and cost data as well as implement new tools in order to succeed in the value-based care environment. Resources and time will need to be put into transitioning to new reimbursement models like bundled payments or pay-for-performance.

“Value-based reimbursement will be organizationally and technically pervasive for payers. What is underestimated are the core procedural and systematic changes necessary in the middle and back office to execute operationally under an environment where soon the majority of payments will be value-based,” Jeff Rivkin, research director for Healthcare Payer IT Strategies at IDC Health Insights, said in a public statement.

“New paradigms in finance, product definition, contract and rate modeling, and workflow will be established driven by direct change in provider contracting, episode recognition, care coordination, and claims pricing and processing. Fundamental revenue transformation is coming, and it is being underestimated.”

READ MORE: Can Value-Based Purchasing Work with Pharmaceutical Companies?

To learn more about the strategies necessary for health payers and providers to succeed in a value-based care reimbursement model, interviewed IDC Health Insight’s Jeff Rivkin. What are the biggest benefits of value-based care reimbursement and why is it becoming so prevalent among payers?

Jeff Rivkin: “Alternative payment models generally make doctors and hospitals attentive to the total costs of treating a patient at a high level of quality, giving clinicians the opportunity to focus on quality, patient-centered care.”

“This is prevalent because Medicare has established official value-based care reimbursement goals by the end of year 2016 and 2018. In 2011, Medicare made almost no payments to providers through alternative payment models, but today, such payments represent approximately 20 percent of Medicare payments.”

“HHS [Department of Health & Human Services] has set a goal of tying 30 percent of traditional, or fee for service, Medicare payments to quality or value through alternative payment models by the end of 2016 and tying 50 percent of the payments to these models by the end of 2018.”

READ MORE: Patient Satisfaction Key for Payer Measurement of ACO Quality

“HHS also set a goal of tying 85 percent of all traditional Medicare payments to quality or value by 2016 and 90 percent by 2018 through programs such as the Hospital Value-Based Purchasing and the Hospital Readmissions Reduction Program. This is the first time in the history of the Medicare program that HHS has set explicit goals for alternative payment models and value-based payments.”

“The traditional fee-for-service payment system is being forced to be less attractive to providers. The Medicare Access and CHIP Reauthorization Act (MACRA) accelerates payment reform. With the Medicare program leading the way, commercial payers will increasingly see healthcare services paid based on value, not volume.”

“MACRA sets higher payment rates for physician services provided through an alternative payment model by tightly constraining FFS payments and by paying a temporary 5 percent bonus on alternative payment model services. With this fee structure, the law pushes providers away from FFS, complementing CMS' efforts to lure them into the new payment models.”

“MACRA's 5 percent bonus for services provided through an alternative payment model does not take effect until 2019, and it expires at the end of 2024. For 2026 and subsequent years, payment rates for APM services would increase by 0.75 percent per year but only by 0.25 percent for services paid under FFS.”

“‘As Medicare goes, so goes managed care’ has been the saying for nearly a decade, starting with e-prescribing and going through the Affordable Care Act. Commercial payers will soon see hospitals and large physician groups come to the contracting table with alternative payment designs, and payers will need to be able to react.”

READ MORE: Aetna to Offer New HMO Option for Delaware State Employees What advice would you offer to health payers looking to implement bundled payments?

Jeff Rivkin: “The value-based reimbursement methodologies inherently involve how providers are paid and how procedures are rated. So, payers should adjust claims and rating workflows and systems with embedded or parallel reimbursement logic.”

“To succeed in bundled payments, payers will need to prepare middle-office and back-office workflows and systems as well as involve multiple departments. Product management, plan management, and contract management are also advised.”

“Other important factors to consider include care coordination/medical management, provider network management, and provider relations.” How does risk play into value-based reimbursement contracts? In what ways does risk affect providers?

Jeff Rivkin: “A portion of the provider's total potential payment is tied to the provider's performance on cost efficiency and quality performance measures. 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.” What steps can payers take to improve their provider relationship especially when adopting alternative payment models?

Jeff Rivkin: “Always tricky, the relationship between payers and their network providers is now both more collaborative and combative. On the one hand, care coordination and quality initiatives encourage collaboration, and value-based delivery changes depend upon value-based payment designs, so working together becomes paramount. Alternatively, the cost pressures and new methodologies pit two opponents, each trying to get the best deal in an environment where both opponents are new.”

“So, payers should restructure physician payout to align provider incentives with value-based care as well as embed care managers in practices wherever possible to create close relationships with patients and practices.”


Dig Deeper:

29% of Doctors Have Tools Needed for Value-Based Care Payments

Value-Based Care Payments May Reach 60% in Next Five Years


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