Most industry experts agree that value-based payment models will define the future of healthcare in part because they reimburse providers for appropriate management of patients, rather than just the volume of patients they serve. However, providers have found it’s hard to let go of the longstanding fee-for-service (FFS) world, not just financially but logistically as well.
Taking on risk is hard. The mechanisms needed to carry forward today’s wide variety of alternative payment models (APMs) require capabilities that many providers lack simply because they haven’t needed those capabilities to keep their businesses running under FFS. For the meantime, health systems and physician practices are working with a piecemeal approach, maintaining FFS while also signing up for value-based payment arrangements — predominantly those with only upside risk.
How long the delivery system will maintain a largely FFS approach is anyone’s guess. It could be another decade or more. But providers have certainly made progress, either on their own or with some persuasion.
Medicare, for example, is automatically accelerating certain ACOs from tracks that offer only upside risk to those that require both upside and downside risk. This year, 41 percent of ACOs are taking on two-sided risk. Yet the providers likely have a relatively small percentage of their total revenue exposed to such downside risk.
In 2017, commercial market models posing downside risk for providers only accounted for six percent of total payments. This isn’t surprising. Providers know the tradeoffs between FFS and value-based structures, and the present reality still demonstrates that FFS models are largely what’s keeping the lights on.
What providers need to do to scale up value models
If you’ve ever moved out of state or switched to a different smartphone product, you know that sometimes undoing an old thing is more challenging than standing up a new thing. In the case of value-based care, providers are fundamentally re-engineering business strategies, administrative processes, and clinical care approaches.
And those changes come with the added task of disengaging parts of an existing model that was built exclusively on volume rather than value.
FFS has been profitable for many. That’s the reason why pretty much every provider taking on risk is limiting implementation to a small portion of the business. Providers agree with the notion of getting paid fairly for appropriate management of patients and good outcomes, but they also need to position themselves for success before scaling up their value-based arrangements.
Here are a few of the ways providers can win when adopting value-based models.
1. Develop specific contracting strategies
Too many providers skip the important step of quantifying the amount of risk they’re willing to take on — whether it’s upside or downside risk — so revisit your strategy often. Keep in mind that payers want the providers more experienced with upside-only risk to eventually take on downside risk.
Before adding up any financial arithmetic, you’ll also need to pinpoint the clinical results you can reliably produce and practical ways to achieve those results. Your current population’s needs and the forecast for what you expect over the next three to five years should figure into your assessment.
To sketch out your payment methodology, you’ll need to understand your true cost of care. An advanced technology platform should be able to surface a cache of data that will inform the calculation. Your goal is to answer the question, “What will it take to realize good clinical outcomes for my patients and a good financial outcome for my business?” Be open-minded to the possibilities and consider bringing in advisors who can help you assess your tolerance for risk.
2. Partner and integrate
Value-based models are predicated on comprehensive care management. Examine your current clinical capabilities and look for gaps that might influence your outcomes. You probably have a laundry list in the back of your mind already.
Behavioral health: Chronic conditions are often associated with comorbid depression and other behavioral health concerns, leading to worse outcomes and higher costs. You might need to create efficient behavioral health screening protocols and a coordinated process for warm handoffs to behavioral health specialty providers to close the loop on referrals.
Social determinants of health: Your partnerships will likely extend further into the community, involving organizations that support food, housing, education, and transportation needs of the most vulnerable populations. Providers have become more in-tune with the correlation between patient outcomes and the above social determinants of health, even though these concerns have not typically been theirs to solve.
Digital health technologies: Under value-based arrangements, you’ll likely have more opportunity to experiment with emerging care delivery channels such as telehealth and remote patient monitoring through vendor partners. Many of these modalities result in productivity improvements and higher patient satisfaction, which can positively impact the bottom line. You might seek assistance from an outside resource that can advise you on investment choices and how to get the most out of them.
3. Operationalize your value model
If an APM touches only a small portion of your patients, the one-offs can quickly turn out to be more work than they’re worth. Yet dodging the value-based market forces entirely can lead to a competitive disadvantage. Your best strategy is to operationalize value-oriented activities so they can be scaled up as your capabilities and your experience grows.
For example, the number one process you need is data collection and analysis. By distilling health data into actionable measures to improve outcomes, you can reduce care variations and gravitate toward best practices for your entire patient population. You also need to be able to share precise patient-level data across your larger ecosystem of partners to ensure care coordination.
Knowing the market landscape and benchmarking against similar organizations can also help you build out a larger, sustainable strategy. If you can track trends as they develop, you’ll be better prepared to manage everything from policy implications to market disrupters. Involve a representative team of leaders in your planning phase to ensure your path forward is clinically and financially sound.
As you begin to see results, consider how you might communicate your success. Your partners and stakeholders will want the compulsory data reports, but your community would benefit from knowing about your accomplishments too. A well-crafted marketing plan can help you become the value-oriented provider of choice.
Our Take: Providers can scale up value-based models and position themselves well for the future with a strategic approach to business transformation. It requires a front-loaded investment of time and resources, but clinging to FFS models is an option whose time is running out.
Looking to accelerate your risk-based approach? Set a growth-oriented path with the expert advisory services of Canton & Company. Contact the team today.