De-Risking Alternative Payment Models for Healthcare Providers
“Skin-in-the-Game” Doesn’t Have to be Scary
When I entered the field of medicine, the goal was clear; to make patients ‘better.” As I trained through the years and developed a strong in illness prevention- how did these patients get here in the first place- things became fairly crystal clear. The US healthcare system was brilliantly set up to handle acute bouts of care—antibiotics for an infection here, a broken limb fixed there. In this setting, it made sense to pay providers like most other tradespeople are paid: a set fee for services rendered. As the country’s disease burden has shifted more to chronic, the care delivery system has expanded, and we’ve grown to conceptualize people as more than objects to be fixed or tuned up, this way of paying for healthcare is becoming antiquated.
More and more, physicians and provider groups are being rewarded for delivering high-quality care and lowering cost. In 2018, only 39% of healthcare payments were strictly traditional fee-for-service. The remaining 61% of payments were tied to value (was money saved?), quality (did the patient get better?), bundled payments (one payment for an entire episode of care, eg hip replacement prep, surgery, and rehab), shared savings (if you save a payer money, you take home some that you saved), or capitation (eg, a per-member-per-month payment model) in some way. Some of the most well-known purveyors of Alternative Payment Models (APMs) are Accountable Care Organizations (ACOs), Medicare Advantage plans, Medicaid Managed Care, Maryland’s unique global hospital budget, and even commercial insurers in the individual and group markets. Payers believe that APM participation will grow in the future, and that the greatest barrier to wider implementation now is provider willingness to take on financial risk.
It’s logical that some providers may be hesitant to go at-risk. They trained in a fee-for-service world, and every tool they used was calibrated to optimize performance in the system. Investing in practice transformation, IT, and interoperability is not only a lot of work, but also not cheap. Providers also rightfully realize that a large portion of excess healthcare spend is due to ED visits, readmissions, out-of-network provider visits, and chronic disease flare-ups requiring repeated hospitalization. With standard fee-for-service billing and brick-and-mortar care practices, these are all but impossible to prevent. Downside-risk models, in which providers have the potential to lose money if their care doesn’t meet thresholds of quality or value, are therefore rightly giving many providers and provider groups a rightful pause.
As with most gambles, there is also significant potential upside for providers in APMs. To illustrate, in 2018 60% of providers who engaged in value-based contracting with one major commercial insurer received shared savings. Even more importantly, quality of care did not decline, while the cost of covered medical care decreased. In many cases, APMs lead to better outcomes for patients. For these reasons, payers say that provider interest and readiness is also likely a main driver of APM adoption.
One of the main goals of APMs is to breed innovation and collaboration in care delivery. While health plans, employers, and provider groups who place fees at risk can innovate internally to meet the demands of value-based care, it often makes sense to outsource. Many already outsource for financial services, patient navigation, remote patient monitoring, chronic disease management, and more. Tech-first startups – such as Livongo Health, Propeller Health, and now CareHive, – have partnered with risk-bearing entities to help them keep their patients healthy while receiving the lowest dose of healthcare necessary. That means preventing unnecessary urgent care/ER visits, guiding patients to in-network providers, and remotely managing chronic diseases to avoid flare-ups.
At CareHive, we believe that with more patients healthy at home and providers supported appropriately with a team and technology to manage them, we are maximizing the opportunity to see the positive returns when fees are at risk. APMs are less daunting if you’re aligned with good partners who can help you to deliver the best care possible to your patient population.
Ron Dixon, MD // CEO, CareHive
