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By Sarah C. Threnhauser, MPA

Knowing how to develop bundled payments and case rates is an executive team skill set that will become more important as value-based reimbursement models mature. While the majority of VBR contracts remain in fee-for-service models with a bonus or penalty, the use of case rate reimbursement is on the rise, and this brings a new level of financial risk to provider organizations (see Health Plan Contracting Opportunities – More Consistency Emerging and VBR @ Scale—Changes Required).

Debbie Cagle Wells

As we learned at the recent 2019 OPEN MINDS Performance Management Institute, these reimbursement models are not “one size fits all”—the models require new approaches in both developing the rates and managing them successfully. That was the primary message from the session, Rate Setting For Value-Based Reimbursement: A Guide To Developing Capitated Payment Models, featuring Debbie Cagle Wells, Chief Marketing Officer at Centerstone, and Maggie Labarta, Ph.D., President and Chief Executive Officer at Meridian Behavioral Healthcare.

The panelists both have working experience with VBR. Centerstone—a large non-profit behavioral health provider organization—currently has 97 contracts in negotiation and 17 that are value-based. The contracts include pay-for-coordination (upside risk only), pay-for-performance, bundled payments, and shared savings (upside and downside risk). Dr. Labarta provided a brief review of Meridian Behavioral Healthcare, which has clinics in 11 Florida counties, covering a combined 500,000 consumers in a high-health disparity population.  Meridian is currently negotiating VBR, after its most recent capitated contract ended last year. Meridian has had several capitated arrangements under carve-in and carve-out scenarios, and the contracts covered the range of behavioral health services.

Maggie Labarta, Ph.D.

They offered five key pieces of advice developing case rates, and then managing to those rates.

Develop a “roadmap to capitation”—In a lot of ways, adopting risk comes down to understanding revenue predictability and a clear understanding of the scenarios that will help the organization sustain the necessary work under VBR contracts. This means understanding the “roadmap” that will let you build on a payer relationship, and work through the process to develop the necessary contract and then manage to that contract. Ms. Wells shared this roadmap:

Start ahead and stay ahead—Managing VBR contracts effectively means that you must hit the ground running as effectively and efficiently as possible. This is not a scenario where you can figure out your services, costs, performance, or process as you go. All these things need to be balanced within the “risk corridor” that the organization needs to operate within. Dr. Labarta explained:

You must start ahead and stay ahead if you are going to manage these contracts effectively. You can’t provide too many services, or you are spending more than you bring in, but you also can’t offer too few if you want to meet the contract requirements and achieve the needed outcomes.

The data needs to be agreed upon—This is the “single source of truth” that the provider organization and the payer will agree upon. This means coming together to select and/or develop key performance indicators (KPI) that will best reflect the outcomes needed to achieve cost savings and population health management. Dr. Labarta explained.

What we discovered was that the data can’t be siloed in separate IS systems. You need to get to a place where there is a single source of truth that everyone agrees on. Pull all the data into a ware house. From there, develop the KPIs. Then make decisions about who needs access to what. The line staff, management staff, and executive staff will need something different, and the data must be available to you to help make decisions, in almost real time.

Internal champions are key—When Ms. Wells thinks of VBR success, she doesn’t immediately think of operations, or incentive bonuses, or quality outcomes. Those are all important, but the first thing that comes to mind are the people on the team who are leading those initiatives. Having commitment and support from both the leadership, as well as the staff who are leading those programs is mandatory. Ms. Wells noted:

Are you ready? I can talk about processes, but really you must be honest with yourself on your staff capabilities so that together you can be successful. And you must recognize that this is a new culture that touches both the staff and the consumers. I think of success, and I see the faces of the people who lead this.

Every cost counts—The new approach to finances means putting much greater importance on costs, including a focus on cost accounting, cost management, understanding population-based payment mechanisms, and unit costs. This is all about managing each service line, and each of these service line costs needs to be factored into risk in a very granular way (as detailed as possible). Ms. Wells explained:

You must take a good hard look at every cost that goes into your model. You need to stratify risk for the kinds of services and benefits you will manage. You can’t manage risk if you can’t manage the services and benefits you are at risk for. An example of a key incentive measurement that we control is every treatment plan contains a health care goal, and we document to that goal. Sounds easy? It is not easy.

For more, check out these resources from the OPEN MINDS Industry Library:

  1. Rate Setting For Value-Based Reimbursement: A Guide To Developing Capitated Payment Models
  2. How To Develop A Case Rate: A Guide To Bundled Payments
  3. Riding The Value-Based Wave
  4. How To Make A Value-Based Partnership Really Work
  5. Options For Alternative Payment Models For Behavioral Health

For more, join OPEN MINDS Senior Associate Ken Carr on June 3 in New Orleans for his executive seminar, Succeeding With Value-Based Reimbursement: An OPEN MINDS Executive Seminar On Organizational Competencies & Management Best Practices For Value-Based Contracting.

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