So much discussion of canoes these days—and I love water analogies. Until 12 weeks ago, executives of specialty provider organizations had to balance “two canoes”—operating in a fee-for-service (FFS) or cost-based environment, with operating in a wide array of emerging performance-based and value-based reimbursement (VBR) models. But with the pandemic crisis, another layer of complexity has been added—surviving through the crisis while developing a sustainable (and innovative) post-crisis recovery strategy. This is a situation more akin to controlling four canoes.
A common question from executive teams is whether to temporarily shelve the plans for alternative payment models during this crisis period. My answer is two-fold. Certainly, putting a crisis management financial survival plan is a first-order priority. This means grappling with cash flow, maximizing revenue as much as possible, determining a temporary break-even, and reducing expenses to match. These crisis management financial survival plans are the reason we see continuing announcements of layoffs and furloughs in the press (just this week, Allstate To Layoff “Thousands” Of Staff and Hilton Cuts Nearly A Quarter Of Its Corporate Workforce: Will It Regret The Deep Layoffs?).
But I would argue that for most provider organizations, being able to accept more VBR, with more financial risk, will likely be part of any recovery plan. As of our last survey (in March 2020), about 74% of primary care organizations and 61% of behavioral health organizations are participating in some form of VBR, and 16% of those organizations have 20% or more of their revenue in this type of contract. If the prognostications of health plan executives we’ve recently interviewed are any indication (see Finding Opportunity In Adversity: Leadership Lessons From The COVID-19 Crisis), this will likely increase in the post-crisis period.
With that in mind, the discussion during The 2020 OPEN MINDS Strategy & Innovation Institute session, One Foot In Two Canoes: Managing Service Lines For Value-Based Reimbursement & Fee-For-Service At The Same Time!, provided some great insights into navigating the transition to VBR. The session featured Friendship Community Care’s Chief Executive Officer Cindy Mahan, and Executive Vice President of Strategy and Planning, Craig Cloud; as well as Centerstone’s Vice President of Quality, M. Brad Nunn, Ph.D., and Director of Healthcare Innovation, Mandi Ryan, and was moderated by my colleague and OPEN MINDS Senior Associate, Joe Naughton-Travers.
Dr. Nunn and Ms. Ryan presented Centerstone’s work with the Tennessee Health Care Innovation Initiative Strategy (see TennCare’s Delivery System Transformation Shows Savings & Improved Outcomes), which includes patient-centered medical homes (PCMH); health homes for severe and persistent mental illness; reimbursement using episodes of care; and quality and acuity adjusted payments for long-term services and supports (LTSS). The payment structure includes case rate payments for health home services and financial incentives for high-performing provider organizations. It also includes episodes of care payments (two of 48 diagnoses are behavioral health) based on a FFS model with penalties for high costs and gainsharing payments if costs are kept below a threshold.
Friendship Community Care is participating in the Arkansas Medicaid initiative—“Provider-Led Arkansas Shared Savings Entities” (PASSEs). These are “organized care” models that are at risk for all services (physical health care services, behavioral health services, and specialized home- and community-based services) for approximately 40,000 individuals who have intensive levels of treatment or care due to mental illness, addiction, or intellectual/developmental disabilities (see Arkansas Medicaid To Launch Full-Risk Phase Of Medicaid Shared Savings Program In March 2019). In this model, provider organization/health plan collaboratives assume the financial risk.
So, what should executives leading the shift toward VBR—while managing FFS reimbursements at the same time—be doing to keeping both canoes on course? I would suggest focusing on three areas—staff skills and training, system integration and data management, and financial performance. And while things are moving rapidly, and the crisis is shifting timelines for the transition, it is important not to rush, advised our speakers. Stop and do things right, because the transition demands care and dexterity.
Staffing: Whether it’s FFS or VBR, clinical professionals are providing the same type and level of care with the goal of helping consumers get better. But it is managers who need to have two diametrically opposite perspectives. Can one person really manage two antithetical programs—one based on service volume and the other based on the right outcomes with less volume? Can they “switch from a left brain to right brain approach,” as Mr. Naughton-Travers put it? What we may need is two different managers to paddle the two canoes. And staff across the organization who have operated in a traditional FFS model will need to be trained in the new norms of VBR, and will need a clear understanding of expected outcomes.
Systems and data: Provider organizations collect a large volume of data but that usually happens in silos. If all systems are integrated (for example, if the electronic health records are integrated with the enterprise resource planning system) and you invest in staff skilled at business analytics—as both Friendship Community Care and Centerstone have done—executives will have the data they need to continuously monitor the variables for both FFS (productivity) and VBR (impact). Further, policies and procedures to manage each payment stream must be clearly laid out and shared with all staff.
Financial performance: Balancing both canoes requires a laser focus on financial performance. Revenue cycling is critical as Ms. Mahan pointed out. Concurrent clinical documentation is key so billing can happen quickly and accurately. Billing staff must have experience in both types of billing and have access to the data that payers expect.
The pandemic crisis already calls for some exceptional navigation skills to steer through extreme market turbulence. Having one foot in the FFS canoe and the other in VBR makes it more precarious than ever before. But health plans and payers have told us that VBR is gaining traction and we can’t ignore the future even as we manage the present.
For more on leadership in a time of crisis, check out these resources from The OPEN MINDS Circle Library:
- The Pandemic Emergency: Effects On Community-Based Organizations
- Leadership—The Other Talent Shortage
- Success Through Leveraging The Skills Of Your Team – Leadership Advice From Emergence Health Network’s Kristi Daugherty
- Is ‘Fear Of Failure’ Your CEO’s Leadership Challenge?
- Meta-Leadership – A New & Tall Order
- Strategic Decisionmaking In Times Of Crisis: Lee & Longstreet On The Final Day At Gettysburg
- During A Cash Flow Crunch, Revenue Cycle Management Should Be On Autopilot
- Strategy In Uncertain Times: Planning Resources For The New Normal
- A Revenue Cycle Management Primer
- Best Practices In Financial Optimization: A Provider Checklist For Maximizing Revenue
And, as we look ahead, mark your calendar for our deep dives into management best practices, leadership, technology and analytics, and performance management:
- The 2020 OPEN MINDS Management Best Practices Institute: August 25 – 27, 2020
- The 2020 OPEN MINDS Executive Leadership Retreat: September 14 – 17, 2020
- The 2020 OPEN MINDS Technology & Analytics Institute: October 26 – 28, 2020
- The 2021 OPEN MINDS Performance Management Institute: February 10 – 12, 2021