Paying for value—is it the opportunity for provider organizations to get paid more? Or the shifting of “bad risk” from health plans to provider organizations? Whether value-based reimbursement (VBR) is a positive business development or not seems to depend on your perspective.
I was surprised at the results of a recent KPMG poll finding that 46% of health care managers and executives expect that VBR will increase their organizations’ profitability in 2018. This is a dramatic rise from the 23% of health care leaders who had this same expectation of profitability in 2016 (see 46% Of Health Care Leaders Expect Value-Based Reimbursement To Increase Profitability). About 33% of respondents see value-based contracts as having a neutral impact on their organizations (compared to 25% in 2017), and about 20% of respondents saw value-based contracts as hurting profitability (compared to 52% in 2016 and 35% in 2014).
This (positive) change in the perception of VBR may be related to both improved understanding and improved preparedness. A 2016 report, Journey To Value: The State Of Value-Based Reimbursement In 2016, found that only 40% of provider organization executives reported being ready to implement VBR. HealthLeaders reported that in 2017, three-quarters of leaders polled were prepared for both value-based care delivery changes (73%) and value-based financial changes (72%) (see Ready Or Not, Leaders Prepare For A Value-Based Future).
But, a recent survey of the National Association of Accountable Care Organizations found that almost two-thirds of accountable care organizations (ACO) involved in the Medicare Shared Savings Program (MSSP) would leave the program if they were required to assume risk. The reasons most often cited for not being ready to assume risk are: the amount of risk is too great, concerns about the unpredictable changes to the ACO model or Centers for Medicare & Medicaid Services (CMS) rules, and the desire for more reliable financial projections (see 71% Of MSSP ACOs Would Leave Program If Required To Assume Risk).
Yesterday, CMS issued a proposed rule that would change the way that Medicare ACOs participate in value-based payments. The MSSP ACOs would have a much narrower window to participate without “downside” financial risk. The program, called “Pathways to Success”, would decrease the number of ACO tracks to two—”basic” and “enhanced.” The basic path would have two years of “upside-only” participation before three years of gradually increasing two-sided risk, qualifying as an advanced APM in the fifth year. The enhanced track, meanwhile, would take on risk and qualify as an advanced alternate payment model (APM) immediately. (For more, see CMS Administrator Seema Verma’s blog at Pathways To Success: A New Start For Medicare’s Accountable Care Organizations; or you can read the draft of the proposed rule at Medicare Program; Medicare Shared Savings Program; Accountable Care Organizations-Pathways To Success.)
What I do know is that my colleagues working for health plans are having difficulty finding specialty provider organizations—particularly those in the behavioral health market space—that are ready for VBR contracts and will accept the VBR-financed program models that health plans are looking for. Why this situation exists is complicated. From my anecdotal experience, some of this is the result of lack of preparedness and risk-averse provider organization executive teams. And some is the result of health plan-preferred models that are not as financially sustainable as proposed.
OPEN MINDS Senior Associate George Braunstein suggests that executive teams start by taking a step back and examining their current risk management capabilities, and gradually building on those competencies by taking small, measured steps forward. He explained:
To start, it is important for executives to look at VBR in context before making general assumptions about their capabilities. First, most behavioral health and I/DD organizations have been operating with some level of financial risk. All organizations, regardless of their market and payers, have been managing the risk of making payroll and addressing inflationary costs without much, if any, rise in reimbursement rates. Any organization providing public-funded services as a safety net provider has been managing limited resources for excessive demand on an ongoing basis. The risk of VBR is just a change in how you measure and manage the risk.
Second, it is understandable that executives from organizations that do not have sufficient cost and revenue data may be afraid. However, there are easy-to-use tools to improve that knowledge. Since it is vital to know your unit revenue and cost structure regardless of the payer source and structure, that needs to move forward as soon as possible.
Third, it is important that with any major change, including changing reimbursement models, an executive team starts with one or two service lines. It is unnecessary to analyze VBR for the entire organization. Most VBR is focused on high-risk, complex populations. Focus a pilot on one or two sample populations and negotiate a ramp-up process with a payer.
Fourth, organizations that are primarily fee-for-service have very little control over the structure and payment for service lines. Accepting the risk involved with VBR will enable an organization to have more control over the structure and funding of services, with the focus on the outcomes. This control can both increase flexibility with your overall budget and possibly your net revenue.
VBR is here to stay, whether executive teams like it or not. And I’ve often found that a lack of knowledge is the quickest path to fear. The best starting place for your organization should be understanding your current capabilities and determining what you need to do to prepare your organization to succeed.
For more, be sure to join John F. Talbot, Ph.D., Chief Strategy Officer at Jefferson Center for Mental Health, and OPEN MINDS Advisory Board Member, on September 19 at The 2018 OPEN MINDS Executive Leadership Retreat for his session, “The New Leadership Challenge: Culture & Change Management In A Value Based Market.”