Have ‘The Best’ Services, But No Health Plan Contracts?

Executive Briefing | by | January 10, 2017


Paul Block, Ph.D.
Paul Block, Ph.D.

In the past few weeks, many provider organization executives have expressed frustration that they have “great” services, but they can’t get reasonable contracts with health plans. In the same time period, health plan executives have talked to us about their challenges in finding provider organizations that are ready for reimbursement pegged to performance. Why this disconnect?

Pay-for-value is a two-part strategic issue for executives of organizations providing behavioral health services. The inevitability of some type of value-based reimbursement is part of the strategic landscape (see There Is No Plan B and Tackling The Thorny Issue Of Behavioral Health ‘Value’). And, strategy needs to be flexible because the formula for “value” for behavioral health is a work in progress (Tackling The Thorny Issue Of Behavioral Health ‘Value’ and For All The Performance Measurement, Are We Really Measuring Performance?).

So what is the best strategic approach? My colleague, OPEN MINDS senior associate Sarah Fine, Ph.D., has some experience in this area from her work with community-based organizations. She noted that data is needed for success in the current environment just to respond to changes in the market and to shape that market:

Value-based care comes down to two factors – lowering costs and improving outcomes. I would argue that lower spending on behavioral health may not be an appropriate goal. The costs of outpatient behavioral health services—now about 25-33% of the cost of primary care visits ($80-120/hour in behavioral health vs. $130-180/visit, with 3-4 visits per hour in primary care)—only justify minimal management expenditures, even if prices were to increase significantly (see How Much does Mental Health Care Cost? Part 2: Finding Affordable Psychotherapy). The reality is that much of the savings when it comes to behavioral health comes not from behavioral health costs per se, but from effects of treatment for behavioral health comorbidities on medical status and spending (see Economic Impact of Integrated Medical-Behavioral Healthcare. Implications for Psychiatry).

This reality presents opportunities for behavioral health provider organization management teams – if they can convince payers to adopt alternative payment models. To address this challenge, provider organizations need to be able to demonstrate and document clinical and financial outcomes. In my previous work at a community mental health organization we learned that our main Medicaid managed care organization (MCO) had data on the effects of our services on health care spending in comparison to our competitors, as well as our comparable costs per family. We were frustrated, however, that they would neither share that information with us, nor use it to make decisions about referrals, payment, or contract structure despite our repeated proposals and their public acknowledgment that they saw our services as distinctly effective.

Our eventual solution was using our own data. Because we couldn’t get confirmed hospitalization rates or costs or information about our competitors’ performance, we pulled together the best information we had and brought it to our payers to propose that they use their claims data to confirm or correct our estimates. A brief three-month comparison by one health plan showed that our program saved an average of about $4,000 per consumer in reduced behavioral health costs. We saved payers millions of dollars compared to our competitors.

We also compared our post-discharge hospitalization rates to statewide system averages and estimated the savings from reduced hospitalizations using our local Kids Count report for pediatric psychiatric stays. The result was an estimate that we saved payers about $3 million compared to having other provider organizations with similar services treat the same children – a $3:1 incremental ROI.

While the payers neither confirmed nor denied our estimates, they did finally agree to increase our reimbursements when we announced that we were closing our program rather than continue to lose money after they had imposed a series of industry-wide cuts. If our payer had analyzed their own data, they would have seen similar results about the success of our program – but it took us using our own data to push the issue. If you develop a method to measure the value of your services, you will be better positioned to negotiate with payers and develop new alternative payment models that can benefit your organization.

After talking with Dr. Fine about her experiences, I have three recommendations for behavioral health provider organizations looking to explore alternative payment models with payer organizations. First, document the clinical outcomes of your services using currently recognized, valid measures. Don’t wait for payers to require you to supply performance data. And don’t limit your performance reporting to what is required now – anticipate what will demonstrate your value compared to competitors (see Will Value-Based Payment Happen & Will It Work (For Us)? and What Do You Need To Demonstrate & Manage Your Value?).

Second, calculate (or at least estimate) the financial impact of those outcomes in ways that attract payers’ attention. Understand what payers are looking for and develop services (with performance reporting) that address their needs (see Sharing Data, Driving Performance: What Payer/Provider Collaborations Can Do and What Is Metrics-Based Management & How Do You Do It?).

Finally, be assertive in proposing specific alternative payment models, including shared savings plans, to payers. Now is not the time to wait for health plans to invite your organizations to be a “partner.” There are lots of potential partners for health plans out there. You need to develop and communicate your service models to them. This is not a one-meeting proposition – this is an 18-month process of meeting, listening, and building relationships within many levels of the health plan (see Payer-Provider Collaboration: The Value Of Data Sharing For Whole Person Care and Strategies, Tools & Techniques That Enable Payer-Provider Collaborations & Partnerships).

For more, join Brian Wheelan, chief strategy officer and executive vice president of Beacon Health Options, on February 16, 2017, at The 2017 OPEN MINDS Performance Management Institute session, Partnering With Provider Organizations: How To Make Risk-Based Contracting Work.


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