Contributors: Wren Keber and Lisa Soroka
To learn more about Wren and Lisa, click here.
Source: Pixabay |
Introduction
In continuation of our previous articles on the evolving payer environment, we are focusing on tactics to drive forward alternative payments and other value-based arrangements against the challenging backdrop of today’s payer/provider relations.
Thinking back to the early days of the COVID-19 pandemic, the imperative for both payers and providers was to “weather the storm and survive.” The focus on meeting basic needs more often than not pushed the topic of value to the sidelines. In some cases, organizations working through value-based care arrangements paused their negotiations. In other cases, core aspects of negotiations continued, but value components were tabled for later.
The VBP Contracting Landscape
As providers engage or re-engage with their payer partners, there are a range of value-based arrangement opportunities to explore. Many of these models are built on the same structural foundation as in the pre-pandemic era, but there are certain styles that are becoming more common.
For example, commercial payers are using this opportunity to roll out arrangements as pilots or experiments, tying fee-for-service (FFS) reimbursement levels to provider performance on certain value measures. In practice, we are seeing arrangements where FFS rates increase or decrease based on the level of value-based performance, and these arrangements may or may not include incentive payments or shared savings.
On the provider side, continued consolidation post-pandemic has changed how many organizations have engaged in defining value-based deals. As organizations become larger and/or more complex, the strategy to design a VBP arrangement evolves and can become more difficult. For example, a physician organization with growth into new specialties will find the complexity of VBP contracting increase substantially – this is particularly true with groups adding or growing surgical specialties. Even further, health systems anchored by hospital facilities will find payers eager to engage in VBP discussions to manage acute care quality and costs, but these arrangements can be the most complex due to conflicting financial incentives.
Tactics
We will first explore tactics for organizations that already have a contracting vehicle such as an accountable care organization (ACO) or another network. These vehicles can be useful for negotiating with payers for value-based arrangements, including:
- A quality incentive program for physicians, facilities, and/or both, with payments designed to incentivize joint objectives. Common post-pandemic objectives include closing gaps in screening/preventive care services and improving clinical quality measures/indicators for key populations left unmanaged during the pandemic. While a network isn’t a prerequisite for this type of arrangement, organizations contracting for larger groups of providers may find a network structure useful for designing and effectively managing VBP contracts.
- Sometimes contracting vehicles are built with the intention to achieve clinical integration (CI), meaning they have met a variety of criteria indicating the participating providers have interdependence and a shared focus on their patients’ clinical and financial outcomes. In some cases, achieving true clinical integration allows the providers participating in a network to contract with providers under a single payer contract (usually for physician professional fees, but in some cases hospitals and other facilities as well.) This version of VBP covers both the level of reimbursement for services, as well as incentives earned through delivering on value measures, either with incentive payments and/or shared savings/losses.
- Building a genuine clinical integration program is challenging, resource-intensive, and complex, but many healthcare organizations were moving in this direction before the pandemic, primarily reacting to increasing pressure from government and private payers to manage cost and quality. A subset of networks participating in the Medicare Shared Savings Program (MSSP) were considered clinically integrated by virtue of their program participation, as stated in 2011 jointly by the Department of Justice (DOJ) and the Federal Trade Commission (FTC). This statement was withdrawn by the DOJ in early 2023, so the standard of clinical integration remains high. However, healthcare organizations working toward CI can still achieve it in practice. Additionally, there are more tools and technology available today than ever before to aid in building evidence-based interdependence between providers.
There are also provider organizations considered financially integrated (e.g., because they employ their physicians or are structured to accept shared downside risk). These organizations can negotiate for value, alongside reimbursement. Often these organizations are structured as medical groups or risk-bearing independent physician associations (IPAs). If the criterion of financial integration is met, then additional opportunities for VBP contracting are available. These include:
- Moving to a fixed fee/global budget model, which is often administered as prospective capitated payments. Even in parts of the country where capitation is not widely adopted, fixed fee or budget-based risk sharing can still be a mechanism to align with payers on value, while retaining FFS or other payment types.
- For organizations that include facilities (e.g., hospital-anchored health systems), opportunities to explore risk-sharing between the enterprise and payer partners continue to exist. This is a transformational process with many steps, often beginning with educating reluctant partners. In the post-pandemic era, payers are increasingly initiating conversations with integrated systems to explore full-risk models. Conversely, hospitals that had higher levels of capitated revenue (or premiums collected from provider-sponsored health plans [PSHPs]) experienced a very different financial reality during and after the acute stages of the pandemic. This was due to dollars flowing into the organization, while disruptions to regular utilization patterns occurred. This phenomenon has piqued interest in exploring risk-based arrangements with payer partners as a strategic move to bolster resilience when fluctuations in utilization would disrupt FFS revenue.
Conclusion
Initiating discussions regarding value-based payments in payer negotiations is becoming increasingly crucial for successful relationships in the post-pandemic era. As we continue to emerge from the pandemic and redefine business as usual in healthcare, we encourage leaders to engage meaningfully and diversify how they partner with payers in value-based payment models. Challenging organizations to think creatively offers opportunities to maximize tumultuous times and set themselves up for future success.
Contact Wren at: [email protected]
Contact Lisa at: [email protected]