The central question to answer
Francois de Brantes, MS, MBA, vice president and director of Center for Value in Health Care at Altarum Institute, says the impact of value-based programs depends on a host of factors, but mostly how risk is managed.
“Value-based payment models at the core are really an attempt to transfer a certain amount of financial risk to the physician, hospital or health system from the payer,” de Brantes says. “How those programs end up being designed and what they accomplish through those designs may or may not be consistent with the objective, which is to transfer a reasonable amount of manageable risk.”
To successfully use value-based reimbursement, providers and payers must first define how risk will be managed. Is the provider going to assume all or just some of the total cost of a patient? Who’s going to take on the most risk? What other conditions will be included?
For the most part, he says, commercial health plans have a variety of primary care-focused, value-based contracts in place and they are typically upside only, meaning that providers can earn incentives for meeting benchmarks but won’t be penalized if they don’t. The focus of these agreements is to beat some defined total cost of care trend rate with the assumption that the primary care provider can control the cost over a population of patients. Because these agreements are upside only, de Brantes says most physicians are not hesitant to sign up.
“There’s no financial risk to going above the target,” says de Brantes. “If you beat the target, you get to share in the savings. If you don’t beat the target, you don’t lose.”
The problem with these types of agreement, he says, is that it’s not clear how they are improving quality or cost of care or helping costs on a larger scale.
“Payers recognize that if all you do are upside only deals, you just end up spending more money. “It’s a little like a casino, where the casino pays out all the winners and never collects on the losers,” he says. “Upside-only deals are great for providers, not so great for those who pay the bills.”
De Brantes estimates that perhaps 90% of pay-for-performance contracts are upside only, and cautions that the money to pay for these incentives must come from somewhere. If it’s a wash when viewed against any cost of care savings, then there is little benefit other than perhaps better care or outcomes for the patient.
MACRA could change all that, de Brantes says, because it will push providers to accept contracts with some downside risk. “They have to accept downside risk or they have to stay in the mix portion of MACRA designed to keep [fee] schedules at the level they are at, potentially penalizing some physicians.”
Within a few years, he says, penalties will be levied against providers who don’t have a little skin in the game, and de Brantes says more physician practices are seeking out contracts “with teeth” that include downside so that they can tailor the agreement to their own terms, not CMS’ or other payers’.
“You wait around then it’s going to be like the old saying that you’re either the master of your destiny or someone will control it. And the someone else in this case is the federal government,” de Brantes says.
Upside only arrangements have failed to engage clinicians effectively, he says, because there is nothing to lose. “If I spend a whole bunch of time in my practice getting a [Patient-Centered Medical Home] certification, I spend some time getting that done but at no point are my contracts putting me at some kind of financial risk,” de Brantes says. “Once that changes, your attention to the program and what you need to do to transform your practice and improve the way you deliver care just changes dramatically.”
Because many of the current value-based arrangements are upside only, de Brantes says it’s also been difficult to measure their effect on outcomes since there is little impetus for change. Providers and payers must work together to define their relationships and roles. Payers need to provide practices with data and support so that caregivers can target improvements.
“All those things that very few have paid attention to in this upside-only world, need to be part of the conversation, and I think one of my observations is that because these negotiable parameters have not been part of the discussions there is such hesitation among providers to take on financial risk,” de Brantes says. “It’s kind of silly, these are just common sense and plans need to engage their network in these discussions, bring them data, show them financial scenarios, and show them ‘what if’ scenarios. This is kind of simple math, but until such time as the payers bring those financial modeling tools to the physician offices with whom they’re negotiating, there is going to be a certain degree of hesitance.”