Create a scalable, successful value-based payment model

Over the past few years, the industry has seen plenty of value-based payment models. But while some have flourished into wide-scale initiatives, others have floundered.

So what’s the secret to success? While data analytics, payer-provider collaboration, and physician buy-in are all key, so is ensuring the participating organizations are making the proper internal investments.

That’s according to Seth Frazier, chief transformation officer, Evolent Health, who presented a session entitled, “Design Scalable Alternative Payment Models to Drive Change,” at the Advanced Payment Models in Healthcare Conference 2016, held in Orlando March 17 and 18.

“The key to driving sufficient investment is to have a well-developed business case that describes how the strategy is going to yield sustainable returns,” Frazier tells Managed Healthcare Executive. “We see too many health systems under-invested and unable to generate sustainable results at scale. They are stuck in the middle, unable to generate value but often spending millions.”

Frazier says health systems must establish a “scalable value-based services organization,” which includes:

• Predictive modeling,

• Care management work flow and analytics tools,

• Strong physician alignment and network management capabilities,

• A care management workforce,

• Risk adjustment infrastructure for Medicare Advantage and Next Generation ACO contracts, and

• Financial, contracting and actuarial resources. 

Dispelling common concerns

When establishing a value-based reimbursement model, and when ensuring the proper investments are made, Frazier says friction can occur among key stakeholders due to various concerns. For one, thing, he says, some stakeholders might fear that a value-based care strategy will reduce volume-based revenues to generate savings.

“Fortunately, the initial savings targets typically focus on lower profitability services such as medical admissions and ED visits,” he says. “In addition, any potential losses incurred are often swamped by the benefits of growing volume associated with the contracts.”   

Another common concern relates to hospital-based ancillaries and outpatient surgery.  “These services are often more cheaply provided at freestanding centers,” says Frazier. “In full-risk contracts, however, the true economics focus on the marginal cost of these services to the contract holder. Typically, providing these services in-house is more economical than paying an outside freestanding center to do the work.”

Next:Ensuring long-term success

Ensuring long-term success

Frazier says healthcare executives should do the following to gain buy-in and increase the likelihood of success in a value-based model:

• Align the network economics so that physicians are incented to do the right thing. That may mean developing internal financial reconciliation or repricing strategies to ensure physician gainshare is not compromised by pricing anomalies.

• Align corporate goals. Ensure that health system and payer executives have corporate goals that are aligned with the success of the value-based contracts.

• Involve senior executives in troubleshooting. Establish internal senior problem-solving sessions to promote real-time resolution of operational challenges.

• Pursue early “wins” to build momentum around the value-based care strategy.  For example, focus on reducing readmissions.

• Invest in early incentives. It’s helpful if the financial model can sustain early physician incentives to generate engagement before the gainshare funding can kick in.

• Thoughtfully construct network design. It’s especially critical to align primary care physicians with geographically accessible high-value specialists. 

“With terrific execution, value-based growth can yield substantial returns to payers and providers,” says Frazier. “These returns come from higher quality, growth in covered lives, greater physician alignment, reduced use of low contribution margin services and increased patient satisfaction.  There are pathways to address friction points, but execution is critical.”