Healthcare Revenue Cycle Management, ICD-10, Claims Reimbursement, Medicare, Medicaid

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Risk-Based Alternative Payment Models Key to Value-Based Care

A recent study found that only one-third of providers have tied more than half of their revenue to a risk-based alternative payment model, which has hindered value-based care progression.

- Although the Department of Health & Human Services (HHS) recently announced that it had already tied 30 percent of Medicare payments to an alternative payment model nearly a year ahead of schedule, a recent study indicates that further value-based care progress may be slower than expected.

Risk-based alternative payment models to advance value-based care, report researchers

Only one-third of healthcare organizations receive more than half of their revenue from a risk-based payment arrangement, reported a study in the American Journal of Managed Care.

While HHS anticipates to connect 50 percent of Medicare payments to a value based care model in the next two years, researchers predicted that the industry will not achieve this goal without engaging in more financial risk contracts.

“Medicare’s ability to drive delivery system transformation will depend on how aggressively commercial health plans push risk contracts and whether providers will accept them,” explained the study. “This is beginning to happen—but relatively slowly—at least through 2013. Ultimately, the experience of the advanced groups in this study suggests that expanding risk-based arrangements across the health system will likely be slower and more challenging than many people assume.”

As of January 2016, about 8.9 million Medicare beneficiaries were treated under an alternative payment model that requires providers to bear some level of financial risk, such as the Medicare Shared Savings Program, Pioneer Accountable Care Organization (ACO), Next Generation ACO, and the Comprehensive End Stage Renal Disease Care Model.

Despite a forward trajectory with risk-based arrangements among public payers, only 8.5 percent of privately insured beneficiaries were part of an ACO. Out of these ACOs, only half included some level of financial risk in their payment contracts.

This slow progression with financial risk has impacted the number of providers who accept alternative payment models, reported the study. Out of the 33 medical groups surveyed, about two-thirds of total patient revenue was tied to a fee-for-service payment model and 16 percent from global capitation.

There were also significant gaps between what percentage of total revenue was under an alternative payment model depending on experience with financial risk. Providers with the most risk-based contracts stated that 25 percent of their revenue was from fee-for-service models, whereas, 97 percent of revenue for less experienced providers came from a fee-for-service arrangement.

Additionally, the majority of respondents did not take on more financial risk by the end of the two-year study. Out of 31 participants, only nine increased risk-based contract revenue by five or more percentage points, with an average growth of 15.4 percent across the group.

For the 22 participants that increased risk-based revenue by less than five percent, the reported average growth was only 0.2 percent.

Many providers have hesitated to accept risk-based payment contracts, but researchers revealed that organizations that participated in more risk-based models demonstrated more advancement with health IT implementation, quality of care, and cost management. These aspects are key to participating in value-based care models.

In terms of health IT, all the participating groups reported having an EHR system with 80 percent having a common system across their organization.

However, providers with more risk-based contracts were more likely to have implemented decision-support tools, such as system-wide data warehouses (80 percent), clinical guideline reminders (70 percent), disease registries (50 percent), and practice variation analysis (50 percent).

The risk-based groups in the study also experienced more progress with improving care quality and reducing healthcare costs.

Ninety percent of providers in the risk-based group said that their organizations were able to reduce hospital admissions and readmissions, establish preferred relationships with specialists and other hospitals, manage care delivery for high-risk patients, and more effectively oversee post-acute care.

Even though more financial risk was linked to promoting hospital quality, very few groups in the study claimed to be “advanced” with implementing value-based goals, such as increasing patient engagement and decreasing hospital readmissions.

Participants in the risk-based group only stated “advanced” for one-third of their responses, while fee-for-service groups only responded with “advanced” for three percent of their answers.

As some healthcare providers reported initial success with value-based care and participating in more risk-based arrangements, the pace of payment system change may not live up to HHS goals for the next couple of years. Between 2011 and 2013, only one third of participants stated that their organizations added risk contracts despite new alternative payment models from Medicare and private payers.

“Although many of these advanced groups have embraced payment reforms, those newer to risk-contracting appear more comfortable building infrastructure before taking on additional risk,” explained the study.

Dig Deeper:

Top 5 Facts to Know about MACRA Alternative Payment Models

How to Address Challenges of Alternative Payment Models

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