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The 5 Essential (and Overlooked) Steps to Risk-Based Contracts

The 5 Essential (and Overlooked) Steps to Risk-Based Contracts

Why aren’t risk-based contracts more popular?

That’s the question that led the American Physicians’ Group’s (APG) formation of the “Risk Evaluation Task Force,” which met recently in Washington, D.C.  This was an opportunity for high-performance medical groups and health systems to engage with national thought leaders and representatives from the Center for Medicare and Medicaid Innovation (CMMI) on this pressing question.

Many physicians — you may very well be one of them — have invested heavily in time, technology, and people to enhance their ability to perform in value-based and risk contracts, only to be frustrated by the few takers in the payer arena. A mere 14 percent of Medicare Advantage contracts include downside risk, which brings the greatest reward for those who deliver high-quality care and meet performance measures.  Without these high-value contracts, the losses required by infrastructure investments can be devastating. Case in point: notice the significant number of medical groups that needed financial rescue over the last few years.

This task force clarified and provided excellent insights into the barriers that exist. The payer-side incentives for risk-based contracting are not powerful enough to drive this relationship… yet. And of course, downside risk may mean risk to the payer as well as the provider. Surprisingly, many payers have a difficult time providing data that is timely and useful about attributed populations, making the management of these patients more difficult as well.

Fortunately, the Centers for Medicare and Medicaid Services (CMS) has begun to move more aggressively into risk with the various models of accountable care organization (ACO) contracts, mandating risk for most within a few years and promising to consider all of the current inadequacies of benchmarking, engagement restrictions (including lack of incentives for beneficiaries), rules around the annual wellness visit, capping HCC scores, and the lack of financial recognition of the costs of standing up an ACO.

So, where do we go from here?

We should continue to press for appropriate reforms to ACO rules, sustained engagement from CMS and CMMI on evaluating new models with broader representation of groups including independent physicians, different levels of risk, and renew their efforts to push payers in the Medicare space to a greater volume of risk-sharing contracts and standardized metrics. Without a significant move to higher value risk contracts, the cost of a high-performing ACO will be prohibitive.

What are the next steps to advance and evolve risk-based contracts?

  1. Physicians must take on risk. This “skin in the game” mentality is crucial as it engages physicians, encouraging better care patients at a lower cost.
  2. Behavioral health and pharmacy benefits are essential to holistic, risk-based contracts. These components are vital to patients’ well-being, which reflects providers’ quality of care. By neglecting these elements, we risk missing an opportunity to provide transformative care.
  3. Power up MACRA and MIPS. The Medicare Access and CHIP Reauthorization Act (MACRA) and Merit-Based Incentives Programs (MIPS) must include more providers in order to minimize the low-volume threshold. For success, the program must have more doctors and providers pushing the move to value, and it must push doctors who are not performing to successful groups.
  4. Further the advanced payment models. For groups with a high percentage of patients in risk contracts, all the contracts including MA must be allowed to be counted toward 5 percent APM bonus. One way to improve this function is by including diverse groups (e.g. Medicaid, Medicare Advantage, commercial value-based contracts) into the risk pool, which currently only counts Medicare beneficiaries.
  5. Continue to improve the risk models. Remove restrictions on HCC caps to engage and incentivize patients, improve benchmarks and increase transparency, allow waivers —including the three-day Skilled Nursing Facility waiver in all ACO programs, enhance the speed of data delivery, and eliminate time restrictions on the annual wellness visit.

We cannot expect to see our health system transform into an outcomes-based, cost-effective model without making some substantial changes from the usual fee-for-service practices. Payers, patients, CMS, and providers need to be in lock-step to make this happen.

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In closing, there was tremendous optimism at this meeting. While we can expect difficulties and hurdles, we should also look forward to the opportunities. As the saying goes, “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.”

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