Value-Based Payment Initiatives Really Do Require Paradigm Shifts (No Joke!)

 

With so many different interest groups touting value-based payments (VBP) as the key to reform of our fragmented and expensive health care system, too little attention is being devoted to the paradigm shift that value-based payments require.

In a traditional volume-based fee-for-service contract between an insurance company and a provider organization, the “levers” that each party gets to move are straightforward.  Insurance companies have almost no control over the volume of services delivered to patients.  Except for certain high-cost services, volume is almost entirely under the control of the providers.  In contrast, the insurance companies control the unit price of each service rendered.  They can aggressively negotiate and, depending on the amount of market share they possess, oftentimes bully the providers to accept unit prices that are extremely low, sometimes below the marginal cost of providing the procedure or service.

Successful value-based payment operates under completely different set of principles.  Payers and providers can no longer pursue purely adversarial positions in which providers focus on maximizing the number of services delivered and payers focus on minimizing the price they pay for those units of service.  Successful VBP requires collaboration between payers and providers, and a healthy dose of something that has been sorely lacking in the US healthcare system for many decades- partnership!  Absent collaboration and partnership, most value-based payment contracts will either never get off the ground or will break down somewhere along the way, resulting in pitched acrimonious battles that ultimately fall apart or even worse, descend into litigation.

Payer-Provider dyads can either continue in a volume-based paradigm, with the payer trying to control costs by way of the unit cost for services and the provider using its control over service volume to achieve its revenue targets.  Or they can agree to pursue value-based payments.  But with that means the end of secret unit price deals negotiated by the payer.  Reference pricing needs to become the rule rather than the exception.  The provider needs to know its total cost of care.  It’s not a Total Cost of Care program if the payer withholds the total costs, at the member-service level!

The transition to value-based care demands provider groups also confront their share of, “difficult realities.”  Providers must seek to identify clinicians and/or clinical processes that are not providing optimal value.  Individual physicians who do not practice efficiently must be addressed and clinical processes of care that consume resources that need not be consumed in order to achieve a suitable outcome for the patient must be redesigned.  Patient safety must also be addressed.  Is too much or too little care contributing to situations where patients are suffering adverse outcomes that can be improved by care process redesign accompanied with honest assessment of how that care is being delivered presently?

Mile High Healthcare Analytics works with ACO payers and provider groups.  For some of our clients we serve as the referee, transparently validating and reporting on shared savings performance on a regular basis.  For others, we are helping to stand up ACOs under Total Cost of Care shared savings models.  And for others, we strive to avert litigation by recalculating historical shared savings results so that payers and provider groups can “make nice” and move forward in a collaborative partnership necessary for successful value-based care.  We are also capable of, in conjunction with our legal partners, Frier Levitt (www.frierlevitt.com) to engage in litigation when a value-based payment deal turns out to be merely a charade or when one party repeatedly fails to uphold their end of the bargain.  Proper design of a shared savings programs coupled with strong and consistent operational oversight are usually the harbingers of success.  Success comes to those who plan, collaborate, and ultimately play fair.

Whether you are just beginning to investigate engaging in a VBP initiative, are in the process of standing one up, are peering into the downside risk abyss (with trepidation), or if something has already gone seriously wrong, the Mile High Healthcare Analytics team can assist you.  We support clients throughout the value-based payments lifecycle, and will offer both straightforward information and honest appraisals as to where your initiative needs to go in order to be equitable and transparent for both parties.  For more information, please click on https://www.healthcareanalytics.expert/vbp_parent/ or fill out our contact form at https://www.healthcareanalytics.expert/contact/ and we will reach out to you to learn more about how we may be of service.