Alternative Payment Models: Are they good for patients?

A common misconception of alternative payment models (APMs) is that they incentivize providers to withhold care to save on costs. On the contrary, well-designed value-based care programs align high-quality care with lower cost.

As an example, being discharged from a skilled nursing facility (SNF) too soon after a hip or femur fracture surgery can lead to costly readmissions, while staying in an SNF longer than clinically necessary exposes patients to unnecessary risks including infection.

Provider organizations that use risk assessments to create patient-specific care plans, manage care to the patient-specific goals of the care plan, and transition patients home as quickly and safely as possible provide higher-quality care at a lower overall cost.

An intimidating aspect of APMs is the way they consolidate risk to providers on three fronts:

1. Technical risk that providers face if the programs are not designed well.
2. Insurance risk already inherent to healthcare shaped by the unknowable variation in the volume and severity of illness.
3. Performance risk associated with providers’ favorable or unfavorable performance.

Through a disciplined and methodical approach, providers can mitigate each of these risks. For example, to reduce technical risk, providers can increase focus on managing each phase of a patient’s episode of care and improving inter-provider communications. Evaluating the impact of quality measures on reconciliation payments, closely monitoring risk adjustments, and gain/risk sharing are other methods to reduce technical risk. Methods to manage insurance risk include analysis of various VBC downside risk protection products, contingent capital, and risk pooling. An experienced insurance consultant can provide assistance in evaluating options.

Managing Episodes of Care for Successful Outcomes

How providers manage episodes of care is key to mitigating all three areas of risk. According to the Centers for Disease Control and Prevention (CDC), total hip and total knee replacements are among the most commonly performed surgical procedures, with over 1 million performed each year. Despite the huge volume of these surgeries, outcomes and costs vary greatly among providers, across geographic areas, and among homogeneous populations.

Factors affecting variation include duplication of exams, imaging, and other diagnostics due to lack of communication between the surgical practice and the hospital. Site of service is another reason, such as performing the procedure in an inpatient hospital setting when a less costly outpatient setting would be deemed safe and appropriate for a given patient. Other variations include length of stay at various care sites, poor post-inpatient hospital discharge planning, and cost of equipment/implants. Cost and quality are impacted by these variations.
Fortunately, there are strategies providers can use to maximize their success across episodes of care.
These common-sense measures fall generally into two phases of the care continuum: before and during the performance period. Healthcare conveners and risk management professionals can provide education and consultative support in these areas including:

1. Care path coordinations - Adoption of care pathways through care redesign has proven to yield substantial savings, in part, by reducing errors, avoiding duplication, and limiting unnecessary resource utilization. Patient-centric care, increases in care coordination, and the expanded use of clinical decision support (CDS) tools are among the core components of VBC.

2. Care path transitions - Transitions of care occur when patients are at their most vulnerable, so heightened attention in this phase of care is a key opportunity to reduce costs and inefficiencies.
Juggling Numerous Medicare Programs: Adopt an Enterprise VBC Strategy
New Medicare models including Direct Contracting, Kidney Care Choices, and Oncology Care First offer a wide range in risk levels to choose from. As Medicare continues to roll out numerous value-based care programs and as other payers follow suit, healthcare organizations will be increasingly challenged with managing an array of programs that vary between services under risk and patient population.
The total risk of these collective programs can be substantial. It is essential for organizations to have an enterprise approach in place to track and manage total financial exposure. This is particularly critical as VBC programs evolve. Innovative, enterprise-level value-based risk insurance represents a valuable option for organizations seeking protection against catastrophic losses.
Insurers Developing Downside Risk Protection Products
Current risk for the value-based contract market is estimated at $226 billion, and there is limited availability of risk protection products. A small number of insurers are introducing products that offer providers protection against this downside risk. This coverage is designed to provide downside protection for all types of value-based care risk programs involving population-based ACO models and episodes of care in defined performance periods. This coverage can be applied to hospitals and healthcare systems, primary care groups, specialty physician groups, conveners, and any provider that enters into a risk-based contract with downside exposure.
Value-based care risk protection allows providers to take advantage of financially beneficial programs in value-based care by protecting against the downside risk associated with these programs. Value-based care insurance provides protection in the aggregate. With VBC-related risk insurance, providers can insure their bottom line and protect their organization.
Don’t Get Left Behind
As organizations approach this transition, the impact of value-based reimbursement on the healthcare market should not be ignored. Those who wait will almost certainly find themselves at a competitive disadvantage to those who embrace the model. The goal of CMS is to have 100% of providers participating in upside and downside value-based care contracts by 2025.1 Currently, the participation rate is less than 20%. That means over the next five years, there will be a massive shift in risk from the government onto provider organizations and other players in the private market.
The flight from volume to value is accelerating, and it represents a major opportunity for providers to grow their businesses. It is also the beginning of a massive shift in risk from payers to providers. To be prepared, providers need to fully understand what programs are available to them, whether they’re positioned to win or lose, how their performance compares to that of their peers, what opportunities they have to earn new revenue, and their level of risk of financial loss.

In order to answer these questions, forward-leaning provider organizations are bringing together key stakeholders from their risk management, clinical quality, contracting, and medical management teams to assess the risk contracts they currently have, as well as other programs they may be interested in pursuing.
Once that initial step is taken, it can be very helpful to bring an insurance broker into the process who can help define the risk that is being considered and structure downside protection products that match with the risk tolerance of the organization.
Once that step is taken, we encourage you to have your broker reach out to Coverys and Archway—we’re here to help.
View the entire Coverys Special Edition Red Signal Report: Value-Based Care Series No. 1.

1 The Health Care Payment Learning & Action Network (HCPLAN, or LAN)