3 insights on risk-based contract strategy from a payer, provider and an IT company

With margins declining for both payers and providers, it is clear they must collaborate in new ways to redesign payment and care delivery models through physician-hospital organizations, accountable care organizations and shared savings agreements.

Many organizations have yet to dive into any risk-based contracts, but industry pressures will swiftly change that. "We are not in the business of filling beds anymore. Anyone who doesn't think we are headed for a risk-based world is in for some tough sledding ahead," Michael Swarzman, vice president of business development and service lines at Chicago-based Advocate Illinois Masonic Medical Center, said on a panel at the Becker's Hospital Review 7th annual meeting.

Mr. Swarzman was joined on the panel by H. Scott Saran, MD, CMO of government programs at Health Care Service Corp., one of the country's largest customer-owned health insurers, and by Vicki Harter, vice president of care transformation at Caradigm, a population health software company. From the trenches of risk-based contracting, Mr. Swarzman, Dr. Sarran and Ms. Harter each brought a unique perspective on how to move the industry forward. Here are their top insights.

1. Many studies suggest physician-managed ACOs perform better than ACOs managed by hospitals alone, but the scales may soon balance.
Physician-centric vehicles do tend to outperform hospitals in accountable care, according to Dr. Sarran's experience. "Physician entities have no financial repercussions of doing activities that empty a hospital bed or move an ancillary test to a lower cost, physician office-type setting," he said. Many hospitals have not yet fully committed to this shift, which puts old profit centers at odds with new initiatives.

However, there are exceptions. Hospitals are increasingly talking about their commitment to taking on risk, more so than driving outpatient improvement, for example. Seeing hospital-centric entities and their leaders start to prioritize risk is a sign hospitals are starting to step up to value-based care and backfill, downsize or recast business into areas that are more appropriate.

2. Multi-contract ACO fatigue is real — keep it at bay by limiting physician metrics.
Coordinating and tracking a slew of different metrics for various payer contracts can be exhausting and particularly overwhelming for physicians.

"It's incredibly painful and requires a large amount of resources in terms of analytics — and it doesn't end there either," said Ms. Harter. If you fall behind or don't meet goals, it can become continually complex, she said.

"At the street level we work with a lot of independent physicians and small practices in urban markets. They are absolutely drowning in the attempt to do the right thing to improve in a metrics-driven way," Mr. Swarzman said. "We need to figure out a way for those physicians who are doing good work and working with difficult populations to have an easier time of demonstrating the work that they do."

To help tackle multi-contract fatigue head on, Ms. Harter said many organizations are looking at prospective reporting systems to address issues before they fall behind. They also focus on areas were they can encourage physicians to take ownership of the organization's specific goals. "One thing I hear continuously is do not push [everything] out to physicians," she said. Rather than taking every data set and measure and overburdening physicians with information and administrative tasks, determine their preferences and identify areas where they can succeed, she said. Luckily there is a hopeful beacon on the horizon — with the Medicare and CHIP Reauthorization Act, much of the reporting will be downsized, she noted.

3. Consumer engagement is lagging.
Despite that HMO networks tend to outperform PPO networks on cost, quality and potentially patient satisfaction, they tend to have a negative connotation among consumers, according to Dr. Sarran. "What we are seeing is frankly, there are a lot of purchasers who will pick a narrow network PPO at a slightly higher cost over an HMO, even though the HMO is better product," Dr. Sarran said. "We have to recognize that there are still people that don't like the idea of an HMO." Simply put, the consumer isn't on board yet with managed care. They have yet to see the value in a lower cost, managed care network and a lot of value-based care initiatives, and it's both payers' and providers' responsibility to get them there. More patient outreach and education needs to be done to engage the consumer and inform them so they can understand why a "cheaper" plan might actually be in their benefit.


More articles on accountable care:

Evolving stages of population health and ACOs: A comparison of 4 health systems
Nonprofit health system's commercial ACO denied tax exemption
ACOs flourish or fail in these 27 states

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