How to succeed under risk-based payment models


An increasing number of organizations are turning to risk-based contracts to improve health outcomes, lower costs and improve the quality of care.

In a webinar hosted by Becker's Hospital Review and Columbia, Md.-based xG Health Solutions, Earl Steinberg, MD, CEO of xG Health Solutions and executive vice president of innovation and dissemination at Danville, Pa.-based Geisinger Health System, and Ray Herschman, president and COO of xG Health Solutions provided guidance for these organizations embarking on new risk-based payment models.

In their presentation, they addressed the following three questions providers often face when pursuing risk-based contracts.

1. What capabilities and knowledge should a provider possess to enter a risk-based contract?

First and foremost, it is especially critical for providers to carefully examine the terms of the contract. While this may seem obvious, it is important the key parties driving the value-based care arrangement — the clinical team — fully understand the terms of the agreement and what quality metrics will determine financial success under the risk-based model, according to Mr. Herschman.

"The key for provider organizations is to build up a good course of subject matter experts and the resources to help people understand their roles," he says. "Part of it is becoming familiar and versed in the data, but it is also important to understand the terminology and tools. This is new, in relative terms, to the provider side of the business. Not everywhere, but from a macro perspective."

The providers should also prepare to assess the historical basis for the contract. Most risk-based contracts are based on historical patient claims data provided by the payer. This data helps determine where savings and awards are possible and in what time frame they can be achieved. Providers should familiarize themselves with the historic foundation for the contract to ensure it is feasible.

"In that sense, [the payer] has an advantage over the provider because they can see all the data over time — the economic and quality components of the data — prior to arrangement," says Mr. Herschman.

Make sure the payer will provide claims data on an ongoing basis to show how risk is changing over time, what interventions are working and which ones aren't.

"You want access to raw claims data and you want to get it on regular basis," says Dr. Steinberg. Data should be timely, accurate and complete, they say, and a good partner will make sure the provider understands the data provided.

In order to turn the agreement into a reality, a provider will also need to be sure it has care management capabilities, including primary care, acute inpatient care and care for patients with complex, chronic conditions.

"Under a risk-based contract, care management is going to play an extremely important role, not only for the quality component, but also for the cost of care component. A lot of focus is spent on reducing administrative costs, but it's the total cost of care that should be the focus for those responsible for care management," says Dr. Steinberg.

Lastly, to support care management and population health, providers should be ready to implement episode data analytics to focus efforts and resources.

2. What data analytics capabilities and care management strategies are required?

"We view data analytics as being essential, but playing a supportive role," says Dr. Steinberg.

This data — the claims data, EMR data, admissions, transfer and discharge data, patient reported data, eligibility and pharmaceutical data — will be used for a number of purposes under a risk-based contract, including risk stratification, targeting, episode definition and performance profiling.

Data should be used to illustrate the patient population. Providers must have equal insight into the historical and projected costs of the population as the payer does, Dr. Steinberg says.

"The most important use of data analytics is in targeting," he says. "Which patients you should be focusing on, which issues related to a given patient you should be focusing on, whether particular providers are practicing a at performance level that is consistent with expectations and determining whether any cost problems that you incur are due to excess utilization."

Data analytics will also enable providers to monitor performance on a large, organizational scale and on an individual, physician-to-patient level, so adjustments can be made when necessary.

"It's one thing to perform data analyses, but it's another thing for those results to have any impact on care," says Dr. Steinberg. "We believe very strongly for the results of data analytics to have impact, the clinicians need to understand what the results mean and the results need to be incorporated directly into the workflow so they are present when a doctor or nurse is with the patient."

In order to leverage data analytics at the point of care, he says, primary care practices must use the EMR.

"Everybody loves to hate the EMR. When used simply as electronic documentation systems, EMRs are not of much value. They need to be leveraged so they facilitate predefined work flows, and support clinical decisions," Dr. Steinberg says.

Full optimization of the EMR will support providers as they manage care and population health. "Providers historically have not had to deal with the management of the population as a whole. They've typically been on the other side of the telephone with the insurance company when programs such as utilization and case management have been employed by insurers," Dr. Steinberg says.

In terms of care management strategies, Dr. Steinberg pointed to advanced patient-centered medical homes with centralized or embedded complex case management and coordination across the medical neighborhood.

While primary care is the foundation of population health management, Dr. Steinberg notes many organizations may feel their ranks of primary care providers are too thin to support the risk of the entire population.

"Aside from having a sufficient number of providers, we have found that there are many opportunities to improve efficiency and effectiveness of primary care through redesign. We use a mantra of elimination. We eliminate anything that is not necessary and automate everything that can be automated. We delegating responsibilities so that every member of the team is operating at the top of their license," he says.

This is done through an advanced patient-centered medical home model, which is a multi-disciplinary care team, led by a primary care provider, that provides coordinated, continuous care. Part of this model includes expanding the traditional scope of services provided in primary care offices.

If the advanced patient-centered medical homes are large enough, Dr. Steinberg recommends embedding specially trained case managers he calls "commando RNs." They can be embedded in the PCMH or centralized and serve a larger region to be more cost-effective. They are considered part of the primary care practice and are the first point of contact for complex cases, helping patients schedule visits, proactively reaching out to patients and acting as an informational resource to help guide patients through the care continuum.

"Originally Geisinger had to pay primary care physicians to embed these case managers. Now it's fair to say you would need protection from the Marines to go in and extract these people," Dr. Steinberg says. They are viewed as a critical part of the care team.

"There is a certain profile for good case manager," says Mr. Herschman. "They are interfacing with the physician, working with them to direct and coordinate across the team. They don't touch every patient; they are most often taking on the toughest patient. They make sure all providers are working at the top of license across the board."

The case managers help ensure there is coordination across the medical neighborhood.

3. How can providers stay financially sound?

"When we are out meeting with the C-suite from different health delivery systems, the biggest challenge for CFOs is their concern about how their institution can transform from a volume- to value-based organization without committing financial suicide," says Dr. Steinberg. It's a valid concern. "Not all providers are going to survive in a value-oriented world. There will be consolidation and bankruptcy," he says.

However, xG Health generally encourages healthcare delivery systems to start incorporating value-based processes to improve quality and efficiency before fully transitioning. xG Health recommends starting with the processes that will still pay dividends under DRGs or fee-for-service models.

One of the best places to start is addressing existing gaps in care. For example, identifying and treating patients with overdue tetanus shots. Procedures like this will increase revenue and, in the long run, help improve population health and reduce the cost of future care.

"Geisinger increased revenue by millions by closing gaps in care," Dr. Steinberg says. He also suggests streamlining care.

Another strategy is to streamline and standardize care across providers and throughout the system. "The amount of unwarranted variation in the way things are done across providers and even across patients in a provider’s practice is staggering," Dr. Steinberg says. "This applies to things such as days spent in an ICU, drugs that are used, tests that are ordered supplies used in the OR." Unwarranted variation can cost thousands of dollars, he says.

"Under risk based contracts, providers are basically to accept less money with the opportunity to earn back part of that savings. The math indicates that even in the best of circumstances in that arrangement, you are going to lose money compared to what you are doing now, unless you really engineer what you are doing," Dr. Steinberg says.

Addressing gaps in care and standardizing care are a good start. However, it is critical for providers to either retain or increase local market share and to geographically expand, he says.

Providers should look at their patient population and identify leakage, determine how many patients seek care externally and see if they can reclaim this care. Organizations can also determine what their strongest and most competitive aptitude is and focus on it, Dr. Steinberg says. This will help the organization become a market leader and secure a larger volume of patients. Organizations can develop programs that substitute high margin volume for low margin volume, he says.

"While you are under fee-for-service, which will be a significant part of the book for number of years, if you can substitute those hospitalizations with higher margin hospitalizations you are better off."

Lastly, he says, position the organization to be a preferred provider. Make sure to get into narrow networks and employer networks. Market the organization as a lower cost option for patients.

Recommendations to get started

It is important to educate all the constituencies about the goal of the agreement and the strategies that will be used to get there. "Alignment of incentives is as important, maybe even more important than the contract," says Mr. Herschman.

"It's more important to start than anything else. Recognize that this is not a one year initiative; it is a multi-year journey, and depending on where you are starting from, it could easily take five to 10 years to really transform your system. This does not mean you won't get incremental benefits. You will," Dr. Steinberg says. "Focus on where you have the highest likelihood of early wins."


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