Commercial risk will be a critical catalyst of progress – it’s complicated, but is it possible? We think so.


March 16, 2021

The right questions to ask about the future of value-based care

Daily Briefing

    The industry's movement towards value-based care has been one of the biggest topics in health care over the past few years. In this episode of Radio Advisory, host Rachel Woods sits down with Advisory Board's Ben Umansky and Natalie Trebes to talk about where the health care industry currently stands on the path to value-based care, how the Covid-19 epidemic is affecting the industry's movement down that path, and the questions providers should be asking themselves about risk.

    Our take: How Covid-19 will impact value-based care

    Read a lightly edited excerpt from the interview below, then download the episode for the full conversation.

    Rachel Woods: We've been trying some kind of different risk-based models, different alternative payment models, different strategies on the path to "value" for some time. Why hasn't it stuck yet?

    Ben Umansky: Providers are looking for deals where they will make more money, and they may not say that quite out loud, but they are, or at least for ones where they're not making substantially less.

    The whole point of these models, from a payer's perspective, is to pay less money. But it's actually pretty difficult to make those numbers work out. We can talk about where there are some win-wins, but just fundamentally, something that works well for the person paying is probably not going to work as well for the person receiving, even if there's some adjustment on the individual case-by-case basis—the overall flow of funds is either more or it's not.

    Woods: Natalie, what are you hearing from the plans?

    Natalie Trebes: Well, it's refreshing to hear Ben say those things, because I did some research a few years ago that still feels fresh to me, where we were talking to both provider executives and health plan executives about their attitudes on risk and what it would take to move forward. And they would kind of point fingers a little bit. From the plan perspective they would say, "Providers just want risk that is predictable." And that is going to make them more money. And also, just as an aside, predictable risk is not a thing. So, that is complicated right there.

    Woods: Right, predictable risk isn't really that all that risky.

    Trebes: Exactly. That's a great way to phrase it. And then the providers would say, well the plan wants us to charge less, that's fundamentally what this is, a price cut, and they're just disguising it as this fancy word "value-based care." And so, that is exactly the tension and exactly why this is really hard to move forward.

    What I think is also interesting is that at the same time plans are complaining about providers, wanting to make sure that they stay whole, wanting to make sure their revenues are stable as they go into a risky model, they are also saying, "We really want to work with you, we really want to collaborate with you," and that is true, but it's wild to me that they're saying those same things at the same time. It would be like if I were to say, "Hey, Rae and Ben, you guys seem to never want to work with me on this podcast but it'd be great if we work together on this podcast." It's a weird thing to say at the same time.

    Woods: Everything we've talked about so far was true prior to the epidemic. So let's talk about how Covid-19 is changing the calculus on the path towards risk. I think some in the industry are saying, "Gosh, that's going to be a lot harder right now," while others are saying, "Risk-based payments are a lot more appealing."

    So let's start with the hard stuff—how are things more complex now than they would have been in January?

    Trebes: The mechanics are really hard, and the ways that we are assessing quality and assessing how sick the population is and what we project the cost benchmark is going to be. That's all based on historical data or actions that a lot of clinicians and public health regulators would say are a little bit extraneous in the middle of an emergency, so I'm not sending reports to physicians on care gap closures when they're trying to figure out how to keep people safe.

    This is all going to catch up with us later, we're making adjustments to quality standards and are having to work with 2018/2017 data because there's always these lags in how we collect data. Potentially in 2023, we will be living in a 2018 data world, so that's like a five-year lag we need to be thinking about that everyone's going to try to design these models around.

    Umansky: But everything that Natalie just said is probably just the tip of the iceberg of what actually has to get done to reach a deal that is workable for both sides, where we agree on the terms, we say this is the price for this population, here's how we attribute people, here's what we're going to track, and we both think it's a good deal.

    Getting to that point is extraordinarily hard in normal times. Throw on top of it all the uncertainty everything that throws the world into chaos these days, I think it's going to be very difficult for people to find risk deals that will be good ones. It doesn't mean they won't do it, I'm very fearful that they might still take the plunge, but in a year or two or three when those contracts come up for renegotiation, I think you may see a lot of regret.

    Woods: The challenges that you're talking about are not insignificant. The challenges from the mechanical side when it comes to documentation, when it comes to just figuring out what is the right price, are massive barriers that that aren't going to go away in the new year. But there are a lot of folks saying that different parts of the value-based care spectrum are looking really appealing to their organization right now. Tell me about the ways that folks are calling for Covid to create this acceleration in risk.

    Trebes: Well, for one thing, plans, fundamentally, their job is to provide access to a network of providers that is reasonably affordable. They can't have their provider network collapse, so there was a real risk of a lot of providers going out of business.

    And then, a secondary risk is they actually have targets they need to meet spending-wise in terms of how much premium revenue they're using, it's called the MLR. So the plans are sitting on a lot of unspent cash that's meant to go to medical services, so they are looking at this field saying, "I've got providers who are vulnerable. I need to spend a good amount of this money on medical services. I'm willing to make concessions I wouldn't normally make on risk contracts to make that a plausible way for providers to hopefully survive here."

    It's not something they can do for everyone, but I think we're seeing a lot more goodwill from plans on trying to be flexible. Massachusetts adapted its very famous and successful AQC model for smaller practices and it's giving upfront payments to those practices in a way that is much more substantial than in the past, so those practices can jump into risk without as much risk in the beginning. So they've got a little support to build that infrastructure. And hearing from plans that the state's signed up, more providers for risk contracts in the last six months then they have in the last six years, which again comes back to, "We didn't have a lot of downside risk to begin with, so maybe it's 1% instead of 0.1%."

    Woods: It's interesting to hear that they may be seeing this as an opportunity. Ben, what are you hearing from the providers when it comes to this idea that we could jump headfirst into the risk game?

    Umansky: Well, two things. One, I think it's important that we distinguish between enthusiasm for the concept of risk and actual willingness and ability to get to a risk-based contract that truly works for both sides.

    Clearly, this has been a bad year to be in fee-for-service, no question about it. And so, the idea of doing something different, of getting into risk-bearing, whether it's capitation or anything else on that end of the spectrum, is conceptually appealing.

    But when you get into the details of it to say, what is the exact price we're agreeing on? Who's attributed? What are we tracking from a quality perspective? How is this going to rebase over the years? All of those become negotiation points, and a lot of them are kind of zero-sum. So it becomes very difficult to reach a win-win.

    Now I will say if you were listening carefully to what Natalie was talking about, you were hearing a lot of examples of physicians. And that's a really important distinction that, if the risk is being given to particularly upstream positions—so primary care, certain specialists who are influencing the downstream—but aren't the ones collecting the downstream revenue, then it's a much easier prospect to get to the win-win. You can actually make the dollars go around the block. It's when you start asking an entire health system, who does the services that are going to be disrupted if we're managing the population correctly, that's where it gets difficult to square it.

    Trebes: Risk by its nature is a closer relationship between a plan and a provider. And we've seen plans more willing to throw support at providers in those kinds of contracts, whether they're systems or practices. And so we saw plans helping with PPE investment, helping set up telehealth infrastructure, where that didn't already exist. So I think those outside of those contracts are looking a little bit enviously at the kind of support that can come in if you are a little bit more closely entwined with a partner.

    Woods: So the question that I'm hearing from leaders in the industry right now is very focused on how will Covid-19 change the path to risk the path to value based care? Will it speed it up? Will it slow it down? I want to hear from you, do you think that's actually the right question to be asking right now?

    Umansky: If you're in the mindset that I will do this when I have to but not before, then I think it's irrelevant the question of whether this is something that's going to happen to you.

    I get nervous when people ask, "What's going to happen to me?" I'd rather see people asking, "What am I going to happen to? What am I going into effect in the world?" And, to that end, I think there is a there is a question of, can we in any time, Covid or otherwise, find arrangements that are sustainable? That we're not going to regret three years down the road?

    In my conversations with executives, this is what I encourage them to do: Really look towards the future, say, "Where do you want to get, what outcomes, do you need? Do you need some significant steerage or shifting and market share to ever get an idea like this?"

    Then make sure that there's something in the contract that makes you think you're going to get that. Do you need it to be a certain level of sharing? Do you need certain upside or downside make sure that's in the contract? Don't just say well, is risk coming. It's too abstract to question that. You go to a lot of meetings accomplishing nothing if that's the level you're talking.

    Our take

    How Covid-19 will impact value-based care

    researchThe Covid-19 pandemic has sparked a lively debate about the future of value-based care. Some experts are predicting an acceleration in uptake of risk-based payment models, particularly capitated models. But ACOs are sounding the alarm about their future prospects, and Medicare has been forced to slow both its implementation of existing programs as well as the rollout of new value-based care models. This piece summarizes Advisory Board’s take on what the pandemic will mean for the future of this landscape.

    Download now

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