Blog Post

What your peers said it would take to get to meaningful risk

By Clare WirthDaniel KuzmanovichRyan Furr-Johnson

January 5, 2022

    There is only one way to achieve meaningful risk-based payment: make it an industry-wide effort.

    So, we gathered a multidisciplinary group of executives from across the health care industry to see what it would look like if the whole industry turned up the heat on value-based care. What if in 2028 the vast majority of health care dollars were in a meaningful value-based contract? What did the industry have to overcome? Was it worth it?

    This is what our conversation revealed.

    How your peers are committing to advancing value-based care

    The journey to true value-based care

    1. Organizations don't need a growth strategy as much as a collaboration strategy that enables growth.

    Our conversation confirmed that no one sector of the health care industry can get to meaningful risk-based payment alone. The challenges are too large, structural, and complex. And placing blame or finger pointing simply won't work.

    Collaboration must be the cornerstone of strategy. The key questions become: How do you develop strategic partnerships with the most important players in your market? What are you willing to give up to make progress?

    2. The industry must overcome the misalignment of incentives—across sectors and within organizations.

    The current state of hybrid financial incentives creates conflicting incentives at multiple levels. There are three levels of misalignment: between different industry sectors, between organizations within the same sector, and even within the same organization.

    For example, physician incentives in a health system vary drastically so the PCP could be paid on value-based care but the specialist on fee-for-service. This misalignment results in inefficiency and suboptimal outcomes for the patient.

    3. Don't lose people on terminology.

    Too often, value-based care terms mean different things to different people. Without a common lexicon, stakeholders speak past each other. Consistent language sets the stage for more productive collaboration.

    And some of our existing terms impede progress on organizational buy-in. Terms like capitation, risk, and downside risk all paint a negative, scary future—rather than an aspirational vision.

    Focus on framing the future as rewarding providers (and others) for improved performance on outcomes and cost. These can be simple. For example, use population-based payment instead of capitation. Or shared savings instead of downside risk.

    4. The journey is treacherous. But meaningful risk-based payment is worth it.

    Currently, providers and payers constantly grapple while figuring out what services to provide based on patient needs, staff abilities, market footprint, technological capabilities, finances, etc. Services, procedures, and volumes dictate strategy. As long as the industry is fee-for-service, this will be the case.

    Cooperation and growth become easier under meaningful risk-based payment because all industry players are fundamentally focused on patient outcomes, expected costs, and what's required to deliver on those outcomes and costs.

    If value-based care becomes the predominant paradigm and fee-for-service is just a small marginal hybrid incentive, it makes it easier for people to do right thing at both the executive and frontline level. The executives in our conversation made it clear they felt the effort is worth it.

     

    Getting to meaningful risk-based payment is not going to be easy. But it is possible. Start by having conversations like this with your partners. Envision where you want to be and discuss what you need to overcome to get there. Be intentional with your language. And make tangible commitments.

    Read our companion blog to see how your peers are committing to advancing value-based care.

    How your peers are committing to advancing value-based care

    responsesThis time last year, many executives told us at Advisory Board they were more likely to accelerate adoption of risk-based arrangements than ever before. So, we gathered a group of executives from across the ecosystem to discuss what it would really take to move the industry towards risk-based payment. Read more to get some of our favorite responses.

    Read more

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