Care Transformation Center Blog

Our top resources for crafting a sustainable value-based payment strategy

by Megan Clark

Last week, I outlined resources for strengthening hospital-physician alignment—one of three aspects of a successful care transformation blueprint, as illustrated in our new infographic.

In this post, I'll focus on the key steps for payment system redesign, but be sure to stay tuned for implementation resources for the last imperative: establishing ambitious clinical standards.

Need guidance for your care transformation blueprint? Join two of our experts for a live discussion on Oct. 31 about the transition path for accountable care.



Financing the transition to a new value-based business model

Although payment transformation and care transformation represent two different curves, its important to balance between the two. A successful transition might start with care transformation and later align the payment model. Or an organization might lead with value-based contracts to gain market share and align incentives so that reductions in utilization, when they occur, are better rewarded.


One thing is clear: the fee-for-service model is ill-suited for supporting efforts to deliver greater value. But what’s the better option? The possibilities are seemingly endless, but there are three main groups of models.

First, the shared savings model—the Medicare Shared Savings Program is the exemplar here. Providers continue to receive fee-for-service payments, but work against an annual budget.

Second, “delegated risk,” or whole family of capitated payment models. Providers receive capped, per-member, per-month payments.

Finally, full risk, where providers become the health insurer. No PMPMs here—the providers receive premiums directly from the subscribers.

  • Follow our sister blog, Toward Accountable Payment, for updates on health care payment reform and innovation—and see how Southwind can help you create a custom risk-based payment strategy and strengthen alignment through physician compensation.


Resources for each step in the transition path

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1. Analyze how much payers and employers benefit from various population health activities to estimate potential contracting opportunities.

  • A primer on avoidable costs
  • How employers are becoming involved in the medical home

2. Ensure employed physicians’ compensation model is aligned with value-based payment contracts that incentivize quality and cost management.

  • Rewarding values, not individual behaviors
  • Find opportunities for improvement in your physician compensation model

3. Size the impact of "demand-destroying" care transformation initiatives on fee-for-service revenues.

  • Visit the Customized Assessment Portal to use our tools, including the Avoidable ED Utilization Assessment, Readmission Penalty Estimator, and Preventable Admissions Identification Assessment
  • Volume impact: How will PCMHs affect downstream utilization and referrals?

4. Establish processes to monitor ongoing utilization, revenue, and cost performance.

  • Identify early target opportunities to reduce total cost of care

5. Pursue those risk-based payment models that are project to maximize payment and bound financial downside.

  • Emerging trends in medical home contracting
  • The provider-payer discussion guide

6. Secure selected commercial risk-based contracts to transition the health system from mostly volume-based to over 50% "value-based" and minimize demand destruction.

  • Building a multi-stakeholder PCMH initiative: Lessons from the Adirondack Medical Home Pilot
  • Sequencing risk contracts and care management investments
  • A real-life example of comprehensive care transformation
    Watch the leader of one of the nation's largest accountable care demonstration projects discuss how population health management technologies are transforming patient care.