Thanks to the 88 member organizations that participated in our accountable payment survey earlier this year, we're able to share trends on the pacing of risk-based contract adoption, which payers providers plan to contract with, and now, the projected revenue distribution among the different contract types.
Although close to 80% of revenue comes from fee-for-service today, the majority of an average provider’s revenue will likely come from a risk-based arrangement in ten years.
After digging deeper though, we noticed clear differences in providers’ ultimate destinations. Respondents’ plans for transiting to risk-based payment tended to fall into four distinct groups, ranging from maintaining volume incentives to living in two worlds.
The volume-oriented provider
About 25% of providers expect to maintain a volume-focused set of incentives. About 50% of revenue on average will continue to come from fee-for-service contracts, while about 40% will come from pay-for-performance contracts.
The destination acute care provider
About 27% of providers are pursuing numerous bundled payment and pay-for-performance contracts, and are planning to grow volumes by offering high-quality, low-cost inpatient services.
Although there will be drastic increases in these two areas (providers in this group expect to generate about 80% of their revenue from these contracts), the proportion of revenue coming from total cost of care contracts will stay relatively flat.
The population health manager
About 20% of providers plan to quickly increase the proportion of revenue coming from total cost of care contracts—doubling it within three years and tripling in five years.
Many providers we work with think this strategy is the most logical for them, but it’s certainly not an easy one. One of the biggest challenges we see here is effectively aligning clinical and financial transformation—so these providers don’t significantly destroy demand under fee-for-service before they can shift those contracts over to total cost of care and be rewarded for their efforts to reduce utilization.
The provider living in two worlds
Finally, about 30% of providers are attempting to live in two worlds in the next ten years. They have a significant amount of revenue coming from total cost of care contracts (about 20% on average), but they’re also maintaining an incentive to grow volumes, expecting more than 40% of their revenue to come from fee-for-service contracts.
This is the most challenging of the four long-term revenue breakdowns because these providers will face conflicting incentives. On one hand, they need to grow their volumes to generate fee-for-service revenue, but on the other, they need to reduce utilization to succeed under total cost of care contracts.
These two payment models come into direct conflict quickly. For example, as providers work to reduce unnecessary clinical utilization in response to the incentives of the total cost of care contracts, they will almost certainly reduce utilization by a similar amount for fee-for-service patients as well.
Our research has shown that physicians don’t change their care patterns based on what type of contract a patient is covered under—a phenomenon known as the "spillover effect." Providers planning to have a revenue breakdown that looks like this graph should carefully consider the potential financial ramifications of such a contracting strategy.
Want All the Results From Our Survey?
To hear all the trends we’ve seen from our accountable payment survey, watch my recent on-demand webconference. To speak with one of our experts about the results, leave a comment below or email me at firstname.lastname@example.org.
ACCESS THE SLIDES AND RECORDING