Covid-19 threatens provider finances. Here’s how plans can amend value-based care contracts.

By: Jasmine DeSilva

As providers anticipate spikes in utilization due to Covid-19, they’re asking questions about their existing value-based care contracts: Will I be punished for not reporting quality scores or exceeding my total cost of care metric? Will I receive the savings that I earned for good performance?

So far, CMS and private payers have focused on reducing member cost-sharing to improve access to care and increasing continuity in provider revenue streams through advanced payments so providers can keep their doors open as elective and well visits slow down. What’s unclear is how Covid-19 will impact value-based care contracts in the short- and long-term.


How CMS will likely amend VBC requirements

To protect providers from penalties as they focus on Covid-19, CMS announced that they won’t count the first two quarters of 2020 data in calculating provider performance for several hospital programs include Inpatient Quality Reporting and Hospital Acquired Conditions programs. They also pushed the 2019 reporting deadline from March 31st to April 30th for providers participating in the Merit-based Incentive Payment System and Medicare Shared Savings Program (MSSP) ACOs. Both changes give providers peace of mind in the short-term.

What CMS could do to mitigate provider revenue loss in the near-term:

  • Reduce the reporting burden tied to quality measures. CMS may continue to extend reporting deadlines and could move to pay-for-reporting for 2020, giving providers full credit for reporting quality metrics regardless of their actual scores. CMS could further extend flexibility by waiving all reporting requirements for 2020, allocating shared savings using data from a different performance year, or disregarding 2020 quality scores when setting 2021 benchmarks.
  • Waive mandates to move to downside risk in 2020 or 2021. If ACOs participating in MSSP missed their cost or quality benchmarks, they would not be required to share in the risk and therefore owe money.
  • Exclude all Covid-related diagnoses from the performance period. There is now an inpatient DRG code for Covid-19, technically allowing for exclusion of Covid-19 diagnoses. However, it may be difficult, or nearly impossible, to distinguish Covid-19 illnesses and deaths from those caused by preexisting conditions.

How private health plans can amend VBC contracts

Private health plans can emulate much of what CMS is likely to do, primarily through risk mitigation measures, such as capping shared losses at a certain threshold or reducing shared losses through risk corridors.

What private health plans could do to mitigate provider revenue loss in the near-term:

  • Amend contracts mid-term using a unilateral amendment clause, if the contract permits. A change in the law often allows plans to unilaterally amend the terms of their provider agreements. Plans could argue that government “stay at home” orders constitute a law change and prevent people from accessing non-essential health care. One type of amendment might be to revise reporting obligations on providers.
  • Disregard performance data from the crisis period. While it’s unclear how long Covid-19 will last, plans could decide to remove performance data related to the time period and tack on 3-6 months of performance data, effectively extending the performance period.
  • Pause downside risk for 2020 and likely 2021. Waiving downside risk requirements in the near-term would allow providers to stabilize their finances through the crisis and reset their long-term strategy.
  • Cap or reduce shared losses through risk corridors. Capping losses would relieve some pressure from providers hit particularly hard from Covid-19, such as those practicing in hotspots.
  • Use a previous year’s performance data to calculate 2020 payment. In addition to paying penalties, many providers are worried about missing out on potential shared savings. Plans could use a previous year’s data to mitigate providers’ losses, particularly for independent physicians and specialists who aren’t able to provide in-person services due to Covid-19.
  • Make no changes, but hold on reconciliation at the end of the performance period. This would mean providers won’t have to pay penalties if they missed their performance benchmarks.

Next steps every health plan should take

  1. Ask your legal team if you have a clause allowing the plan to unilaterally amend the terms in any of your VBC contracts that allow amendments to contracts should the law change
  2. Review existing VBC contracts, and segment provider groups according to their involvement in risk:
    • Currently in downside risk contracts
    • Not performing well in downside risk contracts and likely to owe money
    • Performing well and likely to earn savings in either downside or upside risk contracts
    • Not performing well in upside risk contracts
    • Transitioning to downside risk in 2021
  3. Proactively reach out to providers, starting with groups currently in downside risk
  4. Document conversations with providers in written form for legal purposes (e.g., email, meeting minutes)
  5. Track ongoing provider concerns regarding VBC contracts, and create a venue to discuss your plan of action

What you’ll see in the future

Value-based care and downside risk contracts won’t disappear, but participation in downside risk will certainly slow down for now as providers rebound their operations, budgets, finances, and staffing models in the wake of Covid-19. It’s also unlikely providers will sign any new downside risk contract that doesn’t include an emergency cause allowing flexibility during future crises.

Plans should offer compassion and increased flexibility as providers try to keep themselves afloat, start to settle into their “new normal”, and ultimately rebound from the crisis.

We spoke with Jackie Selby from Epstein Becker & Green, P.C. as well as Matthew Amodeo and David Ault from Faegre Drinker Biddle & Reath law firms to help shape our thinking. We thank them for advising our work.


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