The New Accountability

Michael Zeis, March 17, 2016

Payers and providers are recognizing the need to work collaboratively on at-risk programs.

This article first appeared in the March 2016 issue of HealthLeaders magazine.

Of the many changes necessary to accommodate healthcare reform, the switch in accountability be-tween payer and provider may be one of the most fundamental. Accountability is changing as long-standing fee-for-service payments make the shift to risk-based compensation models.

The financial component of risk-based reimbursement can be thought of as the payer and provider sharing positive or negative results depending on the provider delivering better care for lower cost. The industry is moving from a system where virtually all factors contributing to the revenue stream are known to one where important factors are unknown. That introduces, at least for providers, the risk of financial failure. In the face of such uncertainty, payers and providers are moving forward slowly.

Overall, 41% of respondents to the HealthLeaders Media 2016 Payer-Provider Strategies Survey say that they are participating in at-risk programs such as ACOs that offer both upside and downside risk. Nearly two-thirds (64%) of organizations with net patient revenue of $1 billion or more participate in at-risk programs with both upside and downside risk, which is a higher degree of participation than medium-revenue (47%) or low-revenue (27%) organizations.

Although 18% of respondents say they are not involved in any at-risk programs, that includes a high proportion of those who are in organizations with net patient revenues lower than $250 million. More than one-quarter (26%) of low-revenue organizations do not participate in at-risk programs, compared to 8% of medium-revenue organizations and 7% of high-revenue organizations.

Robert Sehring, central region CEO of OSF HealthCare System, which consists of 11 acute care hospitals and a children's hospital serving patients in Illinois and Michigan, says, "I suspect low-revenue organizations would be more challenged to invest to the extent necessary in things such as data analytics and care management."

Those who are investing expect a return. "If your organization has invested in building the infrastructure and creating opportunities to bend that cost curve and reduce unnecessary admissions, you certainly want to have financial relationships that let you share in the reward of those reductions," Sehring explains. Indeed, concern about matching reward and risk is the area of conflict with payers mentioned most frequently by organizations with $250 million or more in net patient revenue. Fifty-five percent of medium-revenue organizations and 54% of high-revenue organizations report the concern that payers receive unearned benefit from providers' work is among their top areas of conflict with their top-tier payers, while just 24% of those with low revenue place that concern in the top three.

Michael Zeis

Michael Zeis is a research analyst for HealthLeaders Media.

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