As Insurers Balk on Risk Sharing, Providers Take Charge

Many hospitals and health systems aren't waiting for insurers to implement risk sharing into their contracts. Instead, providers are experimenting on their own—especially those that already own health plans.

As the third annual HealthLeaders Media CFO Exchange in Colorado Springs winds down to a close, I am struck by the wide variety of experience around the country surrounding population health initiatives and risk sharing for hospitals and health systems.

Before I go on, there's nearly universal agreement that healthcare takes up too much of the nation's GDP, and that outside of rationing care, which is unlikely to happen even in the long-term, risk sharing is likely the best way to reduce cost growth.  

By risk sharing, I mean that at least part of hospital and physician payment is "at risk" based on how well providers meet certain targets on processes, overutilization, readmissions and other metrics.

In some geographical areas, health plans are being innovative. But in most areas, they don't seem to be, not on a broad scale, that is. Instead, with the consent of employers, payers are content to offload risk onto patients through high deductible health plans.

And guess who's at the end of that chain of responsibility? Health systems, as they seek to obtain the patient's portion of the responsibility for the bill, which seemingly grows each year with higher copays, deductibles and "coinsurance." That strategy, if you can call it that, has a limited shelf-life.

One CFO told me that high deductible health plans are generating not only declining volumes for a variety of inpatient and outpatient services, but also "a level of hate" from patients toward the hospital or health system, which is left to collect the patient's share of the bill.

Indeed, hospitals, physicians, and outpatient facilities are often obligated through their commercial contracts to attempt to collect that portion.

Not that hospitals and health systems are particularly enthused about moving from fee-for-service reimbursement to sharing risk on quality, utilization and outcomes, among other metrics, but in many geographical areas, they seem to be getting little cooperation from payers in testing risk-based payment strategies.

Why? According to hospital and health system CFOs, payers say they aren't ready.

The lack of progress isn't attributable to the hospitals and health systems themselves. Indeed, many aren't waiting for insurers to implement risk sharing into their contracts, and instead, they're experimenting on their own—especially those that already own health plans.

Knowing that taking risk on reimbursement is coming, they're hoping to build momentum by implementing population health strategies with their own employees, for example. They're also implementing their own narrow networks with local employers, in many cases.

But when it comes to negotiations with insurers, too often it's the same old game of negotiating fee-for-service contracts. Even the federal government, with its Medicare Shared Savings program and even the Pioneer program, seems to be moving faster.

Insurers, on the other hand, seem to want to slow-play the game of implementing risk on the facilities they pay, whether they be huge hospital systems or physician practices.

In some cases, these companies, which are presumably being pressured by employers to lower the rate of healthcare cost inflation, are making do with small, limited scope experiments in encouraging pay for performance and risk-based contracting. They're making a reasoned bet that they don't know enough about how risk sharing will pan out to implement it nationwide.

All healthcare is local, it's true, and what works in one geographical area won't necessarily work in another, but employers and patients are getting wise to how much healthcare costs them. They won't wait on insurers forever.