CEO Exchange: Risks and Rewards of Risk-Bearing Contracts

Some of the more integrated health systems already have several of the components for risk-based contracts in place and are already involved in pilot programs.

"We've been an early adopter, opting into the Pioneer [ACO] program in a significant way with 50,000 Medicare members," says Dennis Dahlen, senior vice president of finance and CFO for Phoenix-based Banner Health. "And we have learned some very good insights from the program in just the nine months it's been up and running, results that suggest there is a way to save the Medicare program by just being smarter about how we treat Medicare patients."

Dahlen says that about 18% of Banner's revenue is risk-based today, but in five years the organization projects that figure will be upwards of 45% across its 23 hospitals. "So we're moving pretty fast. The pace may not be as important as the direction, but we're pretty certain of that direction and that faster is better than slower at this point."

Britt Berrett, president of Texas Health Presbyterian Hospital Dallas and executive vice president of Texas Health Resources, says that "the name of the game now is outside the walls of this hospital." Under the fee-for-service model, there has been little incentive for the hospital to manage postdischarge medication reconciliation or navigation, but that is changing. "We [are] forced to do something we should have been doing in the past. We have an obligation to identify what the needs are, where before we just didn't worry about it."

Van Gorder says that to succeed, hospitals must recognize that the shift to population health changes more than just a business model; it also creates a new relationship with patients.

"I asked my people the other day, 'What is it we really sell? Is it healthcare?' I said we sell relationships, and yet we really haven't cared much about the relationships." Van Gorder remembers his own experience as a patient in a gatekeeper health maintenance organization, where he had to sign up for a primary care doctor and never heard from that physician again. "So, I think, for the time first ever, we're going to have to actually build an ambulatory relationship with our patients," he says, "and then find out what their needs are and find a way of meeting those needs to keep them healthy."

Reprint HLR0213-11

This article appears in the January/February 2013 issue of HealthLeaders magazine.