Why Risk-Based Contracts Are Worthwhile

Patrick McGuire, MBA, CPA, and CFO, at St. John Providence Health System, Warren, MI has seen employers in his market take an interest in the total cost of care and thinks it will influence what happens with payer contracts.

"Employers in our markets are starting to look at the total cost of care, and over time, if we can actually influence the healthiness of the population, or the compliance of the population, and the overutilization we can reduce the cost."

"But it wasn't that long ago that [our organization] had a conversation with a company [about working with employees] and basically their philosophy was, 'if it's not going to show up in my P&L in the next quarter, I don't want to talk about it,'" says McGuire.

"But now we're starting to get some employers understanding the concept of it taking longer for a price to change. That it may take two years before they see any benefit from this work, but we know that in the long run, that's what's going to sustainably reduce our costs."

At most organizations, nationwide financial leaders still need to lay some groundwork in terms of understanding their own true costs before their organizations embark on global payment contracts or any other risk-based ventures.

So, too, must physicians before they agree to participate in a risk-based contract with your organization. The pursuit of this payment model across the country, not unlike in Massachusetts, must and will be a slow one.

But in the long-run, the legwork done now will go a long way toward keeping a practice, hospital or health system financially stable while improving the care of a patient population.