The value of participating in risk-based reimbursements is not only in the (short-term) gainsharing achieved, but in redirecting processes and protocols to achieve (long-term) lower costs and higher quality healthcare.
I was talking with a source the other day for a story I'm working on for an upcoming issue of HealthLeaders magazine. During our conversation about a related topic, we chatted briefly about how hospitals and health systems are torn between whether participation in risk-based reimbursement is the right thing for the organization or not—that is, if they have a choice. Most still do.
Such initiatives make no secret about shifting risk to the provider. Broadly, the carrot is the opportunity to "gainshare," or keep at least part of the savings achieved over the life of the contract. This makes such contracts not only a risk for the organization, but for the careers of the executives who are charged with executing against them.
A baseline is set, and rewards or gainsharing can result if a provider, be it a hospital or health system or an individual physician, generates savings above that baseline. Those savings come from reduced readmissions, or from better postacute care, or from better adherence to care protocols—or any number of other metrics. Physician alignment is a prerequisite, of course.
The concern from many in top leadership is generally not around their organization's ability to perform under the first such risk sharing agreement. There's an abundance of low-hanging fruit to be found in standardization, operational efficiencies, and improvements in pre-and post-acute settings, which are often the responsibility of the risk-taking entity to arrange in the most effective and efficient way possible.
Gary Whittington |
Those incentives didn't exist before, but these contracts go a long way to align them. For those reasons, executives who enter into these programs on behalf of their organizations are generally confident about the ability of their teams to meet initial performance targets generally, and expect to perform well.
Where the concern lies is when that contract comes up for renegotiation. Say, in three years, and the baseline is reset after the easy improvements have already been made.
Gainsharing Fades, Then What?
"That is the major concern of everyone involved—that gainsharing fades," says Gary Whittington, chief financial officer at Baptist Health System in San Antonio, TX, a pioneer in various successful value-based purchasing initiatives in recent years. "Physicians tell us, 'this is great, and we can do this for a while, but they will see how efficient we've been and reset at a lower rate.'"
Yes, they probably will. The major goal of such contracts is to slow, and ultimately reduce, the cost of healthcare, especially the kinds of healthcare services that can be commoditized to a degree.
But it strikes me, and for the record, Whittington as well, that if this concern is preventing your organization from at least dipping its toes into the value-based reimbursement world, that concern is at least somewhat misplaced.
Baptist is still investing heavily in remaking the organization to perform better under value-based purchasing, because it understands that's where the industry is headed. Better to help shape and learn how to perform under such radically different payment schemes than have it forced upon you after others have already leapt ahead.
Lasting Value
The value of participating in such risk-based reimbursement, whether in pilot form or in its fully implemented form, across the organization, is not only in the gainsharing achieved, but in redirecting processes and protocols to achieve lower cost and higher quality healthcare. Those gains are probably permanent, for the most part, which improves healthcare efficiency for everyone.
In the end, we're all likely to be patients, after all.
Not only that, but demonstrably better, cheaper, more efficient care provides your organization with a better competitive foundation, that is, if you believe value-based purchasing, no matter how imperfect, is the future.
Even if you don't, you gain insights into how to operate more efficiently in areas where you may not be participating in value-based reimbursement, provide higher quality care, and appropriately determine what care costs you do provide. This happens for all your patients, not just those who are attributed to an ACO or bundle.
I concede, the reset of the baseline, when it comes, will feel like you're being punished for your achievement. But sell it to yourself the same way you'll probably be selling participation in Medicare's new proposed mandatory bundles to the outpatient partners you are busily rounding up: You may have to push down your length of stay, but your beds will stay full because if you are more efficient, we'll send patients to you more frequently.
The same will be true for your hospital. This is already going on in limited geographic areas in the private sector. Many big employers are already effectively guaranteeing volume for their partners, assuring them that if they meet certain performance and quality targets, they'll send all of their employees with a particular condition to that facility.
It seems a better bet to expect more of this, not less.
Philip Betbeze is the senior leadership editor at HealthLeaders.