Jason LeeAs pundits rattle off statistics about how little value Americans get for our healthcare spending, the public demand to lower the overall cost has grown. Providers (physicians and hospitals) are being asked to deliver more (or better) care for less; offering value increasingly means engaging in risk-based reimbursement arrangements.  Although there are historical examples of risk-based reimbursement (DRGs in the 1980s, capitation in the 1990s), the Affordable Care Act of 2010 has brought a laser focus on risk-based reimbursement, and current examples are everywhere:

Providers are asking themselves, “What are we doing to respond to a growing emphasis on risk?”  More important, however, they should be asking, “Are we well equipped to take on risk?”  Provider organizations are often ill-prepared for risk.  Participation requires an organizational commitment to building skills and not just continuing business as usual.  

How can organizations get better at taking on risk, and how does an organization know when it is ready?  

Improving your ability to accept risk-based arrangements requires a high level of commitment and cultural transformation.  Many providers find success by starting with low-risk arrangements, such as performance incentives or a service bundle.  The greatest challenge is shifting the mind-set of both clinical and nonclinical personnel to find the means of providing value, not simply through the reduction of costs but also through an improvement in outcomes for patients.  

There are many places where the value chain can be broken because the patient experience involves numerous touch points and care transitions.  To thrive in a risk-based model, an organization must establish a mentality that achieving the desired value-focused outcome is the primary goal.  Providers will be well positioned to accept risk when they possess the following attributes:

  • An engaged primary care base and care delivery team focused on care management and delivery transformation
  • Focused management of high-risk patients and chronic conditions
  • A structure to establish, utilize, and evolve clinical protocols for certain services and populations.
  • The ability to collect accurate claims and clinical data for the selected population
  • The ability to report on financial performance and clinical outcomes
  • A commitment to regularly review and analyze costs and operational metrics to identify patient or process outliers
  • Capabilities to model the financial implications of risk-based arrangements
  • Funds flow arrangements that align incentives between the payer and the provider and across provider types (hospital, specialists, primary care physicians).

If your organization is pursuing risk arrangements, it should be working to build these skills.  In the current marketplace, providers will undoubtedly be asked to demonstrate value by taking on more risk-based reimbursement.  Before recommending a risk-based arrangement to your CEO, carefully consider the gaps in your organization so you’ll be prepared for the pitfalls.


Jason Lee is a senior manager, ECG Management Consultants, Inc., Walnut Creek, Calif.

Publication Date: Friday, July 19, 2013