Health systems approach risk with payers

Health systems are finding different interest and approaches to downside risk in value-based care (VBC) among health plans in their markets.

Mark Bortnem, CFO of Essentia Health, said some of their payers have clinical teams that will partner with Essentia’s medical leadership to strategize collectively about how to reduce low-value care and avoidable care. However, not all their payers have the data sophistication to help them in that process.

“So, managing our payer mix and concentration of VBC at a payer level is another strategy,” Bortnem said during a session of the HFMA Annual Conference.

Essentia also has found that structuring payer contracts to drive alignment is critically important, and establishing a strategic partnership with the payer makes all the difference.

“If we end up paying the plan back based on downside risk, that’s not to their benefit. That means that they lost, too,” Bortnem said. “And if they’re paying us shared savings, it means they’re better off as well.”

In contrast, Baptist Health in Kentucky has yet to find commercial payers willing to get into downside risk in VBC arrangements, said Richard Carrico, the health system’s CFO.

“We are in a great position for risk [but] I don’t think in Kentucky the commercial payers are eager to come in and provide risk contracts that are downside … because of their economic pressure,” Carrico said.

Baptist Health’s strong positioning for downside risk includes a footprint that generates 70% of revenue from outpatient care.

New phase

Robin Damschroder, CFO and president of the value-based enterprise for Henry Ford Health, said her organization has moved past battles with payers over whose value-based model is better to focusing on their shared understanding on trends, quality scores and what is the fair share when improvements are achieved in those.

Cost discussions also have aimed to move beyond traditional metrics of readmissions, emergency department (ED) visits per calendar day and site-neutral payments.

“You can spend a lot of time and exhaustion around that,” Damschroder said.

A good actuarial team is important, but even more helpful is finding and aligning on the real cost drivers. Those can include comparing the cost of care management provided by the plan versus the health system’s care management.

“So, there’s a lot more that goes into the success of managing the total risk than just taking it all on and getting to the high-level targets,” Damschroder said.

Cost savings

Essentia found that successful value-based contracts can improve patient affordability.

Bortnem described one contract that led to Essentia’s buying down the contract rates, which enabled the plan to lower its premiums in the market and triple its membership.

“That was another way to improve our payer mix and yield in value-based care,” Bortnem said.

Patient savings under Essentia’s value-based care initiatives can come from improved access, including the provision of low-cost diabetes tests to improve detection and management.

“There’s a cost barrier in these [tests], so, for us to address and lower that cost and not think of it as, ‘Are we making money on the lab test?’ it’s about thinking ‘Are we creating easy access to the types of preventable patient care that avoid more costly care?’” Bortnem said.

ED diversion

Avoiding unnecessary ED utilization — a common goal of value-based purchasing models — also can save money for patients with large out-of-pocket costs. Baptist Health is looking to move beyond its longstanding nurse triage line with a pilot to refer calls to a physician before an ED visit is recommended.

“We think that that will help us with our aim of reducing 25% of unnecessary ED visits,” Carrico said.

Another way Baptist Health found to get patients to lower-cost sites of care include an ongoing joint venture to build out freestanding emergency departments (FSEDs). Those include an urgent care option for lower-acuity patients, which is used by 75% of FSED patients.

The initiative has earned support from payers for its ability to help control costs, said Carrico.

Value complications

The push for organization-wide reorientation VBC is complicated by the fact that most physician compensation agreements still are primarily driven by volume, said Carrico. Although contracts now include some smaller amount focused on value metrics, a mindset shift is still needed to move them away from providing low-value care.

Another VBC complication is that patients with different income levels have different expectations, said Damschroder. For instance, wealthy Medicare enrollees prioritize open access to a range of providers, while poor, fixed-income enrollees focus on out-of-pocket costs.

Those differences played out in an insurance offering it created for midmarket employers, which included a low co-pay option for lower-income enrollees at those businesses.  Meanwhile, its high-profile contract with General Motors had to account for white collar workers’ preference for broad access to various providers.

“Affordability looks different depending on where you are in the affluence scale,” Damschroder said.