Innovation and Disruption

Amid lagging hospital risk taking, value-based payment advocates try to woo CFOs

October 30, 2019 7:44 pm
  • Hospitals and health systems have lagged in their uptake of risk-based payment models.
  • Others in healthcare view CFOs as a key to persuading hospitals and other providers to take on risk.
  • Some risk models aim to maintain fee-for-service revenue, but hospitals also will need to downsize, says a health plan leader.

Hospitals and health systems have been an obstacle to the spread of risk-based payment, some healthcare leaders say. Now leaders are trying to appeal to CFOs to increase adoption.

Christopher Chen, MD, the CEO of ChenMed, a primary care provider that takes on full risk for Medicare Advantage patients, urged health plans this week to make fee-for-service (FFS) “less comfortable.”

“If you talk to large systems, many of the people who are running those systems are actually thinking the exact opposite: ‘How do we slow down the progress so that way we don’t have to jump into value-based care because we’re very comfortable in pulling the lever and getting the cookie,’” Chen, speaking this week at a gathering of value-based payment (VBP) leaders, said about how he views some hospital leaders’ thinking.

Another speaker addressing the issue at the gathering of the Health Care Payment Learning & Action Network (LAN), a public-private partnership sponsored by the U.S. Department of Health and Human Services, was Bruce Broussard, president and CEO of Humana.

“When you don’t have assets and you’re a primary care doctor and you’ve got six seats in your reception area and three [staff] in your office, it’s a lot easier to change than if you have 4,000 beds that you’ve got to keep filled,” Broussard said.

That challenge was illustrated by a September Moody’s Investors Service report that found among the  284 not-for-profit hospitals it tracks, only 1.9% of net patient revenue came from risk-based payment in 2018. Similarly, an as-yet-unpublished hospital survey by HFMA and GHX and found 2.7% of hospitals’ net patient revenue came from risk-based arrangements.

The share of healthcare payments tied to quality and value through “shared accountability payment models,” according to LAN, includes the following categories:

  • Commercial health plans, 10.6%
  • Medicare Advantage, 24.3%
  • Traditional Medicare, 18.2%
  • Medicaid, 8.3%

However, much of the adoption of VBP has happened outside hospitals, according to payment analysts.

A health plan leader’s pitch targets CFOs

For the shift to risk-based payment to be accelerated, Broussard said, hospital CFOs need to be recruited.

“If you have the clinical part and the CEO part, you might want to think about a CFO,” he said. “Their job is really hard, and if you can get them to start pushing the industry will follow.”

In an interview, Broussard said certain appeals might be especially attractive to hospital CFOs, including his health plan’s effort to ensure the providers it works with are “in surplus” under its value-based models.

“What that would mean is that they are making more than in the FFS environment,” Broussard said. ”And as CFOs, focusing on how they get into surplus is a wonderful thing.”

However, hospitals will need to reduce their inventory of fixed assets, he said.

“There’s going to be a continued push away from assets in healthcare,” Broussard said.

But hospital leaders’ responses have generally focused on a continuing need to fill beds and meet excess demand, although the health plan has found some health systems more receptive to the pitch.

“So you can do it, but you have to, as they say, have that courage,” Broussard said.

A physician leader sees immorality in the current system

Hospitals and health systems have been designed for FFS payment, Chen said in an interview.

“It is designed to extract revenue at the highest possible cost from the system,” Chen said.

But those “castles” face a gathering “siege” of public and private health plans and employers looking for change, he said.

He also expects policymakers and the public to target hospitals for payment cuts following largely failed efforts to cut pharmaceutical company revenue.

Another reason Chen urged CFOs to consider switching to risk-based payment is the “moral obligation to solve for how to make people better.”

Immoral practices in the current system, he said, are illustrated by the increased revenue that hospitals derive, instead of having financial incentives for increased prevention, when particularly deadly flu seasons cause widespread illness and suffering.

LAN’s leader sees reasons for optimism

Mark McClellan, MD, PhD, co-chair of the LAN Guiding Committee, said he hoped to help HFMA build on its resources to assist hospital and health system CFOs in better understanding and implementing VBP models.

“It’s probably not surprising that if we’re just talking about FFS with a potential opportunity down the road for shard savings, there has been reluctance to do big investments in these new care models,” McClellan said.

Developments that could spur more CFO interest in risk-based payment, McClellan said, include:

  • Increasing the types of private and public health plan model options from which to choose
  • Increasing the number of public and private health plans offering VBP models
  • Establishing varying levels of financial risk that would be needed to participate in models
  • Growing the number of VBP models for which data shows success

“That’s where we saw all of the growth this past year in alternative payment models — it was all in these downside-risk approaches,” McClellan said. “That’s where the momentum is shifting to and that’s what we want to try to accelerate through the next steps in the LAN.”


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