You Get What You Pay For

Payment mechanisms in healthcare are known to be a strong influence on care delivery. In healthcare, the idiom “you get what you pay for” takes on new meaning: what we “get” is not necessarily about how much we pay, but about how we pay for it. Whether we want to admit it or not, incentive alignment has a direct impact on the way we care for our patients.

Especially in primary care, there is little argument that the fee-for-service model of payment has, at least in the U.S. healthcare industry, resulted in a transactional and dysfunctional experience of care for both patients and the clinicians caring for them. This is impacting the entire system of care and resulting in a “sick care” system that is too expensive and produces worse health outcomes than our international peers. 

In response, there has been a slow but deliberate effort by policymakers, payers, and physicians to transform payment mechanisms toward new methods which are intended to better align incentives with more cost-effective care that produces better health. This effort has been spearheaded by Centers for Medicaid & Medicare Services (CMS) and the Center for Medicaid & Medicare Innovation (CMMI), with ongoing iterative experimentation involving various new payment levers in hopes of identifying the ideal mousetrap worth adopting system-wide.

CMS is motivated to identify this ideal mousetrap because they are funding the care of 156 million Americans, to the tune of $1.4T in 2023 to cover 66 million Medicare beneficiaries, the Federal share of all Medicaid and CHIP beneficiaries, and subsidies related to ACA marketplace plans.  

Venturing Into the Unknown

Primary care clinicians are motivated to find better ways to pay for care as well. The fee-for-service model under-compensates them and overwhelms them, driving up overhead costs, administrative distractions, and outsized patient panels. Better-aligned incentives would benefit CMS, primary care, and patients. 

Within this context, we see primary care practices in the turbulent throes of payment transformation, seeking new streams of revenue and better ways to care for patients while getting paid fairly for the work they do. The landscape of value-based payment (VBP) arrangements has become impressively complex and hard for primary care practices to navigate, operationalized by a cast of characters including CMS, private insurance companies, intermediary risk bearing entities, physician groups, health systems, and others. Choosing a payment model, a payer, or a group to join can be a leap of faith. Many physicians in VBP arrangements do not fully understand their contracts nor know how those contracts are contributing to their revenue streams, and furthermore, they don’t know who can be trusted to guard their best interests when venturing into the unknown.

Six Lessons Learned from VBP Pioneers

There is valuable wisdom to be gained from the brave pioneers who have already made the journey into VBP. Below are some general guidelines to consider, intended to help primary care clinicians ask the right questions and choose the best arrangements to set themselves up for success as they weather the upheaval of payment transformation. 

1. Look for arrangements that offer prospective payments. These payments (often known as “capitation”) help fund the additional work – and there is a lot of additional work – required to succeed in VBP contracts and ensure financial stability of the practice, whether patients are generating fee-for-service revenue or not. This also frees the practice to deliver care more flexibly, leveraging virtual care and non-billing team members, which removes barriers to care and helps the practice operate more efficiently. The amount of prospective payment should also be carefully considered, and should reflect the resources required to manage the attributed patients.

2. Consider joining a network. Network groups provide various forms of enablement to help practices adapt operationally to new expectations. They provide data, practice transformation support, reporting services, and manpower that practices need to be successful both clinically and financially in VBP contracts. They also form accountable care organization groups, giving practices access to revenue from shared savings, and serving as a “risk-bearing entity”, which protects individual practices from financial penalties involved in downside risk arrangements.

3. Always have a contract proposal analyzed before you sign. Contracts with payers, groups, or network entities are typically designed by them and for them, not for you. An attorney is an expensive but effective way to look for the fine print which might work against your best interests. However, using an artificial intelligence-based large language model like ChatGPT is a much more affordable way to screen these contracts. Load your contract into ChatGPT and ask it to tell you all the ways the contract is designed to work against your best interests. Then, use this insight to have a strategic conversation about contract terms.

4. When joining an ACO plan, insist on knowing who is in your group. Accountable Care Organizations (ACOs) are designed to produce shared savings, but the savings are only realized at the individual practice level if the group reduces costs for the patient population as a whole. Your practice might perform very well during the participation year(s) and produce savings for your segment of the ACO’s population, but if the rest of the group performs poorly, you are unlikely to receive any shared savings payments at the end of the contract period. Make sure you know who you are grouped with, can work with your other group members to drive performance, and feel reasonably confident that your group can achieve performance goals together before you agree to participate.

5. Beware of shared savings-only arrangements. Shared savings arrangements are a great way for primary care practices to reap part of the value they sow, but as a payment arrangement in isolation, this can be problematic. As mentioned in guideline No. 1 above, practices need predictable, upfront cash flow in order to support the additional work required to be successful in a shared savings model. Additionally, as mentioned in guideline No. 4, there is no guarantee that the shared savings bonus will materialize at the end of the (usually) 2 year contract period (unless your contract guarantees a minimum bonus) – it all depends on the performance of the group. Finally, there is a finite amount of savings to share out of a given population. If primary care does its job well, the health of the population will eventually stabilize and the savings will dwindle. Consider shared savings your “gravy”, but not your meat and potatoes.

6. Beware of multi-payer quality measure programs. Quality measure programs notoriously create a large amount of work for practices in return for very little financial reward. Because each payer can define its own set of measures and require its own reporting processes, getting into these arrangements with multiple payers can create highly complex workflows in exchange for very low compensation. Most VBP programs require quality reporting, so participation is not entirely avoidable. The caution to consider is taking on multiples of these and overburdening the practice without equitable reward for the effort.

Making the transition from pure fee-for-service into value-based payment programs doesn’t have to be a minefield, and we are in this together. For more information about value-based payment and the need for change in the U.S. healthcare system, check out our Value-Based Payment Literacy Series, free on the Elation Health website.