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Providers Don’t Take Enough Risk to Bend the Cost Curve


Back in 2015, 20 major health systems and payers pledged to
convert 75% of their business to value-based arrangements by 2020. Today, more than
of payments from U.S. commercial health insurers are tied to some
kind of value-based model. By 2021, the health plans expect three-quarters of their
payments will be value-based.

However, a recent analysis of Change Healthcare data by Modern
found that the percentage of value-based revenue tied up in
upside/downside risk contracts was in the single digits. Among the types of two-sided
risk contracts that provider organizations had were capitation or global
payment (7.3%), pay for performance (6.5%), prospective bundled payment (5%),
population-based payment (5.8%), and retrospective bundled payment (4.1%).

An AMGA survey picked up signs of a recession in risk contracting
in 2016. A year earlier, survey respondents—mostly large groups–had predicted
their organizations would get 9 percent of revenue from capitated products. In
2016, the actual figure was 5 percent, according to a Health Affairs
by the AMGA’s Chet Speed and the late Donald Fisher.

The authors
cited a number of obstacles to the spread of risk contracting, including
“limited commercial value-based or risk-based products in their local markets; the
inability to access administrative claims data from all payers; the massive
administrative burden of submitting data in different formats to different
payers; lack of access to investment capital; and inadequate infrastructure.”

Fast forward a
few years, and most of the same ingredients for risk-contract aversion remain.
In researching my new book in progress, for example, I discovered that ACOs
were having a hard time getting claims data from commercial payers. That made
it more difficult for them to manage population health and to measure physician
performance, which is critical to improvement and to the selection of
high-value specialists. The insurers apparently did not want to reveal what
they were paying providers, despite the value of ACOs to their bottom line.

Even if plans are willing to meet providers halfway, they still
find a high resistance to risk. Hospitals don’t want to empty their beds, and
they employ physicians, at least in part, to keep them filled. While they talk
a good game about value-based care, they’re not necessarily committed to
reducing costs if it hurts their bottom line.

Not surprisingly, a study
last year that “the growth of population-based payments has not
been associated with a decrease in market-level cost growth.” The
population-based arrangements that the study authors looked at included shared
savings, two-sided risk, and global budgets. Their conclusion: providers were
still not taking enough risk to make a dent in spending growth.

“The current level of population-based VBP penetration may
be insufficient to move the needle on health care spending. Increased
participation in VBP models that include downside risk may be needed for these
models to lead to reductions in overall health care spending,” they wrote.

Because of the low volume of patients in these models, they also
noted, many providers have continued to focus on maximizing fee for service
revenues. “Without significantly more volume of payments flowing through
APMs [alternative payment models], providers cannot make the business case to
abandon fee for service.”

So what does this all add up to? In short, little progress
has been made in the past five years to move U.S. healthcare from pay for
volume to pay for value. As a consequence, not many providers have yet made the
crucial switch to a model in which they can be financially rewarded for saving
money and improving outcomes.

Until that begins to happen, costs will continue to rise at current or higher rates, and U.S. healthcare will remain dysfunctional and will fail to serve the needs of all patients. It is past time for physicians to wake up and realize they can make money by reducing waste, and for hospitals to get out of the way.

Ken Terry is a veteran healthcare journalist and the author of Rx for Health Care Reform (Vanderbilt University Press, 2007). This article is adapted from a forthcoming book.

This content was originally published here.

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