Willing Adoption Requires Provider Understanding of Growth Potential and Risks

The U.S. federal deficit is the highest it has ever been. Healthcare makes up the largest portion of that deficit and the COVID-19 pandemic continues to amplify the issue. Over the past few years, the Centers for Medicare and Medicaid Services (CMS) has lead the charge towards value-based contracting, which “encourages providers to deliver the best care at the most reasonable cost, thus improving the overall value of care” (revcycleintelligence.com, ¶2). By 2025, the intention is to have almost 100% of Medicare reimbursements tied to value-based contracts. Today, in 2020, less than 20% of Medicare spending is tied to value-based contracting, and those providers who are a part of the majority who are not participating in a value-based contract are cautious. They fear the risk of financial loss and, in some cases, the cost to make the shift seems unattainable. The unknown is unsettling, and comprehensive education on value-based contracting is vital to not only increased adoption but successful adoption.


Key Takeaways

1) An increasing number of providers are actively choosing to shift to value-based contracts.

In the traditional fee-for-service (FFS) model, the cost of healthcare delivery is in no way tied to the price of the services rendered. Many providers are excluded from conversations of cost and price and are therefore unaware of the unusual nature of the model, exacerbating the disconnect between provider and patient. New payment models focus on price and cost transparency, as well as actually link patient outcomes to that payment, and providers have responded favorably. When the Center for Medicare & Medicaid Innovation (CMMI) “introduced the first population-based risk program, there were fewer than 1 million providers participating” (revcycleintelligence.com, ¶5). Five years later, in 2017, participation had grown 300% to 4 million providers, and an additional 2 million providers elected to participate in 2018.

2) “FFS as a payment model is actuarially unsustainable.” – revcycleintelligence.com

“Since 1960, US national health expenditure (NHE) growth rates have typically outpaced economic growth rates” (revcycleintelligence.com, ¶7). An ever-growing aging population threatens to push the cost of healthcare increasingly skyward by virtue of volume as well. In 2020, it is estimated that 17% of the U.S. population is 65 or older and in 10 years, 20% of the U.S. population will fall in this age range, with 8.7 million people in the eldest age range, persons aged 85 and older.

3) Value-based payments reward high-performing providers.

There are many value-based payment models, some voluntary and some mandatory, but they all largely follow one of two main tracks, accountable care organizations or bundled payments. There is one unifying factor to all of these models, however: the financial benefits realized by high-performing providers. Success is not a guarantee regardless of the track followed, but providers who deliver the best, most timely, most appropriate care to their patients and meet quality outcome measures see real financial rewards through performance-related bonus payments.

4) COVID-19 relief now will drive further value-based contracting in the future.

While the current focus is caring for and healing COVID-19 patients, providers who are not on the front lines have seen a significant decrease in patient volume, procedures, and service revenue. To that end, CMS has extended “some downside forgiveness in VBC programs for the duration of the pandemic, as providers shift their attention to more urgent patient care and business operations” (revcycleintelligence.com, ¶11). As we move past the COVID-19 crisis, the shift to value-based contracting will likely accelerate to adapt to leaner, more limited healthcare budgets. The federal government has extended economic aid totaling $3 trillion over the course of the pandemic thus far. An increased federal healthcare deficit will intensify pressure to lower future healthcare costs.

5) Value-based contracts offer myriad unique business opportunities.

As an increasing number of providers shift to value-based contracting at an exponential rate, new and interesting business opportunities will appear. Providers need to have an extensive understanding of the programs they can participate in, their likelihood of success in those programs, where they stand as relates to their peers’ performance, and the potential financial gains and losses. Pragmatic provider organizations are circling the wagons with critical departments such as “risk management, clinical quality, contracting, and medical management… to assess the risk contracts they currently have” (revcycleintelligence.com, ¶15) and to identify future opportunities in other programs.


Link: Transitioning to Value-Based Care While Reducing Risks


About Innovista

Innovista Health Solutions is a population health management company that offers management and support services to guide independent physician networks, medical groups, and health systems through the ever-changing landscape of value-based care. With services and toolsets including network development, population health management, delegated services, data reporting, and strategic capital investments, Innovista is structured to help its clients succeed in their Commercial, Medicare, and Medicaid value programs. Innovista is a single resource for physician integrated models to gain access to innovative technology, expert programs, actionable data insights, financial resources, and growth opportunities, to navigate and succeed in value-based and/or risk-based contracts.


Innovista Media Contact

Laura Bingham