As provider organizations shift into value-based contracts and assuming down-side risk, building the appropriate incentive model is critical to success. In my recent podcast with Dr. Betty Rabinowitz, Chief Medical Officer of NextGen Healthcare, we discussed many important factors that influence the success of risk-based contracts.
Healthcare organizations are feeling pressure from payers to assume more financial risk. As a result, providers are exploring ways to manage their attributed patients’ medical spend and utilization and to accurately identify patient risk levels within value-based contracts. A key to achieving financial success is to establish the right incentives that align all the providers around common goals and an operational approach.
One concept we discussed was compensation plans of hospital-employed medical groups. Most employed compensation models still pay providers based on work relative value units (wRVUs) which reward providers based on number of patients they see.
As Dr. Rabinowitz stated, “It’s very difficult to pay physicians based on volume and have them produce value.”
These traditional compensation models are counterintuitive to a value-based contract where quality performance and medical management are important drivers of success. It’s important for healthcare leaders to structure compensation models and financial performance rewards that balance volume (wRVUs) with quality performance outcomes, as well as incentivizing risk awareness through capturing HCCs and annual wellness visits.
A second concept we discussed was the role of data and actionable analytics to drive performance.
“Begin to create a fabric of data and information immediately, that supports aligning incentives and promotes transforming workflows, practice performance and patient engagement” Dr. Rabinowitz explained.
Since building the data platform and culture of actionable analytics takes time, it’s critical to begin having these conversations early, before a provider assumes a risk-based contract. This allows time to create data as a strategic asset driving success in an increasingly risk-focused industry.
Provider organizations often ask how they can get started in becoming “risk-ready” and position their organization for success. Dr. Rabinowitz and I discussed the need to incorporate a holistic approach in building a “blueprint for success” with clear initiatives, assessment of capabilities, and identification of measurable outcomes. This holistic approach begins with establishing a value-based care payer strategy; creating the right operational infrastructure supported by care management; and evaluating the appropriate level of investment and revenue opportunities through financial value models. Since providers’ operating margins remain relatively small, answering the question around “what to invest in” and “how quickly we should move” are very important to the assuming risk and creating an aligned performance objectives.
Lastly, Dr. Rabinowitz and I discussed the role of governance and leadership to “drive everything from the payer strategy, to care management, to using actionable analytics to reward providers based on their performance and goal alignment.”
Since moving from a fee-for-service to a fee-for-value care model is a paradigm shift in clinical workflow and culture, strong physician leadership will foster collaboration of the care team and promote the philosophies of value-based care. As Dr. Rabinowitz stated, “Getting the teams together aligned around the value-based care goals will ensure we are providing care to patients at the right time, right place and for the right purpose.”
In closing, provider organizations must take a proactive approach in becoming “risk-ready.” This includes a focus on aligning compensation and rewards, using data to create actionable insights, incorporating a holistic approach to drive change, and ensuring a strong physician governance and leadership structure is in place.