Avoiding the Pitfalls of Value-Based Reimbursement

As provider organizations enter into accountable care organizations, bundled payment agreements and other value-based reimbursement contracts with health insurers, they are finding some unanticipated pitfalls.

During an education session at the HFMA Annual National Institute in Las Vegas, Ellen Stewart, chair of the healthcare group at the Berenbuam Weinshienk law firm in Denver, walked a large audience of finance professionals through some of the issues they will face.

For starters, the information technology investment is substantial as use of a common electronic health records system and regional or state health information exchange is optimal, meaning a lot of provider sites partnering with each other may be ripping out existing systems. They also need comprehensive analytics capabilities to generate accurate population health and contract profitability data and the ability to project healthcare utilization for specific populations. In addition, they also need two of the toughest nuts to crack: excellent physician leadership and real trust among the partnering providers and the payer.

Providers need to really know what is in an ACO contract with an insurer; not just what parts cover their own organization but partner organizations as well. Failure to dig deep could result in patients going out of network and not knowing it. That’s because a hospital may contract with a payer but while the hospital’s inpatient lab is in the contract, the outpatient lab isn’t and the result could be high patient dissatisfaction rates, Stewart said.

Patients also may be referred to an independent ambulatory surgery center, not knowing the ASC is not participating in the ACO, again raising dissatisfaction. Some independent ASCs have sued hospitals and insurers alleging they are not being offered contracts and that the providers and payers are engaged in anticompetitive practices, Stewart noted.

Another pitfall: Insurer analyses of provider quality and cost measures generally are done retroactively and providers need to know if there is language in their contract that permits a payer to change or add measures during the life of the contract, Stewart advised.

Hospitals and other provider need to know that the payer data being used to judge their performance is good, but sometimes it can be good yet wrong at the same time, Stewart said. For example, a hospital with an active infection control program is finding and reporting more infections. The facility is doing better than peers but their infection rate is based on the payer data and that data suggests they are awful at infection control. Providers must make sure the payer knows of the initiatives and progress that they have underway, and the contract with the payer has to specify in detail how data is collected and compared.

Stewart also suggested that providers who have not previously participated in capitated payment arrangements “shadow cap” during the first year. This enables them to be paid in a more regular manner but see what the capitated payments would be and if there would be a need to tweak the payments or exclude certain payments from capitation.