By Jim Hoyme
In our last blog, we talked about the two biggest and most challenging health care reform changes for independent physical therapists:
Financial Risk Sharing
Consolidation is the effort of businesses to come together to create large organizations that, because of their size, deliver greater strength, economies of scale, and value. One of the size-gaining options that independent practices have is to organize as an MSO that is grounded on trust, value delivery, teamwork, and leadership.
So how about the Risk Sharing thing? What’s it all about? What does ‘Financial Risk’ even mean? And how do you ‘Share it’?
Financial Risk essentially means that a person or company has an uncertainty of how much money they Will Be Paid or Have to Pay and the potential for Earning Less than or having to Pay More than Expected. Seeking someone to share that risk means finding a colleague who will ‘partner’ with you to try to lessen the downside risk of paying more or earning less money.
Let’s do a comparison in the health care world to try to explain.
For years, health care providers have been paid on a ‘fee for service’ basis. They provide a service or intervention and apply a code to it. The code has a dollar value attached to it, and the party responsible for paying for the service reimburses the provider that amount. The more times a provider performs a service and the more services the provider delivers, the higher the total fee. In this ‘volume-based’ world, the person paying the bill assumes ALL (or nearly all) of the financial risk because in most cases they do not know how many fee-based codes will be billed by the provider. The more the provider does, the more risk the person paying the bill burdens.
Risk Sharing means developing payment models with financial incentives in which the payor and the provider agree to some qualification that lessens the financial risk on the payor. This ‘qualification’ is usually a quality and/or cost-reduction measure. If the provider achieves a higher outcome, he or she will be paid more. If the provider’s outcomes don’t meet defined standards, he or she will be paid less. Or . . . if the provider’s care results in lower total costs relative to a previous period of time, the payor shares some of that savings with the provider. The Payor has financial risk. The Provider has financial risk. They Share Risk.
So it may play out like this . . . The payor says, “Look . . . the Affordable Care Act and rising health care costs have dramatically increased my financial risk. I can’t afford it any more. I will agree to pay you a base amount for delivering care. If you achieve a higher outcome, I will pay you a bonus. If you achieve a lower outcome, you will only get your base payment. On top of that, if you can show you helped reduce our total cost of care relative to last year . . . I will share some of that savings with you. But you must provide measurable value to our enrollees and me.”
Here are the the basic Financial Risks to Payors when the provider and payor are engaged in a typical fee for service arrangement:
Provider charges patients for MORE CODES
Provider sees patients for MORE VISITS
Provider sees MORE PATIENT EPISODES of CARE
But guess what . . . that risk can be taken to an even higher level. What if –
Provider delivers inadequate care and PATIENT HEALTH WORSENS
So how does a payor creatively mitigate Financial Risk?
The most common examples of risk sharing arrangements include:
- Per Diem Rates – Payment per visit. This eliminates the Risk of MORE CODES.
- Case Rates (Episodic Rates) – Payment per Referral or Episode of Care. This eliminates the Risk of MORE CODES and MORE VISITS.
- Bundled Payments – Consolidated lump payment for multiple services by multiple providers, eg a ‘lump’ rate for total knee replacement shared by surgery center, surgeon, and therapy providers. This reduces Risk across multiple provider types.
- Capitation (per member per month) – This is the highest form of risk sharing for a provider. The payor pays the provider a monthly fee based on how many people have been assigned to that provider’s health system. This eliminates the Risk of MORE CODES, MORE VISITS, and MORE PATIENT EPISODES of CARE. You will rarely, if ever, see this model with independent physical therapists; it is usually only seen with large organizations like ACOs.
- Value Based Models – These models are varied and can be applied to any of the above including fee for service. Provider and Payor agree to Outcomes or Value benchmarks. If Providers achieve those patient outcomes, they will be rewarded financially. If not, they will not get a bonus. These models ensure that providers deliver care that results in lower costs AND higher patient functional health.
All of these models involve some level of Risk Sharing by the provider. The ‘hottest’ approaches involve some sort of value-based model. And that brings HUGE OPPORTUNITIES for skilled, innovative physical therapists who can bring such value to the table.
Therapy Partners’ MSO has engaged in a value-based model using FOTO since 2010 with HealthPartners, which covers over 1.3 million lives and is the Twin Cities’ largest commercial health plan. This model has been a true ‘win-win-win’ for Therapy Partners’ practices, HealthPartners health plan, and Therapy Partners’ patients. Practices have been rewarded financially for their high value FOTO outcomes. The health plan has saved money in several ways. Patients have benefitted from therapists’ focus on improving their functional outcomes and healthier life styles. You can find out more about this type of model by reading this short note about the TPI-HP-FOTO model written by Selena Horner (@SnippetPhysTher) for FOTO –
So what’s driving this value-based risk sharing movement?
The Affordable Care Act (Obama Care) forces CMS to create shared savings models. Population Health Management involves initiatives to reduce costs through the improvement of people’s health and well being as early in care as possible. The emphasis is on reducing costly interventions like ER visits, hospital stays, and surgeries by encouraging early access to lower cost, effective care. This article should really encourage you –
This should inspire all physical therapists to proactively seeks ways to insert themselves higher on the health care food chain. Opportunity.
But it’s not just the government. The private sector is also pushing a value movement.
BCBS – $65 Billion – and United Health Group – $43 Billion – are spending astronomical amounts to convert their technology systems from fee for service (volume-based) reimbursement models to various types of value-based models. Check out these short stories. (if you follow @TherapyPartners on Twitter, you may have already read them)
Independence Blue Cross (IBC) of Philadelphia estimates it paid providers over $150 Million in 2014 to reward them for achieving savings compared to their “historical spend”. IBC plans to increase provider reimbursement based on the achievement of quality and cost benchmarks. Click on this link to find out the specifics of IBC’s value-based efforts –
In some cases, payors are thinking beyond dollars and cents and are providing additional non-financial incentives to health care providers that encourage value delivery. Some health plans have released Quality Rankings, media articles, and other creative recognitions for value-based providers. I like these ideas. Check this out –
So how do you succeed in a value based, risk sharing world?
We feel strongly that long-term success for independent therapy practices ultimately boils down to connecting with and bringing value to the POWERFUL DECISION MAKERS. Who are they? The government, health plans, ACOs, work comp plans, self-insured businesses, and individuals seeking health care.
But connecting with these powerhouses doesn’t just happen. You must analyze the big picture, plan, lead, engage your team, and sell your value to the people who make health care decisions. This takes time, effort, and savvy.
Start with a MISSION to deliver the Triple Aim – Measurable Quality, An Exceptional Patient Experience, and Lower Total Cost of Care. This appeals to everyone – providers, payors, and patients.
But to deliver on a Triple Aim Mission, you must have a CULTURE that supports that mission. A culture of Value. Your team members must embrace, commit to, and deliver value to every patient. Measuring Outcomes, Patient Centered Care, Collaboration with other providers, and Managing your Care to achieve the best outcomes will deliver that value. This culture is aligned with a Triple Aim Mission.
With a Value-Based Culture and Triple Aim Mission in your tool kit . . . now you can create an Innovative STRATEGY. How does that look? Depends on how innovative you are, but it must create value for those Powerful Decision Makers, and Getting Bigger and Sharing Financial Risk must be part of your strategy.
Health care reform and its many aspects can be daunting. But delivering measurable value and selling that value to the big decision-makers will bring you opportunities.
Keep learning and keep leading.