Why Your Hospital or Physician Practice Must Embrace Risk

Risk tolerance is an interesting thing. Those who make the biggest bets often are actually control freaks—maybe because they know that, by having a strong grasp on the factors that influence the deal, they greatly increase the likelihood that they will come out ahead.

Healthcare executives could learn a thing or two from veteran gamblers as risk becomes a fixture of the healthcare delivery and payment models.

Medicare’s Slow March to Value-Based Payment

For the past decade or more, CMS has gradually been shifting Medicare payments from traditional fee-for-service to value-based programs, and that shift has accelerated in the last two to three years. Despite a recent CMS proposal to pare back certain bundled payment programs, the agency is committed to this move toward value- and outcomes-based reimbursement models.

The traditional structure of FFS reimbursement has largely insulated healthcare providers from financial risk. For the most part, the risk that healthcare providers have assumed in FFS programs has been limited to the patient responsible portion of fees.

With each new iteration of value-based payment, however, the insulation from downside risk wears increasingly thin. Two-sided risk models, such as Medicare Next Gen ACOs, hold providers accountable for providing the entire continuum of care within certain cost thresholds. The ACO is truly at risk for any costs that exceed those thresholds.

Can’t We Just Refuse?

Whether you are a physician, a practice administrator or a hospital CEO, you might wonder why you should accept such a risky proposition.

Here is why: At some point in the not-so-distant future, you won’t have a choice not to accept that risk. The economics of caring for a growing population with limited resources are forcing everyone’s hands.

Right now, Medicare is leading the charge, but commercial payers are paying close attention to the agency’s actions and are preparing their own value-based payment programs.

Manage Risk with Cost-Control

There is good news for control freaks. Just like a gambler can shift the odds in his favor by tracking which cards have been played and which ones are likely on the table, you can improve your chances of success by taking control of your cost structure.

As Medicare continues to raise the stakes, state Medicaid agencies and commercial payers won’t be far behind. Pretty soon, the “play it safe” option of fee-for-service will be off the table.

Providers who clearly understand the cost to deliver care to a single patient will be in the best position to deliver appropriate care in the appropriate setting at costs that are within the designated threshold. The ultimate result will be a healthier population at lower costs to the system and to the individual consumer.

At least, that is the vision.

While the future is yet unwritten, one thing is clear: Healthcare providers who cling to the status quo will be left behind. As FFS contracts are phased out and government reimbursements decline, risk-averse providers will see their patient lists and revenues decline.

Providers who embrace risk now, however, will have the opportunity to make clinical and operational changes, including aligning with like-minded providers, to form new delivery models that realize the vision of the Triple Aim.

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Topics: Value-Based Care, Cost Accounting, MACRA Summary

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