Nearly 36% of payments tied to FFS Alternatives

Can you hold out and still be relevant? When the market moves to something other than Fee for Service at this pace, you must have a strong reason to hold out. Otherwise, prepare to be marginalized.

In 2018, 35.8% of healthcare payments tied to bundled payments, shared savings, and other alternative payment models. The percentage number continues to grow.

I’ve been working with alternative payment methods such as bundled payments, shared savings, gainsharing, pay for performance (P4P), capitation, and other shared risk models since the late 1980s. I’ve witnessed backlashes, triumphs, and significant payment reforms in these past 30 years and learned how to successfully navigate them. At this point in time, Fee-for-Service is no longer the dominant financing mechanism for healthcare.

So why are so many healthcare providers resistant to change to their own detriment? Fear, ignorance, and wanting to leave things as they are until someone in the C-Suite or an influential manager retires. (“Don’t mess with it until after I’m gone.”)

A recent HCP-LAN research analysis indicates that “Only 39.1 percent of healthcare payments made in 2018 were through a fee-for-service structure with no link to quality or value, revealed the analysis of 62 health plans, seven fee-for-service Medicaid states, and traditional Medicare, which represented about 226.5 million covered lives and 77 percent of the national market.”

The data indicated that health plans and providers are moving to alternative payment models that meaningfully tie reimbursement to quality and value.

HCP-LAN uses the following categories to determine alternative payment model progress:

  • Category 1: Fee-for-service with no link to quality and/or value
  • Category 2: Fee-for-service with a link to quality and/or value (i.e., foundational payments for infrastructure and operations, pay-for-reporting, and pay-for-performance)
  • Category 3: APMs built on fee-for-service (e.g., bundled payments, models with shared savings, and models with shared savings and losses)
  • Category 4: Population-based payments (e.g., per member per month payments and global budgets)

Offering alternative value-based payment options to payers differentiated you and delivered competitive advantages. Now, if you don’t, you’ll be left out. Are you ready to risk that?

Under alternative payment models, however, providers become financially responsible for the care they provide. Upside risk, or one-sided risk models, allow participants to  share in healthcare savings if their services make care delivery more efficient. In downside risk arrangements, providers can also lose healthcare revenue if their care exceeds agreed-upon financial and clinical thresholds, or may be required to refund their payors if they go over an actuarially-calculated budget for a certain group of services. 

Provider willingness to take on financial risk was the top barrier to alternative payment model adoption according to payer respondents. They also cited “provider ability to operationalize” and “provider interest and readiness” as major obstacles. Call me for help with strategies and tactics to operationalize and succeed with alternative payment models. (800) 727.4160