At-risk Reimbursement Methodologies

Medicare and other third-party payers are continuing to develop and test new payment methods that largely involve placing providers at risk.  A presentation from an Altarum conference lays out these methods and their status.   (Altarum Presentation)  All of these methods stem from the notion that fee-for-service reimbursement causes excessive and inappropriate utilization (a thesis which ought to be challenged more aggressively since most other countries with far less per capita spending primarily use fee-for-service reimbursement, they just have significantly lower prices).  Some, such as capitation, have been around for decades, but are being rediscovered.  As the presentation sets out, these risk-based compensation methods tend to either focus on a specific episode of care or treatment for a specific disease or condition, or they cover all of a person’s health needs for a set period of time.  One place where risk-based payments are used is in most accountable care organizations which have shown somewhat rapid growth both in Medicare and commercial populations, although their results are decidedly mixed to date.  Medicare’s ACOs have shown small overall savings and while some commercial payers claim savings of 10% or so, these are unverified by more rigorous research.  Medicare is gradually moving at least one branch of its ACO design toward a more rational approach which gets closer to patient lock-in and other features which facilitate risk-taking.  Medical homes are another initiative which tends to use risk-based compensation, but also has had design issues, at least in Medicare.  Medical homes tend to be primary care focused, but there is no reason why the practice or physician could not take overall risk, as they are intended to coordinate and manage all of the patient’s care.  Medicare has stated that it hopes to move the majority of its reimbursement to a risk-basis in the next few years.  For risk-based measures to work well for providers, they must have accurate and complete access to a patient’s past records and to real-time current information and they must have rigorous patient engagement and care management processes.  A good actuarial understanding of risk helps as well.  Most provider groups are not very far up the learning curve on these basic capabilities, so a lot of hiccups can be expected.