Is the Healthcare Industry Embracing Risk in Its Contracts?

If executed well, value-based care models are supposed to yield better health outcomes, reduced costs and improved satisfaction for both patients and clinicians. 

As the healthcare industry slowly moves toward value-based care, healthcare companies are thinking about taking on financial risk in their customer contracts, and payers are beginning to think more about payment innovation. During a Wednesday panel at MedCity News’ INVEST conference in Chicago, healthcare leaders shared some key ideas about how the industry is embracing risk.

The willingness to go at risk could help vendors win health system contracts.

Health systems are dealing with tight budgets, so now is a pretty difficult time for companies to be selling their products to hospitals, pointed out Diana Rhyne, executive director of research and innovation at WakeMed Health & Hospitals.

“I want startups to really think about their work as a partner,” she remarked. “Think about your health system as a partner — it’s not just your product, but what you can do for the health system. How can you impact the things that they care about and align incentives?”

She also encouraged vendors to think about going at risk when signing a new contract with a health system. A company’s willingness to put a little skin in the game can make them a more attractive potential partner, Rhyne noted.

Health systems are inundated with pitches from vendors, so companies “have to be more creative,” to get their attention, she explained. In her view, a readiness to go at risk can help vendors stand out in a competitive landscape.

What should providers look out for when pursuing new value-based contracts?

Seth Zuckerman, chief business officer at home-based medical group Upward Health, has experience managing risk in both payer and vendor contracts.

When approaching payers in value-based contracts, Upward tells them there is a certain amount of what it likes to call “insurance risk” that the company is not willing to take on, Zuckerman said.

“What we’re looking for is some protection for times when CMS makes changes — and we’re looking for the payer to adjust to that. Most recently, CMS has made big changes to how the risk adjustment factor is done, and that’s changing revenue for all Medicare Advantage patients. And they’re making changes to the stars program, which is changing quality measures. And so since those are two big factors in any value-based contract, we’re looking for protection from that,” he explained.

On the vendor side of things, Zuckerman has noticed that “a lot of the larger, more established companies” are not optimized for value-based care. This means that a healthcare provider’s EHR vendor probably won’t be all that helpful when it comes to tracking the financial outcomes and quality measures needed to succeed in value-based care arrangements, he pointed out. 

Upward is looking into the market for companies that can help them track those metrics, he added.

Earlier care can reduce spending while improving outcomes.

At GE HealthCare, embracing risk begins by seeking a true understanding of its customers’ individual needs, said Brian Montgomery, the company’s chief strategy officer. Then, the company uses that insight to inform product development so it can tailor its tools to address those needs, he explained.

He highlighted a recent acquisition his company made. Last year, GE HealthCare bought Caption Health, a company that delivers AI-guided echocardiograms in patients’ homes to detect heart disease earlier — when the condition is easier and less expensive to manage.

“Getting an echocardiogram scheduled may take two months. The cost for doing that under Caption Health is about $300 while the cost for doing that in a normal practice is $1,800,” Montgomery noted. “And in certain value-based care settings, that can be really important for those high-risk patients that have a cardiac event.”

Caption Health’s care model is an example of something that can save money in both the short- and long-term, he pointed out.

Photo: Gabriela Golumbovici, Breaking Media


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