Health Systems Set Sights on Risk-Based Payment in Medicare Advantage

Nearly 60 percent of health systems are looking to move into risk-based Medicare Advantage programmes in the coming year, according to the Healthcare Financial Management Association (HFMA) executive survey for Guidehouse Health Insights. This is a 14 percent increase from the June 2019 Guidehouse/HFMA analysis, Guidehouse said.


According to the survey of over 100 CFOs and finance and managed care executives from provider organizations, Medicare Advantage isn’t the only line of business that will take on risk in 2022.


More than half of executives (52% ) plan to increase risk-based payment or capitation in their commercial lines of business, while 49% anticipate taking on more risk or capitation through Medicare alternative payment models. In other words, health systems expect risk-based payment to both increase and diversify across business lines.


More than one-third of executives believe that risk-based payments will increase in managed Medicaid, 33 percent in direct-to-employer arrangements, and 12 percent “otherwise.”


According to Guidehouse Partner Richard Bajner, we are seeing increased interest from providers to own the premium dollar through risk-based arrangements. Large payers, on the other hand, have been investing directly in primary care assets to gain control over the flow of care and better manage services delivered to members, increasing the need for payors and providers to collaborate closely on market strategies, according to the press release.


According to Guidehouse, payviders, the value-based partnership between a payers and provider, can employ risk-based contracting between payors and providers, provider-sponsored health plans, joint ventures, and payor-new-entrant partnerships to encourage the adoption of employer-sponsored health plans.


Payvider models, however, are not suitable for all markets, the study found. Furthermore, a recent survey discovered that health systems faced substantial challenges in establishing strategic partnerships with payors, a crucial element of payvider success.


According to the survey, 50% of executives cited pursuing payor models or increased risk, capitation, or joint venture arrangements as their top external challenge. This challenge was chosen over local competition (21%), legal/trust issues with payors (10%), other (9%), new entrants/disruptors (6%), and price transparency compliance (4%).


Despite the challenges with fee-for-service, risk-based revenue has stalled.


In addition, 52 percent of executives said that vertically integrated health plans, such as UnitedHealth Group, were a major barrier to success with pay-for-performance models in their market.


According to the survey, 36% of executives see data and technology costs, integrity, reporting, and insights as their greatest internal hurdle to pursuing payvider models or increasing risk, capitation, or joint venture arrangements. Internally, health systems are having trouble with data and technology.


23 percent of those surveyed cited lack of collaborative payor/provider partners as the biggest challenge to achieving quality or cost outcomes, while 13 percent said scale, 10 percent said difficulty achieving quality or cost outcomes, and 9 percent said leadership alignment or support was the most challenging aspect (Klaphake, 2018).

Despite taking a risk-based payment approach, most health systems are still developing the required capabilities in-house. Thirty percent of executives said their organisation is collaborating with a health plan, 21 percent are outsourcing capabilities, and 7 percent are sourcing capabilities from other healthcare organisations. Around half (51 percent) believe the abilities are being developed in-house.