Experienced Providers Offer a Road Map to Successfully Take on Greater Risk

What’s New?

Many hospitals and health systems are grappling with how to evolve their care delivery models, and which payment models can support their transformation goals. A newly released AHA Center for Health Innovation Market Insights report – Evolving Care Models – explores the rapidly changing dynamics in alternative payment models (APMs) and the new capabilities hospitals and health systems need to succeed under these arrangements. The report provides valuable lessons for those in the midst of care delivery changes in these models and shares a road map for organizations to follow as they accelerate their transition to greater levels of risk.

What’s at Stake?

More than one-third of U.S. health care payments are now value-based and that percentage is expected to climb higher as pressure mounts among state, federal and private payers to move an even larger share of reimbursement to APMs.

These changing conditions have led to wide rather than deep adoption of APMs by health systems, however. Many providers interviewed for this Market Insights report now participate in some form of APM but most don’t take downside risk. And more often than not, most of the dollars in these arrangements flow through APMs built on fee-for-service architecture. However, it is expected that providers will steadily assume greater downside risk in APMs.

The Road Ahead

Providers experienced in emerging payment models who were interviewed for the report said hospitals and health systems should consider these points in the near term:

• Payment models will move into more advanced levels of risk. This includes shared-risk models and population-based payments. Look for Medicare and Medicaid to keep pushing for more advanced risk arrangements, with commercial payers lagging behind due to logistical and financial concerns.
• Providers will need to build new capabilities quickly to succeed under higher levels of risk. The report includes a maturity framework describing the care delivery and organizational capabilities providers need to assume as they accept greater degrees of financial risk. The model explores maturity levels in such areas as the care continuum and provider network management, IT infrastructure, analytics and financial management.
• Transformed care delivery works best with a transformed payment model. Providers that transition a substantial portion of their payment stream to APMs are more likely to scale their alternative care models and reduce the inherent tension between competing payment models. Experienced APM adopters noted that as their health systems’ care models matured in these plans, they developed confidence to take on greater levels of payment risk, which then financed greater changes in care delivery.
• A maturity model roadmap: How should your organization proceed based on its current maturity level in APMs? The report offers a six-point road map with guidance on:
  • Developing and committing to a transformed vision of care delivery.
  • a source of financing for care delivery transformation.
  • Developing a proof of concept.
  • Building financial management capabilities to manage risk contracts.
  • Leveraging the proof of concept to negotiate more advanced APMs with other payers.
  • Aligning physician incentives with broader APMs negotiated with payers.

For more, visit www.aha.org/center.