One payer argues for more provider risk amid record high hospital volumes: Q&A

In January, two parts of Highmark Health — Allegheny Health Network (the provider) and Highmark (the insurer) — implemented a risk-based payment model for all of Highmark’s commercially insured groups and Medicare Advantage (MA) populations, as well as many of its Affordable Care Act marketplace plans.

Bruce Meyer, MD, executive vice president and Western Pennsylvania market president for Highmark Health, sat down with HFMA to discuss its downside risk payment program. That program has begun to extend downside risk to providers caring for about half of Highmark’s enrollees, or 390,000 enrollees across all of its plan types including 56,000 MA enrollees.

The program will scale the share of payments subject to downside risk with 3%, or $140 million, subject to it in the first year; 6%, or $300 million, subject to risk in the second year; and 10% of payment at risk in the third year.

Q: Why did you choose to steadily increase downside risk over time?

Meyer: The concept of full risk is a hard one to get to, in part, because it is complex. For example, a health system has reserves and can write a check if there is a shortfall. An individual physician typically doesn’t. Because the contract is with our clinically integrated network, that includes doctors who are employed and therefor have a financial backstop of a health system. But it also includes doctors who are self-employed and running their own small practice. Those folks don’t have the same backstop. We’re trying to create a situation in which the folks that don’t have the same backstop have enough cushion over time and are getting comfortable with the program enough that they are willing to take the risk that they might have to write a check at some point.

Q: Do you plan to keep scaling risk past the third year?

Meyer: We would like to do that, yes. We need to look at some of the experiences to see what the temporality of that is. We will get to it eventually. Is that in the fourth year or is that in the sixth year or seventh year? I don’t have the answer to that right now.

Q: Any plans to expand downside risk to hospitals not owned by Highmark Health?

Meyer: Absolutely, yes. What we’re trying to do is, in an environment where we control it a little better, create [a] template and playbook ‘This is how you need to do things in order to be successful.’ The euphemism I use is ‘It’s really hard to say that somebody else should eat our cooking if we’re not eating our own cooking.’ So, we’ve got to prove that our cooking is edible and healthy, and then we can persuade other people to eat the same cooking.

Q: What are the outcomes, so far?

Meyer: What we have shown is that our hospitalizations-per-thousand-members have decreased, that our emergency room [ED] utilization has plateaued (while the rest of the market has increased by about 12%). So, although we haven’t decreased ED utilization, we have decreased ED utilization relative to folks who are not in the program. We have seen an increase in the ambulatory visits, which is intentional. We want you to see your primary care doctor instead of going to urgent care. We want you to see a specialist rather than going to the emergency room.

Q: Do you know financial outcomes yet for providers in the risk program?

Meyer: It’s probably too early to know with certainty. We are on budget for the data we have to-date, but we’re really looking at six months-worth of full data because of claims runout.

Q: Any indication of what is needed to make this work outside of a vertically integrated organization?

Meyer: The issue we’re going to face is the downside risk and how much downside risk people are going to be willing to accept. That’s part of what the descending floor concept is, which is ‘We’re not going to put you at full risk on day one.’  It’s sort of how much risk then are people willing to accept over what time period? Some of that’s going to be a negotiation, I suspect, but some of that’s also how comfortable are other organizations and how far along are they in their ability to manage a patient population without having to use the most expensive ways to do so.

Q: Why would outside hospitals take downside risk when their Medicare volumes are near historic highs?

Meyer: The way I talk to health systems here in Western Pennsylvania and West Virginia is ‘This may be a great year, and that’s terrific, but it’s an unsustainable model. Eventually what will happen — and we can argue about how long it’s going to take — CFOs and CEOs who lead companies who have employees are going to say, ‘Hey I can’t afford this’ and they will turn healthcare into what they did with retirement 30 years ago and instead of it being a defined benefit, it will be a defined contribution. That’s fundamentally what the ICHRA [Individual Coverage Health Reimbursement Arrangements] program is. I give you a defined contribution and then you go on the [health insurance] exchange and find whatever program works best for you. What that does is it shifts the burden from the employer onto the individual. Healthcare is already the single largest cause of personal bankruptcy in this country. We’d just be accelerating that curve. We’ve got to find a better system. And the only way we are going to find a better system is if we say, ‘Hey. We’re going to untether ourselves from the rate and volume train and say, ‘You know what, we have to find ways to make people healthier and take responsibility around the community that we serve,’ and find a better mousetrap that says, ‘I can keep you out of my ER and I can get you better access, and I can figure out different things that will prevent you from having an exacerbation of a chronic disease.’ And ultimately, how do we prevent chronic disease or mitigate chronic diseases?

Q: What is the business case for this downside risk initiative as a health plan?

Meyer: If we can show that we can keep people healthier and plateau or reduce their total cost of care, there’s a business proposition in terms of selling that to the public who are choosing an MA plan or an employer who is choosing a payer. Because whether I’m self-insured or fully insured [or in an]MA and even ACA kind of plan, the value proposition of how much am I going to pay out of pocket, how much is my employer paying and those types of things are all based on what is the pricing structure. And the only way we’re going to be able to plateau our pricing structure is if we can reduce the care costs that we are providing. So, there’s a business proposition from the plan side because this gives us the business opportunity ultimately have a better value proposition ultimately for the folks we are selling insurance to. 

Q: Is the risk move harder amid tougher operating environment for MA plans?

Meyer: It’s significantly more important because as the payment you receive as a payer for MA gets mitigated, you’ve got to find a way to keep down the cost. You can do that with: ‘Hey, I’m going to pay you less’ to a provider,’ but it’s then harder to get providers to accept that.

We think that in the short term and in the long term, the value proposition is much higher for us to be able to say. ‘We will mitigate the cost of the care,’ then there’s a win-win for everybody. The members and patients are healthier. There’s a sustainable business model for us as a payer, and the federal government is going to mitigate its costs as boomers move into Medicare.

I don’t know what the new administration will want to do but there’s no question that the government is saving money on MA versus traditional Medicare. And the government has said their goals are to get everybody into a value-based structure like MA by 2030. So, if there’s going to be a mandate that everybody move, and, as an example, RFK Jr. has said, ‘Hey, we ought to mandate that everybody is on a Medicare Advantage and there’s just no traditional Medicare anymore because it’s more cost-effective for the government.’ Ok, it hasn’t happened yet but if it does, being able to manage that risk as a payer becomes critically important and the most effective way to manage that risk is to really have programs that in fact decrease total cost of care.

Q: Has anything unwanted emerged in the risk model yet?

Meyer: We were expecting some increased utilization but not to the degree we have seen. So managing that and trying to understand whether that is a new baseline, where this is just what the expectation is from the community, or whether this, for lack of a better term — the pig in a python — there was a pent up demand, and it’s going to work its way through the system and then we will get back to a previous baseline — it’s unknown right now.

Q: Is provider scale a pre-requisite for downside risk?

Meyer: There is a minimum scale. We think of it as sort of a membership of about 3,000 [plan enrollees]. But having said that, it is more about access than it is necessarily about that kind of scale, which is if we can’t provide appropriate access to primary care, in particular, but also to specialty care, then people are going to delay care. And delayed care means you’re going to spend more money. So, some of it is that adequacy of access to care is a little more important than the scale of the members you’ve got. The good thing for us is our scale in the program is big enough that pretty much every primary care doctor is going to have hundreds of members as opposed to ‘I’ve got six members in the plan.’ The trouble for doctors historically has been ‘If I’ve only got 15 or 20 people in my practice who are in this program, it’s really hard for me to pay attention to that.’ But if one-third of my practice or 50% of my practice is in his program, then it’s pretty straightforward for me to pay attention to them, to the data that’s coming to me about who’s at risk and who’s got care gaps that need to be closed or who is a rising risk patient who needs more attention. So for us, it’s more about ‘How do we make sure that people have access and that enough docs in the program where each doc has critical mass,’ than it is about ‘Hey, a practice has to have a particular scale to do it.’ You just got to have enough scale to have attention in the individual physician’s practice.