Analysis: Survey results show health systems prepared to take risk

A recent HFMA/Navigant survey finds 72% of health system executives believe their organizations have the capabilities to assume more risk and plan on doing so in the next three years.

Respondents from health systems (81%) were more certain of their ability to take risk than those representing stand-alone hospitals, where 68% indicated their tolerance for risk. Of those that don’t anticipate taking additional risk, 56% cited a lack of local-market demand as the reason.

Not surprisingly, in preparation for risk, these are three areas where respondents anticipate making investments:

• Information technology capabilities – 62%
• Physician engagement – 57%
• Member engagement – 56%

Likely Partners

Although commercial payers are most cited as likely partners for increased risk by 64% of respondents, Medicare FFS (57%) and Medicare Advantage (51%) risk contracts will also see significant growth based on the survey results. Additionally, 19% of respondents anticipate launching a provider-sponsored health plan in the next five years.

Takeaways

Several things jump out at me from the HFMA/Navigant survey findings:

• No Advantage to MA I would have thought MA would have been the preferred partner. There aren’t issues with attribution like in Medicare FFS models and you have flexibility to negotiate your arrangements like in commercial plans. And the MA plans have a greater incentive to enter into risk- based deals with providers relative to the ASOs running ERISA plans.

Since the respondents were all from hospitals and health systems, it might be indicative of the fact that either:

1. Respondents feel like the MA opportunity is tapped out for the time being
2. Respondents’ answers reflect the MA plans’ focus on risk-based contracts with physician group practices not hospitals and health systems.

• Staying on Path Given that Medicare FFS came in second, it doesn’t sound like Pathways to Success is scaring health systems off.
• No Demand No Surprise That half of the folks who said they weren’t taking more risk in the next couple of years due to a lack of interest in their market isn’t surprising.

I frequently hear from HFMA members in progressive organizations participating in Medicare APMs that they struggle to find or negotiate mutually agreeable terms for risk-based arrangements with employer or commercial health-plan partners in their local markets (more below).

• Overly Optimistic The commercial number strikes me as being overly optimistic.
• When I ask providers why they don’t have more commercial risk-based arrangements, I frequently hear one or more of the following issues:
  • The plan/employers want is too steep of a per unit price cut
  • The plan/employers aren’t willing to narrow the network or use creative-benefit design to prevent leakage
  • Shared savings percentage is insufficient
  • Concerns about attribution models if it is an open-network APM
  • Insufficient risk adjustment or protection from insurance risk (not performance risk)
  • An inability or unwillingness by the plan to share data in a timely manner

When I ask the plans why they don’t have more risk-based arrangements with providers, I typically hear providers want:

1. To keep too much of the savings
2. Significant carve outs or exclusions to protect them from insurance risk that the plan believes is performance risk
3. A base-rate increase to participate
4. To narrow the network beyond what the market, into which the plans are selling, will buy

There’s probably a bit of truth from both perspectives. But, I’m not sure what’s happening in the current environment that’s going to make both sides come to the table and ink a deal if they haven’t yet.

Maybe it’s the various studies of price variation that have alerted employers to the fact that brokers aren’t effectively managing costs for them. So, the employers will either direct contract or take their business to those brokers who have the expertise to develop collaborative risk- based deals.

Or maybe it’s concerns about “Medicare For All” that are finally pushing the stakeholders together to collective action.