Only a tiny share of hospital revenue is risk-based: Moody’s

• Only 1.9% of net patient revenue for not-for-profit hospitals came from risk-based payment in 2018, says Moody’s.
• The Trump administration has two pending mandatory models that would increase risk-based payment for many providers.
• Coming legislation could increase the appeal of value-based payment.

Just 1.9% of net patient revenue for not-for-profit (NFP) hospitals in 2018 came from risk-based payment, according to a credit-rating agency.

Moody’s Investors Service issued a sector profile in September on the 284 NFP hospitals it tracks. The report included a finding that risk-based payment actually declined slightly from 2% of NFP hospitals’ total revenue in 2017.

Similarly, the latest sector profile from Fitch Ratings concluded that “only a few payers [are] pushing at-risk contracting,” and therefore “many providers will continue to develop a strategy based on increased size and scale.” That approach will allow them to “extract greater efficiencies, gain contract leverage with payers and suppliers, and build adequate capabilities to support population health.”

The tiny share of risk-based hospital revenue runs counter to longstanding and continuous pronouncements about the shift to value-based payment by the Obama and Trump administrations.

“As the market moves to more value-based payment, and as participants demonstrate success, at some point models will no longer become optional and will become standard payment policy,” said Seema Verma, administrator of the Centers for Medicare & Medicaid Services (CMS), at a gathering of hospital executives last week in Washington, D.C.

However, industry advisers and executives were not surprised about the continued low participation of hospitals in risk-based payment.

“As much as we talk about it and as much as we try to grow it, we’ve had trouble sometimes with the payers,” said Carrie Nelson, MD, chief clinical officer for Advocate Physician Partners (APP).

APP’s share of revenue from value-based payment has stagnated at 20%, she said, because of issues such as having to shift from a value-based contract back to fee-for-service payments with one health plan. The sides had been unable to resolve data-related issues and concerns about inaccurate assessments of care quality, Nelson said in an interview.

“There are hospitals and health systems with very small amounts [in risk], and we’re not as high as we’d like to be,” Nelson said.

The rating-agency estimates are much lower than the self-assessments of 177 hospital executives, most of whom recently told a Premier healthcare alliance survey that nearly 20% of their patients were covered in risk-based arrangements.

Could risk-taking soon increase?

Industry executives such as Blair Childs, a senior vice president at Premier, increasingly view the federal government as the insurer that is leading the push toward risk-based payment.

For instance, the Trump administration has placed participants in the Medicare Shared Savings Program (MSSP) on an accelerated path to take on risk. The MSSP is the largest group of Medicare accountable care organizations (ACOs).

“When those changes took effect on July 1, participation in Medicare’s preeminent ACO program fell from 561 to 518,” noted a recent assessment by the National Association of ACOs. “While not yet a reason to sound an alarm, the dip in participation in 2019 will be problematic for Medicare if it continues, and policymakers should pay close attention as we move forward.”

In an interview this week, one prominent ACO advocate noted that some ACOs that dropped out are watching how organizations fare under the changed rules, and may jump back in.

Other instances where the federal government is pushing providers to take on risk are two proposed mandatory Medicare payment models: the Radiation Oncology (RO) model and the ESRD Treatment Choices (ETC) model. However, the continuing tension between providers’ interest in taking on risk and their ability to do so was on display this week, when many organizations filed comments with CMS stating varying levels of opposition to the RO and ETC models.

How Congress could get involved

Congress could increase the appeal of risk-based payment through several changes to federal rules, Childs said. Needed changes include:

• Restoring the MSSP shared savings rate to 50% after previously dropping it to 40%
• Extending the availability of physician bonuses under the Medicare Access and CHIP Reauthorization Act of 2015
• Changing physician self-referral and anti-kickback laws
• Removing providers in two-sided risk models from Medicare’s benchmarking calculation

Among the legislation most likely to advance in the current Congress, Childs said, are bills to implement the benchmarking changes, as well as another to encourage Medicare Advantage plans to use electronic prior authorization instead of slower traditional methods.

Other measures may loosen anti-kickback restrictions and ease the sharing of mental health and substance abuse records to improve patient results under value-based payment.

Also under consideration is adding language to must-pass spending bills to increase the MSSP shared savings rate to 50%, Childs said.