By: Kitty Juniper, Esq.

Provider reimbursement is shifting to value-oriented arrangements, but perhaps at a faster pace than anticipated.  Data released on September 30, 2014 by the non-profit employer coalition, Catalyst for Payment Reform, show that commercial payers continue to gravitate toward some form of value-based compensation, particularly in California.    

According to Catalyst’s results of surveys returned voluntarily by 39 health plans (including 80% of the largest insurers), 40% of all commercial in-network payments nationally are value-oriented – meaning, some portion of the compensation is tied to performance (quality or the reduction of waste).  Of the value-oriented payments, 53% of payments placed hospitals and physicians at some financial risk for their performance.  As expected, the percentage of value-oriented payments was higher in California at 55.4%, of which 86% included some type of provider financial risk.  Full capitation (per member, per month payments), long used in California, accounted for 40.7% of payments in California compared to 15% nationwide.   The survey results and methodology can be accessed at Catalyst for Payment Reform.

The Catalyst report shows that capitation and the inclusion of incentives in payment arrangements, with variations within each of those models, continue to spiral.  Ideally, providers will propose their own innovative models and strategies, rather than sit on the sidelines as passive participants in the payer’s contracting process.  Some points for providers to address when considering new payment models include:

  • Determine your organization’s strengths and how to increase your leverage with payers; implement only those options and models that make strategic sense for you.
  • If your group chooses to assume full risk as a revenue-enhancing method, remember that in California, that means the formation of a health care service plan, limited or otherwise. 
  • If you as a provider choose to participate in high performance networks or other customized delivery systems, make sure your organization is ready to achieve the measurable outcomes that will determine your compensation. 
  • When negotiating contractual compensation provisions, include specific, clearly delineated targets and payout times, upon which all parties agree.
  • If your organization is at risk, be sure that it is responsible only for outcomes that it can control or affect.
  • Data relevant to the determination of compensation needs to be understood, shared and transparent to all parties.

The Catalyst survey results remind us that the pace of health care reform is not slowing for providers.    There is no one-size-fits-all payment arrangement and those who want to be successful players should consider initiating innovative compensation arrangements that work for them.