Managing Exposure in Risk-Based Contracts

Understanding variations in risk for different categories of patients is critical to setting successful strategic approaches to managing exposure in risk-based contracts.

The shift to value-based care model in healthcare requires development of a key skill set—managing exposure to risk in risk-based contracts.

Managing risk exposure was a focal point during a recent HealthLeaders Media Roundtable event in Denver, with the panel featuring three physician leaders and a healthcare-finance expert from New York City-based Bank of America Merrill Lynch.

Risk exposure varies across a plethora of patient categories, said Alan Lazaroff, MD, co-founder and coding medical director of Physician Health Partners, a Denver-based physician organization.

"There are a lot of different risks that people face. For example, in geriatrics, one of the worst risks is the risk of having to go to a nursing home. The risk factors for that are completely different than the risk factors for going in the hospital. If you have Alzheimer's disease, that is the risk factor for going into the nursing home. Alzheimer's probably affects the hospitalization risk, but not as much as heart failure or coronary artery disease."

Setting patient-outcome objectives is critical to success in managing risk-based contracts, said Louis Levitt, MD, vice president and a practicing physician at The Centers for Advanced Orthopaedics, a physician group based in Bethesda, Maryland.

"You have to define the goals you are trying to achieve. If you can't define goals—and dementia is a tough one to define—it is hard to be successful. If you are successful, what will you see changed? Keeping patients at home? Keeping them out of the hospital?

Payer mix has a significant impact on managing risk exposure, said Rick Lopez, MD, senior vice president of population health at Atrius Health, a Newton, Massachusetts-based physician organization.

"In the commercial population, people who are at high risk of hospitalization tend to be the sicker commercial patients who almost look geriatric in terms of their conditions. We developed a separate algorithm to predict the risk of spending more than $100,000 in the next year, and when you apply that algorithm to the commercial population, the big costs are not the hospital costs. The big costs are the pharma costs and the physician procedures."

Data management is an essential element for success in risk-based contracting, said Seattle-based Kerri Schroeder, senior vice president and credit products executive at Bank of America Merrill Lynch.

"Most providers are struggling with data—having congruent access to data with the payers, so you have all that claims data in a way that you can consume it. You need data analysts who can merge claims data with EHR data and any other data sources related to socio-economic issues that can help predict risk in patient populations. You need clarity about the composition of the population, how you are going to measure success, and the spending benchmarks.

"Another problem is that every provider is dealing with multiple payer contracts, and the rules are different for each one. So, how do you create one process and one set of business rules that work for all of the different payment arrangements that you are under? That is a huge challenge."

View the complete HealthLeaders Media Roundtable report, Success Strategies for Managing Risk-Based Contracts.