64% of senior finance executives are planning for risk in commercial contracts

Health system executives who feel ready to take on additional risk over the next few years are in the majority, according to a new survey.

Providers appear to be coming around to alternative payment models such as those offered through commercial payers and Medicare. The analysis by Navigant, based on a survey of 170 hospital and health system senior finance executives, shows 64 percent of respondents planning risk assumption through commercial payer contracting models, 57 percent through Medicare value-based models, and 51 percent through Medicare Advantage.

Furthermore, 44 percent of survey respondents said their organizations are already part of a provider-sponsored health plan or plan to launch one in the future -- another sign that risk assumption is on the rise.

WHY THIS MATTERS

Notably, close to three-quarters of the executives expressed confidence that their organizations have the capabilities needed to assume such risk, citing increased investment in IT and physician engagement. There is also likely an element of necessity, with the addition of roughly 10,000 people to Medicare each day.

However, 42 percent said operational processes remained a top challenge for maintaining risk-based capabilities, suggesting that payer-provider partnerships should look to innovate in this area. 

THE LARGER TREND

Some studies show that providers have been averse to taking on more risk in payment models, but Navigant's analysis signals a shift.

This could be a response to the Centers for Medicare and Medicaid Services making clear that it wants providers and other entities in current and in future payment models to take on more financial risk.

Value-based payments are on the rise and there is an ever-growing interest in Medicare Advantage.

Still, the Navigant analysis recognizes "providers will inevitably continue to operate in a market primarily driven by fee-for-service payments," and offers strategies for driving revenue and margin growth under both models through clinical standardization, cost reduction in areas such as post-acute care and pharmacy care, and emphasizing "customer keepage."

ON THE RECORD

"The Affordable Care Act left many providers assuming that risk-based models would be the new normal, but the transition has not been as successful or widespread as anticipated," said Richard Bajner, Navigant managing director and healthcare value transformation practice leader.

"With most health systems anticipating continued downward pressure on margins, accepting risk can represent a lever for revenue growth, as long as providers clarify internal accountabilities and commit enough of their resources to risk models," he said. "These results show the value-based movement may be coming full circle, and this time providers will benefit from previous experiences in designing their approach."

Deirdre Fulton is communications professional and freelancer based in Maine.
On Twitter: @deirdrefulton