Practice Makes Perfect: 3 steps to prepare for reimbursement models that place a greater share of financial risk on the practice

In June, MGMA-ACMPE released the results of a questionnaire that ranked members' most pressing practice management challenges. In this edition of "Practice Makes Perfect," we'll tackle No. 2 on that list: Preparing for reimbursement models that place a greater share of financial risk on the practice.

To be successful in this environment, medical practice executives need to continually monitor the marketplace and prepare for the future. This includes understanding and monitoring new and evolving payment models. Practices and payers are exploring new payment models that place an increased financial risk on the organization. As practices evaluate their options, it's important to remember that there are a variety of payment models available and it's possible to be successful, to better serve your patients and to meet your financial thresholds.

There are several types of payment models and value-based contracts that physicians and practices can consider, and there is a lot of variation with shared-savings agreements. Models are constantly evolving and differ by payer. When looking at a contract proposal from a payer that appears to place more financial risk on the practice, it is imperative to understand the requirements of the contract and evaluate the advantages and disadvantages.

Capitation agreements pay on a per-member, per-month basis. This model incentivizes physicians and practices to keep their patient populations healthy and maintain low utilization of clinic services.

Bundled payments provide a bulk fee to cover the cost of services provided by more than one provider for a defined period of time or episode of care.

Shared-savings agreements appear to be one of the fastest-growing versions of value-based contracts. A practice can earn financial incentives if more efficient care is achieved with reduced utilization and increased quality.

Make sure the contract does not have your practice take on more risk than you are willing to accept.

When evaluating a contract payment model, be sure to understand the patient population your practice will serve. Evaluate your risk by looking at factors such as population size, demographics, growth patterns and utilization trends. Explore scenarios based on the factors above, determining when the practice benefits financially and when payment would be less based on the contract. Know what your cost to provide services are. Add those to each scenario to determine whether the reimbursement would cover your expenses. In each scenario, take a look at how it affects your practice. This will help you evaluate whether a new arrangement and contract will work for you.

A risk-based contract incentivizes practices to improve health measures, meet quality thresholds or decrease costs of care. However, you may receive reduced payment if you do not meet measures or quality metrics.

In the end, regardless of whether a practice is currently on a value-based or risk-sharing contract, it is imperative that practice executives prepare for the future.

Successful practice leaders will seek to understand the differences in payment models, know their practice's ability to take on risk, and stay educated on trends and changes affecting payment models. Any successful risk-sharing payment model requires a top-down understanding, commitment and management of risk from the physicians, leadership, staff and payers. Understanding how best to serve your community and working diligently to understand your options will help as you consider alternative payment models for your practice.

Joan Hablutzel