Practice Makes Perfect: Collaborating with insurers to implement new payment models

Last June, MGMA released the results of a questionnaire that ranked members' most pressing practice management challenges. In this edition of “Practice Makes Perfect,” we address No. 8 on that list: collaborating with payers to implement new payment models.

Payment mechanisms are changing as healthcare moves to value-based reimbursement. Multiple programs from both government and commercial payers involve a plethora of reimbursement plans that include varying metrics, benchmarks and incentives for physician practices. Some of these plans offer only upside reward potential, while others create possible risk for medical practices.

Payers and providers are embracing the volume-to-value initiative to varying degrees, but some believe that fee-for-service reimbursement will continue to be part of the equation. It is possible that FFS and value reimbursement will coexist for a number of years.

Though they can be time-consuming for healthcare executives, value-reimbursement programs can be managed effectively. As payment mechanisms evolve, keep in mind:

• Value reimbursement isn't going away. Fee-for-service is evolving, and practices should anticipate combinations of FFS and value-reimbursement methodologies when contracting with payers.
• Physician compensation may be based on both FFS and value metrics, which can add additional complexity to compensation plans.
• Practices will need to understand and manage multiple value-based reimbursement programs, each having multiple components from multiple payers. This will add complexity to reimbursement management and physician compensation.
• Some value-based reimbursement programs may require practices to incur implementation costs, such as a startup investments and ongoing operating expenses. Practices should also consider how these new reimbursement programs could initially impact productivity and understand gains or losses in revenue flow. It is important to correlate the timing between a plan's component costs and anticipated revenue, because the time lag can affect cash available for operating expenses and compensating physicians.
• Understanding new contracts with payers inside and out is critical. Does the specific payer value-based reimbursement program and each of its components make sense for your practice? Is it worth doing at all? Can practices decline participation initially? Is there a way to amend the contract in the future if necessary? Working closely with commercial payers to negotiate the various plan component metrics and benchmarks might be possible if the practice has some contracting leverage. This might not be possible, though, since payers tend to standardize as often as possible.

Practices should evaluate each payer's reimbursement programs and their components carefully. It will also be critical for practices to acquire program data that are accurate and timely to monitor, audit and actively manage various programs and the supporting providers.

Although there are many issues to consider in collaborating with payers on implementing new payment models, take these issues as an opportunity to understand how to enhance patient care, and how these new contracts could lower expenses or stabilize compensation for physicians. Immense industry changes bring opportunities to think outside the box and to determine ways to collaborate more meaningfully with payers to position organizations for success in a value-based care environment.

Jeffrey Milburn Independent ConsultantMGMA Health Care Consulting Group