Providers and payers talk about shifting away from volume-based payments and toward “value-based” payments perhaps more than any other topic today. One large integrated delivery system has put specific numbers behind that nebulous goal.
Sanford Health, based in Sioux Falls, S.D., manages 43 hospitals throughout the upper Midwest and operates a health insurance plan with 200,000 members. Last year, about 15% of its revenue was considered to be at risk—in other words, that chunk of money was tied to fixed-budget contracts or other alternative payment models that cap costs and are based on quality outcomes.
This year, a quarter of revenue was tied to risk-based payments, and the proportion is expected to rise significantly in the short term. “We think 50% of revenue in two years will be at risk,” Kelby Krabbenhoft, CEO of Sanford Health, said at an event in Chicago this week.
Sanford's individual projections would track ahead of the federal government's broader goal for traditional Medicare payments. This past January, HHS Secretary Sylvia Mathews Burwell said half of fee-for-service Medicare reimbursements would come from bundled payments, accountable care organizations or other similar models by 2018. A coalition of large private health systems and insurance companies that does not include Sanford said 75% of their contracts will be tied to value-based payments by 2020.
The most aggressive form of risk-based payments is full-risk capitation in which providers receive a lump sum and are on the hook if the cost of care exceeds that amount. Managed-care plans work this way in Medicare Advantage and some state Medicaid programs.
Former HHS Secretary and Utah Gov. Michael Leavitt also spoke at the event, which was sponsored by his consulting firm and care management company Health Integrated. He said innovation won't occur in healthcare until providers and insurers move more toward those types of risk-heavy payments.
“Without risk, there really is no integration,” he said.
