Payer Contracts

HealthLeaders Media Council members discuss their organizations' experience with risked-based payer contracts.

This article first appeared in the October 2016 issue of HealthLeaders magazine.

Brian S. Bizub
Chief Executive Officer
Palm Beach Orthopaedic Institute
Palm Beach Gardens, Florida

We don't have a risk contract at the current time. Our contracts are based upon negotiated contracts with each insurance payer, but we are in a comanagement agreement with our hospital that involves a gainsharing model for total joints and fractures.

There are benefits and downsides of the comanagement agreement; the downside is that the hospital takes more of a control position in the negotiations, and controls the payment. The pros to it would be that the physicians and hospitals work together collaboratively in ensuring that quality of care is not jeopardized, nor are the outcomes based upon reducing cost.

I think both insurance payers and providers are interested in sharing risk. They believe that's a fair model, versus being at the mercy of a payer, who may decide that an arbitrary amount is what they are going to pay based on the Medicare fee schedule. Risk-based contracts give providers an opportunity to show that they are responsible for taking care of patients, making sure their costs are low, and not overutilizing the system. In the past, it felt like reimbursement was based solely on DRG or ICD-10 codes, and that was the extent of it. From a monetary standpoint, gainsharing would be advantageous for both sides.

Dennis Empey
Chief Financial Officer
Trinity Health
Minot, North Dakota

We're just starting to dabble in risk-based contracts. We started implementing some aspects of pay-for-performance last year with our major commercial contracts, and we're going through the second phase and getting more involved this year. North Dakota is more of a rural area with a lower population, and the payers require a higher number of patients to get into a risk-based reimbursement scheme.

We're still on a fee-for-service payment model. Every time we see a patient, we get paid for it. And we know that if a number of patients are taken out of the system, we're not going to get reimbursement. In order to maintain profitability, cost will need to be reduced.

In some of the areas, you can't reduce cost—for example, in the emergency room. If you had 30 patients who used to come in five times monthly, and now don't, you're not recouping that cost. And if you set up a program where someone monitors those patients, well, there's a cost for that.

And you don't get reimbursed for that, but you can't cut back staff, either. For the ER, staff numbers are fixed. The balance from the financial perspective is: How do you balance that with fee-for-service, but also maintain emergency room staffing? When these issues are spread across the entire hospital or health system on a greater scale, that's where the challenges are for healthcare.

Herbert Sohn, MD, JD
Chief Executive Officer
Strauss Surgical Group
Chicago, Illinois

Our organization is mainly fee-for-service. I have no real experience with risk-based contracts. It may be a little different here in Chicago than in other places. In my organization, we feel that payers haven't done enough work on risk practice to really have a good risk-based contract yet. It's not easy to figure out.

Being an attorney in addition to a physician, I run the healthcare section for the Illinois State Bar, and we have seminars on this all the time. It's not an even field. I feel that contracts must be fair for both parties, but these contracts aren't. They're all in the favor of the insurance companies.

I have nothing against payers, but it isn't fair. And you, as a provider, have no input into the contract—you either take it or you leave it. With large national physician groups now in existence, there may be some hope for leverage, but a great many of these groups haven't become involved in contract negotiation yet.

Some of the local and national organizations I've worked with are trying to change things so that physicians, smaller providers, and hospitals can have more say in what they're doing, and so that physicians can have more say in what the hospital does, but none of that has gone through yet.

Charles Vignos
Vice President of Managed Care Initiatives
Wake Forest Baptist Medical Center
Winston-Salem, North Carolina

On partnerships and contracts: Wake Forest Baptist participates in the Medicare Shared Savings Program, and we also have a contract with United for their Medicare Advantage Plan. We started that in the beginning of this year. On July 1, we began a contract with Humana's Medicare Advantage Plan. We anticipate participating with Aetna for their Medicare Advantage Plan as well.

Our focus has really been around the Medicare population at this point. It has been moving pretty slow on the commercial business side here in North Carolina. Some of the larger payers in our marketplace don't really have an effective program around value-based contract relationships.

On the shift to fee-for-value: I think we, as a healthcare organization, have learned that we need to be proactive toward the population we're managing as opposed to reactive. We used to wait for the patients to come to our office, we provided them with the service, and we hoped that they followed our advice; and out the door they went, and the next patient came in. That's a very reactive healthcare delivery system.

Now that we need to be proactive, we also know we need to be flexible. We've known we have to meet the patients at the time they need the care, and new technology, like telemedicine, for example, can make that possible.