A team of physician healthcare policy experts has analyzed the financial risk that medical groups are increasingly taking on, and, in an article published in The New England Journal of Medicine online on July 28, is offering a nuanced perspective on the assumption of risk, noting its many advantages, but also balancing praise for risk-based contracting with sober commentary on some of the challenges and unresolved issues involved.
Zirui Song, M.D., Ph.D., Dave A. Chokshi, M.D., and Matthew J. Press, M.D, begin their Perspectives analytical article, “Primary Care and Financial Risk—Navigating the Crossroads,” by writing: “Underresourced practices. Clinician burnout. Fragmentation of care. These long-standing challenges to practicing primary care in the United States have contributed to an increasingly unsustainable reality, marked by a shortage of primary care clinicians, an aging population’s mounting health needs, and pressure from payers and employers to control health care spending. In this environment,” the authors write, “primary care practices are increasingly taking on accountability for total health care spending for a defined patient population. Such practices reap financial rewards if total spending is below a prospective benchmark or budget (often called upside risk) but may incur financial losses if spending exceeds the budget (downside risk) — which means they function, to some degree, as an insurer. Practices continue to receive fee-for-service payments or could accept capitated monthly payments for primary care services, along with facing performance incentives related to quality of care. At year’s end, savings or losses relative to the budget are typically shared with the insurer, the practice’s accountable care organization (ACO), or a company that helped the practice bear risk. Such arrangements could have important implications for clinicians and patients.”
Dr. Song is an associate professor of healthcare policy and medicine in the Department of Health Care Policy at Harvard Medical School and an internal medicine physician at Massachusetts General Hospital (both, Boston); Dr. Chokshi is a clinical professor in the department of population health at the New York University Grossman School of Medicine, New York; and Dr. Press is an associate professor of medicine at the Hospital of the University of Pennsylvania, the medical director of the Primary Care Service Line, and a physician executive and Penn Primary Care.
The physician leader authors note that “Primary care practices enter risk-bearing arrangements in various ways. Companies such as Oak Street Health and ChenMed have built brick-and-mortar practices throughout the United States geared toward serving Medicare Advantage beneficiaries, for whom they can receive rather generous risk-adjusted prospective payments from the federal government.1 Other companies, such as Aledade and Agilon Health, have created virtual groups of independent primary care practices (or ACOs) and assumed financial risk from insurers, while offering incentives to member practices. National and regional insurers have pursued similar arrangements, either by working with these types of companies or by adding provisions to their contracts with primary care practices that make the practices accountable for total spending.” And, they note, “Bearing risk for total spending presents clinical and economic opportunities for practices. Clinically, it allows them to move away from incentives under a purely fee-for-service model that mainly reward providing higher volumes of services and to potentially move toward practice styles that focus more on promoting population health. The opportunity to earn shared savings and the flexibility associated with having a budget could reorient practices toward providing higher-value care that produces health — rather than producing reimbursable services. Moving in this direction could involve supporting non–visit-based disease management, reducing unnecessary referrals and utilization, and pursuing activities that aren’t on traditional fee schedules, including those addressing social determinants of health (e.g., housing and food insecurity). Indeed, some companies emphasize a philosophy centered primarily on offering a better care experience for patients and clinicians.”
There are also, of course, “financial opportunities” involved in shifting into risk. The article’s authors note that “increased revenues” from taking on risk for the total cost of care for defined populations “could fund higher clinician salaries or additional primary care team members (e.g., behavioral health specialists, social workers, and nutritionists) or permit clinicians to have smaller patient panels. This potential may empower primary care clinicians and make their decisions more financially consequential. In addition, having smaller panels could make practicing primary care more manageable…”
But, the authors note, “[T]here are potential pitfalls associated with relying on primary care practices to control total health care spending. One is that practices can succeed financially under these arrangements by intensifying their diagnostic coding and strategically investing in their performance on specific quality measures — steps that may be detached from meaningful improvements in quality or efficiency. Although basing payment on a population’s disease burden makes sense conceptually, practices have an incentive to code every diagnosis that patients could have — and to code them in revenue-enhancing ways that may be loosely related to substantive patient care (e.g., favoring codes that maximize risk scores or grouping coexisting conditions into higher-revenue codes).”
Another issue at scale is that “[C]urrent quality measures capture some important aspects of preventive care and chronic-disease management, but focusing on these measures may divert resources from addressing unmeasured outcomes and aspects of the patient experience. Specialty and inpatient care — which account for the bulk of health care spending and are therefore critical to primary care practices’ ultimate savings or losses under these arrangements — are less represented in quality measures than primary care and are difficult for primary care clinicians to affect, which drives a wedge between accountability and influence.” Another is the complexity around cutting back on appropriate care to reduce spending, something that “direct incentives for clinicians to generate savings,” could end up incentivizing.
The other core issue that the article’s authors see is that “[R]isk-bearing primary care companies not only face strong economic incentives to demonstrate savings but also often have fiduciary obligations to generate profits for investors. Profits could be used to raise incomes for clinicians working with these companies, which might help shrink pay gaps between primary and specialty care and encourage more trainees to enter primary care. But the bulk of profits could end up going to owners and investors.”
Looking at all these, in some cases conflicting factors involved in primary care risk-based contracting, the healthcare policy leaders state that “Policymakers and primary care leaders can take steps to mitigate these concerns. First, we believe incentives related to total spending should be largely confined to the primary care group or organizational level, whereas incentives for individual clinicians should be tied to meaningful access, quality, and patient-experience metrics. Primary care leaders could use shared savings to fund practice-level resources or across-the-board compensation increases. Clinical leaders and insurers should also monitor for stinting and provide practice-pattern data and decision support to help clinicians make high-value, evidence-based decisions without compromising clinical evaluations.”
Further, they advocate for “making risk-based payments less sensitive to strategic coding. Medicare’s new ACO Realizing Equity, Access, and Community Health (ACO REACH) model, for example, aims to limit risk-score growth, in part by capping risk-score growth and adjusting caps on the basis of changes in population demographics (age and sex), not diagnostic codes. Similarly, Blue Cross Blue Shield of Massachusetts recently implemented a primary care capitation model that adjusts capitation payments on the basis of age and sex, while maintaining diagnosis-code adjustment for total spending; under this approach, a primary care practice’s degree of accountability for total spending is determined by the provider organization or ACO. Risk adjustment may also be improved by incorporating patient-reported and sociodemographic data to capture social determinants of health.”
The article’s authors recommend two additional strategies that they believe might address problems involved in risk-based contracting on the part of primary care physician practices. They recommend “adopting specialty-specific quality and efficiency metrics, disease-co-management pathways, and e-consults,” and “ensur[ing] that profits are, as much as possible,” reinvested into the practices and populations they serve.”
