For starters, most experts advise against diving directly into the most extreme form of value-based care—full capitation, in which a provider is paid a set rate to care for a group of patients—if that provider has never done value-based care. Capitated

A better place to start might be shared-savings programs, which are closely associated with Medicare but can also be done through commercial insurers. That’s when providers are rewarded for meeting certain quality and financial metrics. Some carry upside risk only and others include some degree of downside risk.

Moving into capitated models—in which physician groups receive pre-arranged payments to care for a group of patients and risk losing money if their costs exceed those payments—is where it gets complicated.

States have a mishmash of different regulations for providers who assume downside risk. Some treat providers, or so-called risk-bearing entities, the same as insurers, which means they must maintain a set amount of financial reserves and go through an onerous registration process similar to that of an insurer. In some cases, semi-annual filings are required, including fees and ownership disclosure.

The purpose is to prevent a repeat of what happened in the 1990s, Watrous said. That was when some providers who dived headfirst into full-risk arrangements subsequently went bankrupt or out of business, putting insurance companies on the hook for huge losses. After that, the federal and state governments implemented regulations designed to require providers assuming financial risk to have the same level of reserves as insurers, Watrous said.

The problem, though, is there’s no alignment across states in terms of the criteria providers have to meet, said François de Brantes, senior vice president of episodes of care for Signify Health, a company that designs and administers episodic payment programs for third-party payers, employers and providers. “It’s very, very frustrating for those of us who are trying to work through these value-based payment arrangements,” de Brantes said.

It’s also an impediment to national employers and health plans who want to spread value-based payments nationwide, he said. He hopes the federal government or another organization works to harmonize those rules.

It’s not an issue that’s divided along political lines, either. A blue state like Connecticut, for example, has fairly loose regulations on risk-taking providers, while nearby in New Jersey, also blue, the regulations are very strict, de Brantes said. California is known for being particularly strict, while Washington state has little or no regulation, he said.

In states that are more lax, de Brantes said, he believes providers are better off not asking anyone and going ahead with their risk arrangement.

“Just wait until someone comes knocking on your door,” he said. “In fact, no one is going to come knocking on your door.”

If providers do consult the state’s insurance regulators, they run the risk of encountering someone who doesn’t know the difference between insurance risk and a risk-bearing provider, which means the regulator would direct the provider to jump through the same 20 hoops insurers do. That could mean months’ worth of lawyers’ time explaining to the regulator why they’re not an insurer.


Source: Capitated payment models come with lots of hidden and not-so-hidden hurdles

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