Risk vs. Performance in Value-Based Hospice Care

Value-based payment programs are opening up to hospices in 2021, including a mix of risk- and performance-based models. These new payment systems come at a time when hospices face stiff competition from other care providers entering the market.

The Primary Care First initiative and the Seriously Ill Population payment programs are expected to have reaching impacts on hospice and palliative care providers, as will a drive towards Medicare Advantage.

One of the challenges of navigating a new reimbursement system for hospices includes grasping the concepts of risk- versus performance-based payment methodologies. The nuances of each have many hospices grappling to keep up with evolving changes in policy. 


“In a risk-based system, you receive a full payment if your metrics are good. Particularly if they’re good relative to other agencies in your geographic area,” said Brad Stuart, chief medical officer of the Coalition to Transform Advanced Care (C-TAC), during the fifth episode of Hospice News’ Elevate podcast. “If you measure up and actually surpass the average performance in your area, your payment will be great. The performance has to do with making metrics, and the risk depends on the level of risk that you elect to take.”

With performance-based methodologies, hospices receive full payment if their quality and patient outcome metrics are good, particularly if they compare well against other providers in their area. This will also be true of the Geographic Direct Contracting Model. A hospice’s full or partial reimbursement for services depends largely on how their performance metrics measure up to local competition, receiving full payment as a reward and partial payment if they don’t.

Risk-bearing programs operate on a total cost of care basis. They’re paid typically some form of a capitated per member, per month payment. Then they’re responsible for the full cost of care and quality of all the members that are enrolled with them.


Providers can take longitudinal risk, which means risk spread over a long period of time. And then there’s episodes, in which a provider might be responsible for a particular episode of care and a time period that follows the episode. These organizations, whether they’re involved in taking longitudinal risk or episodic risk, are responsible typically for a total cost of care and quality for beneficiaries

“There are no integrated health systems, we’re all still integrating,” said Stuart. “We’re still learning, but hospice will be brought into that mix more and more. The opportunity is that you’ll really have a chance as a hospice agency to become more a part of the game.”

This year, hospices will have the opportunity to participate in value-based payment programs such as Medicare Advantage, the Primary Care First initiative, direct contracting and the Serious Illness Population payment model. These models include a mix of risk-based and performance-based payment structures, concepts that will be new to many in the hospice industry.

Hospices will need to understand their specific risks and opportunities within these new payment demonstrations. They will likely need to adopt a new perspective focused on integrated care to successfully navigate these changes, according to Stuart.

“Value-based payment arrangements that are coming around now are going to be both a real new opportunity for hospice providers and also a real challenge,” said Stuart. “Now we’re entering a world where coordination of care is becoming a really bigger and bigger focus, and it’s needed because the system is so fragmented — it’s really disintegrated.”

The focus on care coordination could be a step towards an ultimate goal of system integration, in which health care providers work in close concert, share information and resources, coordinate care and share accountability for patient outcomes.

Improving quality and reducing costs are the two pillars of value-based care, as both health care and political leaders increasingly recognize the unsustainable trajectory of the nation’s health care spend. Gathering and reporting accurate performance data on quality and cost savings, particularly those associated with reduced hospital readmissions, will be essential to success in value-based models.

Hospice and palliative care providers of interdisciplinary, goal-concordant services are uniquely positioned to reduce readmissions. 

“The metric that matters the most is reduced hospitalization rates. This has to be at the front of any pitch that a hospice provider makes to a payer,” Stuart told Hospice News. “In the Medicare Hospice Benefit, you have to satisfy the Conditions of Participation (COPs), but really your only metric is how many days your patient is on service. In the new world, there’s going to be a lot more metrics to satisfy.”

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