The Keys to Building Value-Based Palliative Care Contracts

Demand for palliative care is rising, but providers still have few avenues for reimbursement.

To support their programs, more are securing reimbursement through value-based contracts with payers. Some are finding a learning curve in terms of how to structure and negotiate these agreements within new or unfamiliar payment models.

These contracts are typically associated with programs like Medicare Advantage (MA), Accountable Care Organizations (ACOs) and Medicaid managed care plans, according to Kathleen Kerr, a consultant with Transforming Care Partners.

Palliative care providers, about 50% of which are hospices, now also have the option of pursuing contracts through the new ACO Realizing Equity, Access, and Community Health (REACH) model, which is replacing Global and Professional Direct Contracting (GPDC).

Forging these kinds of partnerships outside of traditional fee-for-service Medicare requires providers to deepen their understanding of alternative payment models and value-based contracts. It also requires them to hone their skills for negotiating and collaborating with payers.

“The idea is that you go in knowing what success looks like, and then you work together to achieve success,” Kerr told Hospice News. “It’s the plans and providers coming together to present two perspectives on what patients and members need, and then coming to an agreement on a set of services and fair compensation for that.”

Compensation in alternative payment models typically comes in the form of a per patient, per month fee. This is often incorporated into value-based contracts, which often include some level of financial risk.

Risk-based contracts are structured around estimates of the expected costs necessary to address patients’ health care needs. This typically involves capitation, bundled payments and shared-savings arrangements.

The provider could receive a percentage of any savings, called upside risk, or losses, known as downside risk. In downside risk, the provider may be required to cover the difference if actual costs of care exceed what was budgeted.

MA plans and ACOs, including those in the new REACH program, tend to use this approach.

In these arrangements, providers must understand how to manage their anticipated utilization and related expenses, with efficiency and cost control essential to maximizing margins.

More payers are embracing palliative care for its potential to save them money. Home-based palliative care could reduce societal health care costs by $103 billion nationwide within two decades, the nonprofit economic research group Florida TaxWatch reported in 2019.

The most prominent mechanism for generating these savings is reductions in hospitalizations and emergency department visits.

“Prior to hospice, the patient may have had two or three hospitalizations in a matter of weeks. From the payer perspective, that means you eventually are getting to hospice, but along the way you have a huge amount of possibly preventable hospitalizations,” J. Brian Cassel, palliative care research director for the Virginia Commonwealth School of Medicine, told Hospice News. “That’s really what a community-based palliative care provider can demonstrate as something of value to a payer, seeing a reduction in hospitalizations toward the end of life, while the patient and family are gaining that additional layer of support.”

Palliative care providers have a strong track record in achieving that goal.

​​Community-based palliative care can reduce total health care costs by 36%, according to a paper by Turn-Key Health, which the home-based services company CareCentrix acquired in 2020. These services can also reduce hospital admissions by 48%, resulting in 28% cost savings per patient day, the paper indicated.

When providers come to the table, a key goal is ensuring that any contracts support a care model that effectively meets patients’ needs in addition to cutting costs. Leveraging quality data and education when establishing payer relationships are critical to success.

Palliative care providers need to ensure that potential partners understand the value of their services to patients and their families. This requires them to demonstrate that they can offer high quality and lower cost of care.

When developing these relationships, providers seek payers who are willing to listen.

“Providers should look for an entity that either knows or is willing to learn about the totality of domains that a palliative care program can address, and say no to a compensation level that won’t allow them to deliver the type of care that you know is necessary to achieve the outcomes of interest,” Kerr said. “It does nobody any good if incomplete palliative care is scaled.”