Risk-based contracts may be the future of palliative care reimbursement as Medicare Advantage continues to ascend.

The simple term “value-based care” belies its complexity. The term can refer to any number of payment models that are designed to reduce total cost of care and improve outcomes. While most palliative care remains locked in the fee-for-service realm, most value-based organizations like MA plans are moving towards it, according to Dr. Gavin Baumgardner, vice president and national medical director for complex and palliative care at Contessa Health, a subsidiary of Amedisys (Nasdaq: AMED).

“There’s a large spectrum of value based care. We really feel the future is in risk-based contracting, and we think that palliative care is an excellent vehicle to take on risk with payers,” Baumgardner told Hospice News at the ELEVATE conference in Florida. “So our biggest program that we have is a direct-to-payer, upside-downside risk-based model. We really see that as the future.”

Hospice News photo Hospice News photo

More payers are moving away from per-member, per-month payment models and into the risk-based area, Baumgardner said. In this context, palliative care providers would do well to understand risk and how to manage it.

Risk-based contracts with payers are structured around estimates of the expected costs necessary to address the patients’ health care needs. These models typically involve capitation, bundled payments and shared savings arrangements. In these arrangements, providers must understand how to manage their anticipated utilization and the related expenses, with efficiency and cost control essential to maximizing their margins.

In some contracts, the aforementioned 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 the budgeted costs.

Providers can also encounter risk within different timeframes. Some take a longitudinal approach, which means the risk is spread over a long period of time, even year over year in some cases.

And then there’s episodes, where somebody 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.

“The ultimate lagging indicator for success in a risk-based contract is going to be the total cost of care,” Baumgardner said. “The leading indicators are going to be some of those quality metrics that we’re all familiar with, early and appropriate hospice transitions, goals-of-care discussions, things like that. So both in the negotiation process as well as management, providers need current, up-to-date data to be able to adequately manage these programs.”