Defining Incentive Distribution in Support of Network Alignment: Key Options and Considerations in Developing the Right Model

Transcription

1 Defining Incentive Distribution in Support of Network Alignment: Key Options and Considerations in Developing the Right Model The shifting healthcare environment continues to bring traditionally hospital-centered health systems together with physicians in new collaborative relationships, ranging from more traditional employment models to joint participation in accountable care organizations (ACO) and clinically integrated networks (CIN). Additionally, new consortium model networks are forming to bring together multiple health systems typically along with their aligned physicians joining forces to explore collaborative endeavors, often with a primary focus on better positioning for value-based reimbursement. As these networks come together and pursue joint contracts, with shared accountability for the delivery of high quality care at a lower cost, achieving alignment across physicians and health systems to more effectively manage care is crucial. The development of incentive distribution methodology should be driven by each network s overall strategic goals, member composition and operating model. One of the most important enabling mechanisms to enhance this alignment is through the thoughtful development of an integrated incentive distribution model, which ties individual organizational and provider goals with the overall goals of the broader network. The concept of value-based incentive distribution is still fairly nascent, and there is no industry standard. Instead, the development of incentive distribution methodology should be driven by each network s overall strategic goals, member composition and operating model. Additionally, there are also stringent legal requirements and guidelines that must be considered; particularly in the ultimate distribution at the individual provider level.

2 While there is not a one-size-fits-all approach for networks entering into value-based arrangements, we introduce a starting set of questions that networks can follow to begin to frame the many points at which minimum requirements and standards will need to be developed (see figure and associated questions below). The source of funds that flow to the network will vary based on contract type. But, for the purposes of defining the general options for distribution models, the framework below is based on a network in a two-sided shared savings model. It assumes no change to the underlying fee-for-service payment schedule and the magnitude of upside opportunity or downside risk is based on quality performance and the difference between the actual medical spend vs. a target benchmark for the defined population. While these general options can also be adapted for other contractual arrangements, models with payment mechanisms such as capitation or global payments will require additional structured guidelines related to payment for care that is delivered. This framework also works for the flow of funds in a single level clinically integrated network structure as well as a consortium network structure with a super CIN and sub-cin entities. Page 2

3 As networks work through each of these key questions, early lessons learned from the development of distribution models across the country can be helpful to inform both the process as well as the ultimate distribution model chosen. Keys to success include: Page 3

4 1. Customize the solution in support of shared and individual goals: The incentive distribution methodology should align with the overall strategic goals of the organization as well as the major requirements necessary to advance against these goals. Early in the process, networks should define a set of guiding principles and objectives against which options for each distribution point may be evaluated. To be sure that the ultimate solution is successful at engaging the diverse membership of a network, involving a representative set of stakeholders in the development of the model is helpful. This could include a range of physicians (primary care and specialists, employed and independent), clinical leadership and administrative leadership in areas such as finance and contracting, information technology and analytics, and strategy. 2. Define models early but not prematurely: It is prudent to establish and agree to the overall approach to incentive distribution model early, before there is actually a significant amount of dollars available for distribution in the incentive pool or downside risk to be shared in order to remain true to the guiding principles for distribution and alleviate conflicts at a later point. However, networks should avoid going too deeply into establishing the specifics of distribution models until there is clarity around not only the strategic goals of the organization, but also its go-tomarket plan (i.e., what types of payment arrangements is it likely to pursue), its likely membership, and its operating model and structure. A network should be able to answer the question of what it is they plan to do together to drive value before asking what is in it for me? Though ultimately both questions are essential to address in network formation. 3. Anticipate the likely constraints: One frequent limitation is the inability to establish metrics that appropriately and comprehensively measure performance. Networks may have to settle for more blunt indicators in the near-term, with a goal to refine those metrics over time. Another common challenge in many payment arrangements is that dollars available for distribution are calculated annually and may not be available for many months following the end of the reporting/tracking period due to data and insurance claims limitations. Networks may want to consider options for distributing an interim (quarterly or bi-annually), preliminary payment based on quality metrics in order to keep providers engaged. 4. Set realistic expectations: In the early years of most networks, the dollars available for distribution or at risk will likely be small given the limited scale of most initial forays into value-based payment. Networks should be clear with their members about the expected magnitude of likely distributions and understand that to a large degree, initial distribution models are more meaningful in their impact on driving a shared culture of transformation, rather than dramatically driving financial performance of it organizations and physicians. 5. Keep it simple: The methodology should be kept as simple as possible in order to effectively track performance, administer payments, and communicate to health system and physician leaders and members. Page 4

5 6. Expect change: The incentive distribution methodology should not be static; rather, it should adapt as new types of contracts get signed, more data becomes available to understand and manage performance and as more physicians or other organizations join the network. The incentives should also mature as the goals of the organization evolve. ABOUT THE AUTHORS Bowei Hao Engagement Manager Greg Maddrey Director and Accountable Care Solutions Practice Leader Anneliese Gerland Accountable Care Solutions Practice Manager The Chartis Group, LLC. All rights reserved. This content draws on the research and experience of Chartis consultants and other sources. It is for general information purposes only and should not be used as a substitute for consultation with professional advisors. Page 5