How Physicians Can Utilize Partnerships to Reduce Risk

If you view assuming risk as a healthcare provider as a gamble, you have no business assuming risk. Ever.

But, you can take the risk out of risk.

Healthcare insurers manage to be at risk without taking risk by ensuring the math is always in their favor. Despite that, they can only manage the price of care-and to a limited extent.

Physicians are in a much better position because they can manage healthcare spending by avoiding medically unnecessary diagnostics, procedures, hospitalizations, inefficient, ineffective and high-cost consultants, and allied health providers

That’s the good news.

The bad news is that cobbling together a bunch of providers, from doctors to hospitals, all with crippling conflicts of interest, and adding surface changes like coordinated care and common software (so-called “clinically integrated networks”) is not gambling because losing, sooner rather than later, is virtually assured.

Your best defense from being caught up in ill-conceived schemes starts with understanding the basics.

Let’s start with the terms of the trade:

• Total Cost of Care (TCC): All costs paid by insurer including patient responsibility (copay, co-insurance, deductibles), which vary widely depending on the insurance product.

• Total Medical Expense (TME): What the insurer actually paid.

• Capitation: Receiving a specific amount per patient in a specified diagnostic or demographic group per month in exchange for assuming responsibility for TCC.

• Percentage of Premium: Partially or fully paying all TME for a specified population in return for a percentage of insurance premiums and full capture of patient responsibility.

• Reinsurance: A stop-loss (insurance benefits for all expenses over a set amount) policy limiting exposure, typically $50,000 to $100,000 per patient per year.

• Carve-Out: Cost areas, typically those out of the control of the providers, not considered or charged against TCC or TME.

• Defined Episode of Care: Specific treatment protocol such as surgery; typically a 180-day cycle of care. For example, 90 days pre-operative, intra-operative, and 90 days post-operative. This may also be a time-specific round of chemotherapy, dialysis, or other definable treatment protocol.

• Acute Episode of Care:  Treatment of an accident or sudden acute event such as a heart attack.

• Chronic Episode of Care:  Specific treatment protocol for chronic disease such as getting an uncontrolled condition under control.

• Relative Risk:  A calculated risk factor for a specified population used to adjust bundled, capitated, or percent of premium payments ( this is the primary means of taking the gamble out of risk).

The three kinds of risk:Episodic Risk
Bundled payment for specific episodes of care such as surgery or specific, predictable protocols such as infusion therapy

Mitigated Risk
TME or TCC with carve-outs, stop loss, defined narr ow network with patient incentives to staywithin network (reduced co-pays, deductibles, etc.)

Full Risk
Unlimited liability/return in exchange for capitation or percentage of premium

• Who manages/coordinates care?

• Who manages physician behavior?

• Who transforms physician office staff to follow site of service protocols?

• Who manages transitions of care and develops treatment/discharge plans?

• Who manages utilization, spending, medically unnecessary care?

• Who makes and enforces the rules?

And, this is the most important of all: using analytics to productively change behavior.

That means leaving the high-level reports and colorful graphs to amuse executives and employing patient- or provider-specific actions that will reduce the cost of care on a population basis by a calculated per member per month (PMPM) amount at the operational level.

For example, directing chronic low back-pain sufferers to specific local chiropractors instead of routine physical therapy or spine surgeons can reduce overall PMPM by $10.42 per month for the entire population (your numbers may differ).

In the simplest terms, the only way to take the risk out of risk is to equip, enable, and empower physicians to work as a team, and to come to terms with the simple fact that acute care providers cannot be in charge of reducing acute episodes of care. No more than tobacco companies can be in charge of smoking cessation.

It’s simple math.