What are the risks involved with value-based reimbursement models?

In recent years, value-based pay arrangements have erupted across the healthcare space – and for good reason. With healthcare dollars being redirected toward preventive services, there’s a greater focus on quality care as opposed to a number of services performed.

The challenge for many FQHCs, however, is that they are rarely included in reimbursement models which reward this type of shift in care delivery. And when they are, they have to consider the financial risks involved.

For every arrangement, there’s upside risk, downside risk, or a combination of the two. In an upside-risk model, payers typically set a financial benchmark for providers and so long as the provider stays under that, they get a share of the reimbursement. If, however, they exceed it, they don’t get any benefit. While they’re also not liable to repay any financial losses that are incurred, providers in these models are very limited in how much they can earn and are only receiving a small portion of the payments received by health plans.

“Often when contracting with managed care, FQHCs are promised a split believing they’re getting a part of the shared savings," says Loren Anthes, Head of Policy and Programs at Yuvo Health. "But when you break down the math, they’re often just helping health plans maximize their Medical Loss Ratio (MLR), helping the payer achieve maximum profit. In this way, most arrangements are actually more like a quality improvement project than a risk-based arrangement, which means they aren’t getting fully compensated for their work. True shared savings can’t happen unless you can take on risk.”

In downside-risk models, providers share in both the losses and the profits – and sometimes the profits are quite significant. Participating in these models, though, can be risky, and often require the provider to have the technological infrastructure in place to collect and share data, which not all do. FQHCs are also legally prohibited from taking on this type of risk themselves, because they don’t usually have the capital reserves to do so.

But there are ways for FQHCs to participate and be an active stakeholder in the value-based care ecosystem. When partnering with Yuvo Health, for example, FQHCs can engage in these newer models (which include downside risk) without taking on the potential losses. In this model, Yuvo Health takes on the risk as opposed to the FQHCs — leaving the FQHCs with the opportunity to gain a much greater potential upside. FQHCs shouldn’t simply benefit from a payer’s reimbursements; these organizations deserve to earn part of the whole profit. By participating in downside risk models, FQHCs get that chance.

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