The New World of Value Based Contracts and Shifting Risk

As we near the end of 2019, healthcare continues to grow more complicated, with more constituents and an increasing amount of verbiage coming out of DC.  While these potential regulatory changes are designed to help, they will be unlikely to fix the overall challenges.  The challenges are fundamental: a) those that consume healthcare don’t know how much they are consuming, and b) those that provide care aren’t looking at the bills as they are generated.  How can the current system evolve without regulatory change to improve efficiency, and deliver high quality care at a lower cost while improving health outcomes? The short answer is risk shifting!

The risk shifting solution

In today’s healthcare marketplace there is an increasing trend toward shifting the risk i.e. the cost and quality of care, from traditional health plans to provider groups.  This allows those that provide care to police whether care is necessary and in which setting (Urgent Care, PCP, Outpatient, ER, etc.) that care should be provided.  If a provider is on the hook for the cost of care, they have built in motivation to reduce redundant, unnecessary testing/procedures/surgeries/treatments, and to ensure the patient is getting the right care in the right setting. If the patient has the flu, or severe upper respiratory infection and they can be influenced to go to the local urgent care center or their PCP rather than the ER, the costs to manage these episodes are reduced overall and the patient still gets a good outcome.  In this scenario, we ask who is best served to help educate and influence the patient; the provider or health plan.  It is definitely the provider.  Many consumers do not trust their health plans as they believe they find ways to not pay claims. Having the provider share in the risk of cost of care is helping move care to lower settings and reduce unnecessary costs.

Path to risk sharing

Many stakeholders, including those inside health plans, suggest that they are already engaged in risk sharing and value-based contracts with providers.  If you take a look under the hood, the reality is that most provider groups simply have bonuses for quality scores or for cost of care targets. While they are technically value-based contracts they typically only have upside arrangements for the providers to earn more revenue.   This is definitely a step in the right direction, but it’s not enough.  The reality is that many of these provider groups aren’t earning their bonus, so the needle isn’t being moved with upside only arrangements. What is really necessary are full-risk models, which are starting to emerge but have a very small market share at the moment.

The second step in a path toward shifting risk to providers includes arrangements where the health plan and providers will both share in the downside and the upside.  This creates alignment between the two, but because neither party is fully at risk, there are still inefficiencies. This is because the provider knows the health plan is still underwriting some of the risk, and might not have systems in place to maximize cost savings, and quality improvements, so they are not fully invested. There are also challenges with integrating claims and clinical data into meaningful use. Again, this is a good step toward shifted risk – but not with their full economic system.

The final step is provider groups taking on full risk of the cost of care and profitability of the patient.  These new provider groups typically start with taking risk as the cornerstone of their practice. They have systems, infrastructure, IT, clinical protocols, actuarial/finance and methodology all assembled around taking full risk and care of patients. Most importantly, these providers have a leadership team who fully understand the importance and impact of risk-based contracts. These groups include Oak Street, ChenMed, WellBe Senior Medical and some larger systems. Since they are designed from the ground up, they can drive results that truly bend the cost curve, improve quality and health outcomes for patients.

The models that are having success are those where care is provided in very frequent interactions with the providers. The benefit of a high touch model is that the patients get frequent feedback, spend more time with the provider, receive education from the providers on where to best get specific care, and therefore can achieve the desired goals.  However, a traditional brick and mortar like Oak Street or Chen Med can only reach a small geographic area of patients due to transportation restrictions.  These challenges cap the potential for these models to be provided broadly.

Why providing care in the home increases the number of patients served AND the improves odds of success

Now that we know deeply engaged, purpose-built providers can successfully take full risk, the model is ready for its next evolution; expanding reach.  Rather than the age-old design where patients go to the care setting, the model is being reversed and providers are coming into the home to provide care.  Patients receive the same benefit of the deeply engaged PCP model, but since the providers travel to the patient, they can impact a larger group of patients in a geography.  Solutions such as WellBe Senior medical can reach patients that are two hours apart. The staffed MD/NP solution allows the clinician to see 4 patients per day and spend up to 1 hour per visit, versus brick and mortar PCPs may only be able to reach 10 miles, or a 20-30 minute radius and maybe only spend 10 minutes with each patient.  This is a four-fold improvement in access and facetime engagement.

Consider what else can be accomplished by these groups when they come into the home to provide care.  They can assess the setting – is it safe and free of hazards? They can assess quality of food by looking in the pantry and fridge – They can evaluate medication adherence – They can evaluate the social status of the patient – this is exactly where all the buzz around social determinants meets the road.

The other large benefit of traveling providers is they can follow the patient through their journey across the entire healthcare system – not just in the PCP office. Think about a large primary care group, where they only interact with the patient in their office setting.  How can they possibly influence medical spend when it happens outside their setting?  The answer is they can’t. In contrast, those primary care groups that provide frequent care, and follow the patient across the care settings have a fighting chance to manage the entire patient cost structure, and intervene frequently enough to educate the patient (and subsequent providers, like specialists) and potentially enable the most efficient and highest-quality care.

Think about ‘Sally’ who has COPD, diabetes, is recovering from cancer and is starting to become demented.  If Sally were to show up at the hospital, it is almost guaranteed that she would get admitted. It would take days for the staff to baseline Sally before being able to identify the reason she is there to begin with, as she may have forgotten or can’t tell the staff herself for a variety of reasons. However, if Sally were to be accompanied by a provider that has been providing care for the patient in the home, treating her COPD, managing her diabetes and knows that she fell and came to the ER for hip pain, it creates a completely different result.  The provider can speak to the hospital staff, educating them that the other diseases are under control, and that she is being treated for dementia.  She will get the care she needs, without the stress, anxiety and physical challenges of going to a hospital without extended stays and costly hospital visits. The patient is receiving more exercise, less infection exposures, lower falls risk, and enhanced caregiver support. This is a simple example of how consistent care, from an at-risk provider, across the patient’s care settings, can have an immediate impact, both on the overall costs, but also on the results for the patient.


While no one model is a best fit for all cases, the industry is trending toward managing complex, high cost, chronic disease cases in the home and to do so at full risk. This is the best path forward when it comes to helping health plans manage cost, provide the best care for the patient and enable the providers to see the entire cost structure, and intervene.

For more information about successful at-risk provider models such as Leverage Health’s Portfolio Company WellBe Senior Medical, contact Stephen Kendig at