Once the practice has identified the types of APMs available to the practice, it is vital to determine how the new payment methodology will impact the practice. All APMs transfer some degree of risk to the practice; and the degree of that risk will help determine whether the practice will be successful or not.
The key to success for a budget- or risk-based payment system is to determine expected costs and utilization specific to the practice and to assess whether the practice can come in at or under the projected budget. Specifically, the practice needs to assess the proposed payment methodologies, such as how the prices are set, the type of benchmark data being used, and how the risk is shared. Key steps for a practice evaluation include:
2a. Obtain from the proposed payer their actuarial certification of the current and proposed payment plan.
Payers may resist sharing this information however it will demonstrate how the payment plan is set up and the methodology employed to calculate risk. Since the practice is assuming risk, not only for its own services but possibly the services of others providers, it is imperative to understand any the payment and risk adjustment methodology.
2b. Supplement the payer's certification with an independent analysis of the practice utilization and costs.
Don't just take the payer's word for what the fee schedule and payments will be. Look at your current and projected utilization and assess your payments under the proposed payment plan. Although some believe that this can be done by practice staff, it is advisable to have the practice financial advisor or accountant or actuary to conduct the assessment.
2c. Identify all services that are to be included in the budget and what services will be carved out.
It is critical to identify which services are included as well as excluded in captitated and bundled payments. Identify carve outs or services not included in the capitated or bundled rate. Carve out services are usually paid on a fee-for-service basis, and should be specifically identified by their relevant codes and any related modifiers.
2d. Accurately predict expected utilization.
Have the payer provide the number of enrollees and age, sex, and risk of the practice's expected population. Determine the expected utilization by patient profile (age/sex) and Current Procedural Terminology (CPT) code. Also include the demographic information of the covered population (occupation, high crime area, etc). Consider how the payer will market the plan. Who will be attracted to join the plan? Also look at co-pay information. How is the plan discouraging unnecessary care? What is the plan's benefit design? Look at transition costs between primary and specialty care. What risk-adjustment factors are used by the payer? Look at the practice's current claims data to develop a practice profile to determine current utilization and compare it to the projected utilization.
2e. Develop an imputed fee schedule to determine potential revenue.
Identify what you will be paid for the services you will be providing.
2f. Determine whether the services covered by the budget can be provided within the budgeted amount.
If these are not covered by the proposed budget, you will need to reconsider participating or look at ways to streamline service delivery to meet the projected budget.
A practice can mitigate the level of utilization risk by incorporating means to identify, assess, and manage risk. Necessary elements to manage risk include:
- Technology infrastructure: systems to aid in streamlining administrative operations (i.e., registries, callback systems, data systems)
- Reporting and analytics: data mining to identify areas of risk, including outliers, patient demographics, and risk factors
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Population health management: processes to manage the health of defined at-risk groups
Additional Resources on Managing Risk:
How to Prepare Your Practice for Implementing Alternative Payment Models
To view a recording of the free webinar, please click here
How to Prepare Your Practice for Implementing Alternative Payment Models
Risk Adjustment