Health plans expanding risk-based contracting efforts

Are risk-based contracting arrangements between health insurers and providers here to stay? The answer can be summed up in three words: “Follow the money.”

Health plans are investing in and paying for an increasing amount of care covered by risk-based contracts. And these contracts aren’t just with the obvious accountable care organizations (ACO) and patient-centered medical homes (PCMH) — large health systems and integrated delivery networks are also engaging in various forms of risk-based contracting.

What’s prompting health plans to make such dramatic change? First, insurers can’t do much more with fee-for-service programs to keep costs down. At its core, fee-for-service incentivizes providers to see more patients. Risk-based contracting flips the incentive, where providers profit when patients are healthier and don’t require as many hospitalizations.

Costs are a big factor. Insurers are keenly aware that the price point of their product is becoming cost prohibitive. The big insurers are pushing value-based contracts with providers, and have announced plans for more.

  • The Blue Cross Blue Shield Association announced in July 2014 that approximately one out of every five dollars BCBS companies spend on medical care — around $65 billion — will now be directed through value-based programs. About 24 million members are accessing care through such programs, which they estimate saved their plans $500 million in 2012.
  • UnitedHealthcare spent $36 billion on members in risk-based payment arrangements in 2014, and announced its plan to increase such payments by about 20 percent — to about $43 billion — in 2015.
  • The Health Care Transformation Task Force, a consortium of 20 large provider, payer, purchaser and patient advocate organizations, pledged that 75 percent of their businesses will be “operating under value-based payment arrangements by 2020.”
  • Humana anticipates that half of its Medicare Advantage membership will be enrolled in full-risk-bearing accountable care organizations by 2017.

For more reasons why health plans are expanding their risk-based contracting, and suggestions on how you should respond, download Optum’s Trend Watch.

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