Shifting Financial Risk to Providers in Value-based Care: An Opportunity or A Catastrophe?

The top question on everyone’s mind as the Covid-19 crisis begins to unwind is about money. Healthcare budgets of providers and payers are out of balance. Innovation is no longer just about staying relevant; it is becoming the preferred strategy for survival.  

The federal government’s ability to print money does not solve the financial problems it faces in the short or long run.  Payback in the future looms even larger. As everyone tries to focus on a blurry future, the importance of “value for the money spent” in health care rises to the top. 

Value-based medical care is already established as a core strategy in health care reform. It is logical that “managed care” will move rapidly to the center of our financial thinking as payers of all types attempt to rationalize their budgets. Some health care leaders continue to encourage pushing more direct financial risk toward providers; however, in our haste to fix our budgets, is that direction the best for patient care and quality outcomes? 

There is no question that we must become more serious about delivering better care at a lower cost. In a recent blog published on Linkedin and the Salient website, it was shown that the 548 accountable care organizations saved only $739.4 million last year, an amount sufficient to cover Medicare’s costs for only 8 hours and 45 minutes. While this may be considered a good start, it is just a 0.1 percent savings, hardly enough to sustain the program over the long run.[1]

The Covid-19 crisis uncovered the financial vulnerability of many primary care practices, causing some to limit availability, lay off employees, or close. These access-limiting events should raise questions about how CMS wants to modify financial compensation in the current health care reform. Would pushing more financial risk toward providers potentially raise the same serious issues that complicated the HMO fiasco a few decades ago? Could that financial risk create a conflict of interest that would compromise patient care? 

There is universal agreement on increasing accountability and performance improvement of all health care providers, but does shifting the financial risk toward doctors increase the providers’ focus on their own financial survival rather than on their patients’ health care outcomes? Furthermore, do the current models consider the disruption caused by Covid-19 on any risk calculations? Historically, providers have given endless hours of free care, but would they be willing to pay for that opportunity by accepting unbalanced downside risk?

Alternatively, would prospective or a modified prospective primary care compensation model fit better in our current upside-down clinical world? Having a steady population-based income potentially could have prevented a lot of practices from closing completely because of no working capital. That income would then, for example, be there to support rapid and radical changes in telemedicine adoption. Furthermore, making care and case management prospective and population-based rather than episode-based would keep that vital patient connection open and functioning.

Any shift in risk-sharing or compensation strategy demands an easy-to-use analytical solution that monitors the performance of every type of provider. Additionally, clinical outcomes and quality metrics remain foundational to supporting any change. It seems that there are more questions than answers; however, asking relevant questions in front of any change seems wiser than trying to answer the question after a decision is already made.


Craigan Gray

About the Author

Craigan Gray, MD, MBA, JD

Dr. Craigan Gray, Salient Healthcare’s Chief Medical Officer, brings rich experience from private practice, hospital leadership, and governmental health-benefit programs. Prior to joining Salient, Dr. Gray was director of North Carolina’s $12 billion Medicaid program. His time as VPMA at Bon Secours Our Lady of Bellefonte Hospital in Kentucky was distinguished by moving the facility into the top-quality performance tier for Health Grades and CMS health quality indicators. Dr. Gray is a Stanford University trained Obstetrician/Gynecologist. In addition to an MD degree, Dr. Gray holds an MBA degree and a JD degree. He is a Certified Physician Executive and is published in various medical journals.

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