Reimbursement methodologies are trending away from volume-based payment and are increasingly focused on making health care providers accountable for controlling costs and producing high-quality outcomes.  Particularly following the establishment of the Center for Medicare and Medicaid Innovation (CMMI) in 2010, value-based payment models have required extensive collaboration across provider types -- from hospitals to post-acute providers to independent physicians.  Although mandatory alternative payment models (APMs), such as the Comprehensive Care for Joint Replacement (CJR) Model, remain on tenuous footing in a fluid political landscape, cost and quality measures under voluntary models, such as Medicare Shared Savings Program (MSSP) Accountable Care Organizations (ACOs) and the Bundled Payment for Care Improvement (BPCI) Initiative, indicate that provider partnerships beyond traditional networks can result in substantial cost savings by maximizing benefits from economies of scale.


Episode-based care has centered on hospitals as the primary point of contact between patients and their providers.  As a result, hospitals have incurred substantial responsibility and risk under value-based payment models as regulators envision them as “gatekeepers” to care.  Vertical integration under the Affordable Care Act (ACA) has further squeezed those hospitals with limited infrastructure, tight profit margins, low reserves, and geographical constraints limiting promising partnership opportunities.  At a time of intense financial and operational pressures, hospitals must choose their partners wisely in order to consolidate costs and share both downside and upside risk arrangements.

Ambulatory Surgery Centers (ASCs)

In an effort to shift costs from inpatient to outpatient settings, policies have been introduced that simultaneously penalize hospital readmissions and incentivize the transition of services to freestanding ASCs.  High-quality ASCs present uniquely-positioned opportunities for physicians and post-acute providers alike seeking to capitalize on the financial and outcome-related benefits of shortened inpatient stays offered by both government and, increasingly, commercial payers.

Post-Acute Care

Inpatient stays at post-acute providers have also been subject to heightened scrutiny in the value-based reimbursement environment.  Health plans have continued to push care to the lowest cost site with a proven or a developing track record of quality care.  In parallel, post-acute care facilities are struggling with higher costs and reduced reimbursement rates (currently scheduled through 2019).  Providers traditionally focused on one post-acute care role (such as Skilled Nursing Facilities) are broadening service offerings and/or partnering with other providers to offer an integrated continuum of services, from  transitional care and short-term rehab to palliative and hospice care, in order to mitigate shared risks and capitalize on the benefits of care coordination treatment models.  The impact of a new presidential administration’s view of mandatory payment models, such as CJR, which rely heavily on post-acute provider participation and risk-sharing with hospitals, will greatly impact developments in reimbursement rates for providers focusing on provision of services following inpatient discharge.  

Physician Groups and Independent Practitioners

Physician groups, Independent Physician Associations, and similarly-situated physician organizations continue to play integral roles in payer negotiations, but over the past decade (and with the rise of BPCI and Pioneer, MSSP, and now Next Generation ACOs) have witnessed new opportunities for sharing in upside risk and collaborating with institutional health care providers.  Particularly following market consolidation efforts, physician groups have emerged as key partners for developing cost-efficient provider networks and coordinating care.  On the other end of the spectrum, independent and community physicians have become as threatened as any providers by the “eat or be eaten” risks and opportunities in the present health care market. 

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Providers and provider networks have been actively involved in value-based care developments for nearly a decade.  The most successful providers have identified well-positioned partners to leverage coordinated care opportunities in an evolving reimbursement setting, and confronted from the outset the fraud and abuse, data privacy, antitrust, and related regulatory challenges raised by these new cost and quality incentive-based payment models. 

Key objectives for providers in this dynamic value-based health care environment are, thus, first to identify those collaborations that have demonstrated success as well as opportunities for risk-sharing and streamlined coordination going forward and, second, to implement and manage those collaborations effectively, efficiently and within the bounds of applicable federal and state regulations.  Contact your advisor at Ropes & Gray today to discuss their experiences in advising clients on these very issues. 

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