Provider Calculus: How to Set Up a Staff Payment Model Under a VBP
Editor’s note: Jeremy Hastings, Beacon’s Vice President of Corporate Strategy, wrote a blog piece posted on Tuesday, Oct. 27, about how the future’s unknowns present challenges in building and implementing value-based payments (VBPs). His post this week follows up to describe in detail the inherent difficulties in setting up a single provider in a VBP. However, in spite of the hard work required to establish VBPs, it is not only possible, but also critical, to do.
Value-based payments (VBPs) are one of the next frontiers for innovation in health care. In behavioral health, the innovation is coming, but inertia is a powerful force that needs to be overcome. Some of this inertia is entirely appropriate, as changing a decades-long reimbursement system is complex. While we have mostly succeeded in winning hearts and minds that VBPs are the path of the future, we still must do the hard work to show that they will not break a provider’s operations.
The number of payer and providers movements required to set up a single provider in a VBP is significant. For example, Beacon Health Options’ finance, strategy, clinical, contracting, system and operations teams must do things differently than regular business to support a VBP. Also, the provider must change its processes for the same core set of capabilities, as well as the complicated calculus of how to pay its staff in a model where weekly fee-for-services (FFS) billing is not the measure of productivity.
While we have mostly succeeded in winning hearts and minds that VBPs are the path of the future, we still must do the hard work to show that they will not break a provider’s operations.
Let’s take an illustrative example of an outpatient clinic with a clinician currently billing $1,800 per week (30 billable hours per week x $60 per hour). Let’s further assume this clinician takes home 75 percent of her billings (75 percent of $1,800 would be $1,350 per week). In this scenario, her pay is totally variable, based entirely on the billable hours she generates in a week.
Now think about the same actors in a VBP. For argument’s sake, and to express the complexity, let’s say Beacon represents 33 percent of the clinic’s payment in this market. This means of the $1,800 per week, Beacon generally pays $600, and other payers cover $1,200. Let’s further assume that all of Beacon’s payment is covered by a VBP. Our clinic now generates $600 in weekly fixed revenue (Beacon’s VBP), and the clinician generates (on average) another $1,200 in variable revenue.
Complex but not impossible: Three potential models
What is a clinic operator to do? We suggest a few practical models to manage this complexity.
Model 1: Separate teams. In this structure, the clinic operator divides the workforce cleanly into VBP clinicians and FFS clinicians. For the VBP clinicians, the clinic uses an employed-like model, where the clinicians receive revenue based on the number of people they cover per month and adherence to activity measures that show the clinician is actually engaging in care. This set-up mostly eliminates the potential “free-rider” problem and allows revenue maximizers to stay in a FFS model. It also simplifies HR and finance reconciliation.
Model 2: Average out performance. Here, the clinic operator contracts with clinicians at a mixed rate. Individual clinicians see a random pool of consumers, and clinician revenue is based on a formula that provides a base compensation from the VBP payment and additional revenue based on total consumer-facing hours (not strictly billable hours, just total hours). This model takes the VBP dollars and gives everyone a share, thereby encouraging clinicians to take VBP clients when assigned, and the clinician revenue flexes with total consumer-facing hours, which encourages maximizing consumer-facing time at the benefit of the entire population. The HR and finance reconciliation work here is meaningful, as compensation is fairly variable and would need to be calculated weekly in order to make payroll.
Model 3: Set an hourly rate for VBP clients. A simple operational implementation involves a clinic operator using the negotiated VBP rate from the payer and the target maintenance of effort threshold to get to an hourly rate for a VBP client. An 85 percent Maintenance of Effort, or MOE, basically says that if the payer gives the clinic $10 under a VBP, the clinic must demonstrate actual claimable events valued no less than $8.50. This approach gives the payer confidence that the vast majority of dollars are being directed to patient care.
The provider must change its processes for the same core set of capabilities, as well as the complicated calculus of how to pay its staff in a model where weekly fee-for-services (FFS) billing is not the measure of productivity.
The math gets tricky for a clinic operator. Using the example above, if a clinic operator receives $600 per week for VBP clients, and has a MOE requirement of 85 percent, then the clinic operator might set an hourly rate for VBP clients at $51 per hour based on 10 hours per week for VBP clients ($600 per week x .85) / (10 hours per week). The take-home for the clinician will be $51 x .75 (as described above) = $38.25 per hour. This is, of course, lower than the $60 per hour x .75 take-home ($45 per hour) with strictly FFS. Here, though, the clinic operator has $6.75 per hour in unspent dollars that can be used to reward creativity, new program models, or non-consumer-facing work that helps achieve target goals. In theory, a clinician could make the same money if the clinic operator distributes the $6.75 back to the clinician. This structure can be used to incentivize specific behaviors that go to quality or other benchmarks.
So often when we talk about VBPs, we are thinking only about the payment structure between the payer and the clinic operator. We need to have solution sets like these to help guide providers to make the operational changes that will overcome the large, but understandable, inertia that exists.