What is upside and downside risk in value-based healthcare?

Value-based care can seem like too much time, effort, and uncertainty for Community Health Centers (CHCs) and Federally Qualified Health Centers (FQHCs). But “risk” doesn’t have to be a four-letter word. In fact, these financial arrangements are designed to reward participants for what health centers already do well every day. Why not take advantage?

If you’re not sure what value-based care really means, or if these arrangements are right for your health center, keep reading.

First, a quick primer: What is value-based care? Why should I care?

Value-based care (VBC) is the idea that healthcare providers should be reimbursed based on the value they provide to patients, not the volume of services they deliver.

The goal is to achieve the Triple Aim of Healthcare:

Improving the health of individuals and populations…
By fostering better experiences and outcomes…
At lower costs.

The process starts by defining what “value” means for patients. Payers who are sponsoring value-based care contracts will set clinical quality targets and spending thresholds for specified clinical conditions and/or service categories in the primary and preventive care settings with the aim of reducing more expensive service utilization down the line.

Examples:

Preventative care measures like wellness visits and cancer screenings
Care coordination measures like proactive outreach and follow ups with patients
Population health measures like immunization rates

(Fun fact: Medicare Advantage members treated by doctors in advanced value-based care models saw 5.6% fewer hospitalizations and 13.4% fewer emergency department visits compared to those treated in fee-for-service arrangements.)

Participants in value-based care contracts choose from several financial risk pathways that align with their organization’s goals and competencies.

Can you explain more about these risk pathways?

The majority of value-based care models combine a foundation of fee-for-service reimbursements or per-member per-month (PMPM) reimbursements with the chance to earn additional incentives through enhanced risk pathways.

Upside risk

In upside risk (also known as one-sided risk) arrangements, participants who keep their spending below specific thresholds while meeting their quality targets can keep a portion of the difference between the projected spend on a given population and the actual spend. (This is known as the shared savings amount.)

In fact, average clinical scores tend to rise and total costs of care fall with the assumption of more financial risk.

If they go over spending targets, there won’t be shared savings to split. But participants also won’t be on the hook for overages and don’t owe money back to the payer. It’s a great way to get used to value-based care and build skills for the future.

However, the portion of the money participants keep in upside risk models is usually fairly small, which means the benefits are relatively limited over time.

Downside risk

In a downside risk contract (or a two-sided risk contract), the stakes get higher. Participants still get to keep a portion of the shared savings if they meet their clinical and financial targets.

Participants usually get to keep a larger percentage of the shared savings than they do in upside-only risk contracts. The extra incentive is necessary because of what happens if a participant goes over budget.

If a provider exceeds spending thresholds, they need to return a percentage of the overages, or shared losses, back to the payer. The greater the risk, the greater the reward.

(Fun fact: In comparisons with fee-for-service payments, full-risk models were associated with a 15.6% relative reduction in avoidable hospitalizations, whereas the relative reduction for all-cause hospitalizations was 4.2%.)

Other models will build off these concepts with bundled payments (a flat fee for a defined set of services in a single episode of care, such as a low-risk knee replacement or a childbirth without complications) or even full capitation, where a provider is given one amount for all the care required for a certain population in a given time period.

(Fun fact: Shifting to team- and non-visit-based care led to a better financial outcome, as the proportion of patients reimbursed under capitation increased. After the shift to team- and non-visit-based care, the annual net surplus per physician increased from $35,890 under traditional fee-for-service to $120,654 at 50 percent capitation and $205,418 at 100 percent capitation.

But the majority of value-based care models available to health centers are designed to encourage community health centers to build their competencies and slowly increase their risk levels over time so they can reap all the benefits that risk-based value-based care contracts have to offer.

Why would I gamble on downside risk when my health center is already operating on razor-thin margins?

A lot of healthcare organizations feel the same way, which is why downside risk is still a hard sell to many provider types. But those practices don’t have Yuvo Health by their side.

Yuvo Health shoulders the risk in downside contracts for your health center. That means even if you overshoot your spending targets, your FQHC is not on the hook for the extra expenses.

You get all the security and benefit of participating in an upside-only risk contract, but with the added boost of the higher incentive amounts that come with a downside risk arrangement. Value-based care stops becoming a gamble and starts becoming a significant revenue-generating opportunity.

Why would Yuvo Health do this?

We believe that value-based care holds the potential to heal our broken healthcare system and ensure that CHCs can continue to deliver exceptional, equitable, comprehensive care to communities in need.

We also know from experience that CHCs are already doing so many of the things required to succeed in these value-based contracts. The ability to deliver proactive, preventive, team-based care on a budget is built into your DNA, but the legacy healthcare reimbursement system simply isn’t set up to reward you for it.

It’s our goal to redesign the financial landscape and guide community health centers through the transition so CHCs can finally get everything they deserve. And we’re so confident in your success that we’re staking our salaries on it. Yuvo Health only makes money if your CHC makes money. That’s a very strong motivation for all of us to work together on our shared goals.

If value-based care is such a good deal for CHCs, why aren’t more of my peers already doing it?

There’s no getting around it: value-based care is tough. It requires extra effort to realign operational and clinical activities or adopt technologies to better coordinate care.

It can also be difficult for FQHCs to access attractive contracting opportunities because of their unique place in the healthcare landscape. In some states, it’s nearly impossible to participate in the most lucrative contracts as a solo CHC due to size limitations, regulatory criteria, or insurance mix.

Many health centers simply don’t have the in-house resources to make it happen, so they feel like they have no choice but to let the opportunities pass them by.

But there is a choice. And there is help available to you. Yuvo Health’s powerful contracting engine, along with our dedicated teams of technical experts and practice transformation professionals, can equip your CHC with the legal and administrative knowhow, patient panel scale, and practical infrastructure required to reach your goals and unlock incentives.

Our CHC partners across the country are seeing real-world success as members of the Yuvo Health community.

“Yuvo Health is willing to work with us around the challenges that FQHCs have in the value-based conversation.”

Rita Bilello, DDS, Chief Executive Officer
Metro Community Health Center

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We’re confident that Yuvo Health can help your CHC see similar results. We’d love the chance to answer more of your questions and show you how value-based care can transform your CHC’s revenue streams.

To connect with a Yuvo Health expert, schedule time today.