13. Risk sharing payments

Other health systems have evolved from pure fee for service, towards a blend of payments that balance episodic care, with rewards for improving (or penalties for not improving) patient engagement, clinical outcomes or appropriate health system utilisation. Many states in the US for example, have legislated a minimum % of their health care payments to be value-based – that is, funding that is linked to a measurable outcome, rather than just activity. That makes sense – paying for what you want a health system to deliver, which is cost-effective, superior patient outcomes. Instead, some of our current funding mechanisms drive the opposite – I get paid more if my patients come back for recurrent visits but don’t get their health issues sorted properly; likewise, private hospitals get paid more if patients are sicker and come back more often, a somewhat perverse incentive that is hard to see in any other service industry.

So what do risk sharing payments look like – there’s a spectrum in the attached Exhibit.

An incremental approach is to top up existing episodic or fee for activity payments with a case payment for supporting patients with health risks or, commonly, established chronic disease. Medibank Private’s CareComplete service is an Australian example where chronic disease payments are made to GPs and nurses in primary care, on a per patient-basis, for care plan review, monitoring, coaching and quality improvement.

Next, a bundled fee can be paid to primary care clinicians for managing patients across an episode of care, or to deliver a specific program, and/or over a fixed period of time. Variants include (i) pre-agreement on a reference price, with providers bearing risk if there is a surplus or deficit, (ii) pre-commitment to a predicted value of health expenditure, with provider gain or pain sharing, and (iii) definition of agreed service or clinical outcomes, with rewards or penalties against the bundled fee if they are delivered or not. These blends can effectively pay for the activity, but also balance an incentive to deliver a good result.

Finally, more collaborative partnerships entail full risk-sharing, where capitated payments are made at the commencement and during service delivery, but with results-based sharing along the way or annually (e.g. if payer has budget surplus or deficit, there is a pre-agreed distribution or contribution). The fully Monty is an arrangement where a payer passes the full-cost of their patient population to a provider to manage, with the latter able to keep all profits or suffer all losses. This would be the equivalent of an integrated primary care provider in Australia receiving a pre-determined amount of Medicare, State hospital, health insurance benefit and PBS funding to manage a specific population of people, and paying for their own staff, for hospital admissions, for medicines and for equipment; what’s left over they can keep.

Whilst some of these options sound drastic for Australia, some groups are moving in this direction. There already is captive population funding – consider DVA, AMS, Correction health – and it would be relatively easy to link these payments towards desired service or clinical metrics. Under these risk sharing models, GPs could assume a gate-keeper role and partner with patients to medically triage the appropriate utilisation of health services downstream. Given the compelling evidence that primary care can deliver value-for-money outcomes, we ought to embrace the testing and implementation of these models. Otherwise, GPs who can influence so much cost and utilisation downstream, won’t be paid enough to pull the levers at their disposal effectively.

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