Supporting Safety Net Providers Through Value-Based Payments

At the beginning of the coronavirus outbreak, many healthcare organizations halted elective procedures. While this helped increase hospital capacity for patients with coronavirus, it also took a financial toll on many providers. In California, Medi-Cal payers addressed this by paying out value-based reimbursements early.

Stay-at-home orders meant many patients were not coming into the provider’s office for routine care visits.

“This drop equated to a loss of income for may providers,” John Baackes, CEO of Medi-Cal managed care organization L.A. Care, told HealthPayerIntelligence.

Improved telehealth reimbursement helped minimize the losses many providers were experiencing, and payers tried to process these claims faster, putting money in provider hands quicker.

“Normally we have 30 days to pay claims,” Baackes explained. “We dropped certain processes we go through to make sure our claims are accurate. It’s not something we are going to maintain because it’s really not a good business practice, but it did push money out to hospitals as quickly as possible.”

In fact, L.A. Care paid electronically submitted claims in just ten days because of this change in process. The company was able to push out $300 million in April, according to Baackes.

“That’s about $80 to $90 million more than we normally pay out,” he continued.

Despite these efforts, many hospitals and clinics still rely on paper claims. So it was more challenging to speed up the claims processing when payers needed to wait for paper copies.

“We would really love to get these hospitals to go to electronic claims,” Baackes argued. “That would be a way in the future to speed up payments.”

Transitioning to fully electronic claims processing may not be feasible for some organizations, especially now as they are caring for an influx of patients, easing the minds of the worried well, and adjusting to new standards of care. In order to continue supporting their providers, L.A. Care accelerated many of its value-based payouts.

“We pushed out the pay-for-performance incentive payments that providers would have been paid in January 2021 to be paid in April based on what we gave providers the prior year,” Baackes said. “That pushed out $21 million to our providers.”

At the end of 2020, L.A. Care will calculate the payout providers should have received. If the April payments were less than they should have received, they will be sent the difference. If the April payments were more than they should have received, providers keep the difference.

These early payouts are helping providers when revenue has slowed. But this solution is only a Band-Aid on the larger problem. Proposed state budget cuts and lower base-rates for hospital payments could perpetuate the problem.

L.A. Care is working closely with its providers to develop potential solutions.

“It’s important for a plan like L.A. Care to engage with our partners in a dialogue and come up with solutions that work for all of us,” Baackes said. “We want to hear from our providers because that will help us shape our decisions.”

Many of L.A. Care’s primary care physicians are paid on a capitated payment model but many other providers are not. Discussing the transition to capitated payment will be critical moving forward for physicians to maintain consistent revenue in uncertain times.

“We view ourselves as partners to the providers,” emphasized Baackes. “If they’re not there, then we can’t do our job of serving our members. We’re really focused on keeping the providers whole.”

As a Medi-Cal managed care plan, L.A. Care is uniquely positioned to support safety-net providers who care for traditionally underserved populations. Keeping these providers finically sound will help them further support the patients they serve.