Key Characteristics for Successful Downside Risk Contracting

Organizations that do strong vendor relationships, invest in the organization, and are willing to take on commercial risk will be poised to take on downside risk financial contracts. Through working with population health management vendors, KLAS released a recent report identifying which of their customers are most advanced in adopting downside risk contracts.

In the United States, only 10 percent of the average healthcare organization’s revenue comes from downside risk contracts. However, KLAS discovered that several health systems are beginning to pursue this revenue option, and their insights on adopting downside risk could assist others in improving value-based reimbursement (VBR).

KLAS conducted interviews with the top executives at 15 organizations, speaking with large, midsized, and small health systems as well as some accountable care organizations (ACOs). The report highlights that with the right technology, organizational structure, and buy-in, organizations of all types can advance value-based reimbursement.

Organizations that aggressively pursued downside risk contracts shared three common principles, starting with maintaining active and collaborative vendor relationships. According to the report, “Success with downside risk requires a lot of effort from provider organizations and their vendor partners, and both parties must be willing to put in the necessary work.”

Next, successful organizations pursue organizational investments/buy-ins. Leading organizations have VBR advocates in leadership positions and work to promote complete buy-in from senior leadership and physicians.

There are three common approaches to creating a buy-in:

• Adjusting physician contracts to ensure physician alignment with organization goals
• Distributing statements from leadership about commitment to VBR (including long-term road maps)
• Creating a separate leadership structure responsible for VBR.

Successful organizations show support for VBR by investing in technology and staff, including care management teams to close care gaps.

Finally, experienced organizations have a willingness to take on commercial risk and work with payers. The report explains that leading organizations have expanded beyond Medicare and Medicaid to enter into downside risk agreements with commercial payers.

Among the smaller organizations Azara Healthcare, HealthEC, and Cedar Gate Technologies earned high functionality ratings. Additionally, they were acknowledged for their strong care management functionality, for customizing tools to meet customers’ workflow needs, and for working closely with customers to ensure they understood any updates.

“Azara Healthcare and HealthEC are also noted for their strong integration. Azara Healthcare customers feel their solution interfaces well with various other systems and generates actionable insights. Clients describe HealthEC’s PHM platform as robust and easy to connect to external data sources,” the report stated.

For larger organizations, Innovaccer received “high integration ratings for providing a system that is able to quickly integrate complex data.”

The second part of the report conducts case studies for each of the participating organizations. The case studies explore further detail regarding the organization's journey to downside risk, their vendor’s role in enabling downside risk as well as further information on what the organizations achieved and learning in the process.