The healthcare industry is shifting towards risk-free models, aligning incentives for better patient outcomes and cost savings. Outcome-based care models are emerging as a solution, paying vendors based on specific milestones and clinical outcomes.
The Rise of Risk-Free Models in Healthcare: Aligning Incentives for Better Patient Outcomes
The rapid increase in healthcare costs is driving a transformation in vendor pricing as companies adopt ‘save or don’t pay’ contracts. Outcome-based care models are emerging as a solution, aligning incentives for better patient outcomes, cost savings, and accountability in healthcare.
The Shift from Volume-Based to Value-Based Care
Traditional pay-per-employee models have created a revolving door of dollars in and out, making it challenging for employers to measure the value of their health and wellbeing solutions. In response, many vendors are rethinking their pricing models, moving towards risk-free, outcome-based frameworks that only reward companies when they deliver on their promises.
Outcome-Based Contracts: A New Era in Healthcare Partnerships
Outcome-based contracts pay vendors based on specific milestones and clinical outcomes, such as reduced emergency visits or pharmacy utilization. Providers can earn more if they meet or exceed these targets, creating a clear win-win scenario for both the organization and the vendor. This approach encourages healthcare providers to focus on delivering high-quality patient care while managing costs.
Performance Guarantees with Fees-At-Risk or ROI Guarantees
Performance guarantees with fees-at-risk or ROI guarantees are another way vendors can align incentives with better patient outcomes. Providers may initially collect full fees, which are then put at risk based on performance against defined key metrics or delivering an ROI. This approach positions both the healthcare company and enterprise as having mutual skin in the game.
Risk Sharing in Bundled Payments
Risk sharing in bundled payments involves providers receiving a set payment for a package of services, but if the cost of care exceeds the payment, they may be responsible for covering the overage. This puts their fees at risk, creating an incentive to manage care efficiently and keep patients healthy.
Capitation Models: A Payer Setting Perspective
Capitation models typically involve providers being paid a fixed amount per patient per month to cover all of their care needs. Providers who manage care efficiently and keep patients healthy can profit, but they also take down-side risk and risk losses if care costs exceed the capitated amount.
The Impact of Performance-Based Models on Healthcare Spending
The shift towards risk-free and value-based care models is transforming the healthcare landscape by aligning incentives between health and wellbeing solutions and employers. These innovative models not only enhance the quality of care but also empower employers to make informed decisions that benefit both their workforce and their bottom line.
Real-World Examples: Companies Embracing Performance-Based Models
Companies like Sword Health, Spring Health, and WellTheory are embracing performance-based models, with impressive results. For example, WellTheory has seen an average of $7,200 in cost savings per patient thanks to reduced ER visits, medical procedures, and outpatient care.
Leveraging Clinical Studies for Success
Leveraging clinical studies on a program can help gain buy-in on risk-sharing arrangements, as it enables employers to see proof that the program improves employee health while reducing healthcare costs. There are even creative opportunities for companies to offer significant portions of fees at risk in exchange for marketing commitment from benefits partners.
The Future of Healthcare: Aligning Incentives for Better Patient Outcomes
The shift towards risk-free and value-based care models is poised to transform the healthcare landscape, prioritizing patient outcomes and cost savings. As healthcare spending continues to rise, these innovative models will enhance the quality of care while empowering employers to make informed decisions that benefit both their workforce and their bottom line.
