Risk-Based Contracting: How does taking on risk contribute to value-based care?

As healthcare laws are ever-evolving, the latest shift in the industry centers around value-based care. In fact, value-based care has recently become exceedingly popular, because it seeks to streamline healthcare while also cutting costs. It is both patient- and practice-centric. To achieve lawful value-based care, at least two value-based enterprises must enter into a value-based arrangement, whereby the arrangement is designed to achieve a value-based purpose.

To understand how value-based arrangements work, it is important to know the following definitions by the Stark Law and Anti-Kickback Statute:

  • Value-based arrangement: an arrangement for the provision of at least one value-based activity for a target patient population between or among (1) the value-based enterprise and one or more if its participants, or (2) value-based enterprise participants in the same value-based enterprise.
  • Value-based enterprise: two or more value-based enterprise participants (1) collaborating to achieve at least one value-based purpose; (2) each of which is a party to a value-based arrangement with the other or at least one other value-based enterprise participant in the value-based enterprise; (3) that have an accountable body or person responsible for financial and operational oversight of the value-based enterprise; and (4) that have a governing document that describes the value-based enterprise and how the value-based enterprise participants intend to achieve its value-based purposes.
  • Value-based participant: an individual or entity that engages in at least one value-based activity as part of a value-based enterprise. The Anti-Kickback statute provides exceptions to who can and cannot be considered a value-based participant.
  • Value-based purpose: (1) coordinating and managing care of a target patient population; (2) improving quality of care for the target patient population; (3) reducing cost to payors without reducing such quality of care; or (4) transitioning from fee-for-service healthcare to quality of service healthcare.
  • Value-based activity: any of the following activities provided that the activity is reasonably designed to achieve at least one value-based purpose of the value-based enterprise: (1) the provision of an item or service; (2) the taking of an action; or (3) the refraining of taking an action. A referral is not a value-based activity.

Once a provider understands the structure of how value-based arrangements work, they must consider how they want to implement the value-based arrangement. Value-based arrangements are increasingly implemented through a risk-based contract. Risk-based contracts place more responsibility on the provider, such that providers must provide high-quality patient care while remaining efficient, at a potentially lower cost. Risk-based contracts are generally done through bundled or capitated payment models. These types of financial arrangements between physicians and other healthcare providers that were previously deemed problematic are now permissible, so long as they comply with the Anti-Kickback Statute and the Stark Law.

To successfully enter into a value-based arrangement with risk-based contracting, you need to reflect on various aspects of your practice and determine whether or not a value-based arrangement is a good fit for you and your practice. To learn more about how value-based arrangements work, and how they may or may not work for you, tune into our first annual Health Law Summit on November 4th and 5th. Click here to register.

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About the Authors:

Emma Trivax is an Associate in Dickinson Wright’s Troy office. She can be reached at 248-631-2098 or etrivax@dickinsonwright.com. Her biography can be accessed here.

Mark Wilson is a Member in Dickinson Wright’s Troy office. He can be reached at 248-433-7581 or mwilson@dickinsonwright.com. His biography can be accessed here.