Lynn Carroll on the Shift Towards Capitation Models

With the adoption of capitation models and the growing demand for coordinated care, healthcare providers continue to shift away from traditional payment models. On this episode of Value-Based Care Insights, Lynn Carroll, COO of HSBlox, sheds light on this transition. Learn about the evolution from performance-based to risk-based contracts, the value of sub-caps within capitation models, and the pivotal role of care coordination.

KEY TAKEAWAYS: 

• The healthcare landscape continues the shift toward capitation contracts focusing on quality and fixed reimbursement. 
• Effective capitation models depend on seamless collaboration between primary care physicians and specialists. 
• Sub-caps within capitation models, such as primary-care physician caps and bundled payments, can help manage costs and enhance patient care.

LISTEN TO THE EPISODE:

 

 Transcript:

Daniel J. Marino: 

Welcome to value-based care insights. I'm your host, Daniel Marino. As more health care providers as more hospitals and health systems transition into value-based care, particularly the contracting side ovalue-based care. There's a progression of contracts and organizations go through a progression. Maybe moving into performance-based contracts and then moving into shared savings contracts and then eventually moving into risk-based contracts. On this program. We've talked about risk based contracts a number of times. It's an area that I think is both interesting and challenging for providers, many providers, many hospitals, health systems. As I'm talking with them around the country, they often say, well, II don't know if I'm ready to get into risk yet. And frankly, I don't know even if I can succeed into risk. But as organizations are moving into risk-based contracts, there's a progression into capitation or fully capitated type levels of reimbursement which is structured around a Pmpm. And again, it's a journey as you start to build those capabilities, to drive that success. There are a number of elements that go into it, as you know, as we've discussed changing the care model, putting in place strong care management, looking at the performance analytics to drive a lot of the successes around managing the population in a capitated environment. 

Well, I'm very excited today to have as my guest. Lynn Carroll. Lynn is the COO And head of strategies for HSBlox. HSBlox provides a lot of business support and a payment business or analytics platform. That helps organizations drive success around capitation. And he wrote a really good article that really caught my attention called, why capitation contracts can benefit providers, payers, and patients. We will put a link to that in our notes. Lynn. Welcome to the program.

Lynn Carroll:

Dan. It's great to be here one of my favorite topics. So I'm looking forward to the conversation. 

Daniel J. Marino: 

Well, I appreciate it. So, Lynn, let's jump right into this. What are you seeing around the types of concentrated capitation contracts that providers are getting into? Both in terms of the payer structures, and maybe, what payers or what providers are struggling with or challenged with, as they enter into some of these capitation arrangements.

Lynn Carroll:

Sure, Dan, in our business. We have kind of seen, but as you mentioned in the your opening comment sort of a progression from some more traditional pay for performance pay for quality type programs. And certainly we in our business see a lot of Mssp and then, now, we're seeing some more ACO reach types of programs out there. We've also seen programs taking hold in the commercial arena as well. But a lot of the programs kind of fit these characteristics. First of all, they all have some type of a quality component in the programs. But they are typically defined sets of services for a defined population with some type of a fixed, either per head or percentage of premium type of a model. 

Daniel J. Marino:

Right? So that's kind of like a Pmpn type of a reimbursement structure.

Lynn Carroll:

Sure, sure per head at a fixed sort of a rate or a percentage of the premium for a completely go global type of an approach. Some of the programs will also incorporate on the risk bearer side where there will be some sub caps going on to sort of delegate some portions of the risk downstream. 

Daniel J. Marino:

So let's dive into that a little bit when you say sub caps. What do you mean?

Lynn Carroll:

So typically might carve out some piece of the pie underneath a global capitation model. So there's a percentage of premium. There might be a Pcp cap underneath it. There might also be some elements of either bundling or episodic types of reimbursement to try and manage the overall cost structures underneath the programs. And then we'll also see and have seen programs. And you probably read about one almost every day where folks are contemplating different types of carveout scenarios which would be either, you know, chronic kidney disease certainly comes to mind Ms. K. And other programs where there's a defined set of services and a need to create some type of a coordination mechanism between more specialty and primary care to address trying to find the right care path sooner in the continuum to make sure that the diagnosis is correct. 

We see that happen also in scenarios where there may be poly chronic parts of the population to make sure that there's alignment between primary care and specialists.

Daniel J. Marino:

Are you seeing that more so in the specialty areas where particularly high cost services are occurring?

Lynn Carroll:

Because of COVID-19, there has been a renewed emphasis also on, you know, mental medical and social areas. And so we've seen some emphasis and some of the behavioral health areas as well. Just to try to bring in different models.

Daniel J. Marino:

That's interesting. Because tie in the behavioral health piece into a capitation type of a structure. I think it's got to be a really big a big challenge. You could see the medical side on that. But the behavioral health piece has got to be really tough for providers to assume level of responsibility. 

Lynn Carroll:

Well, so it's interesting, right? Because if you look at a global reimbursement scenario, one of the first things that you want to be able to do is where are parts of expenditure that could potentially be capitated in a sub model. Right? And so you start to carve out different scenarios. And we've seen things getting folded in under the more global programs. And so when you're talking like, for example, total cost of care, percentage or premium scenarios. You're going to see a different pot pods or pockets underneath Those programs start to get capitated as well so that you can fix the cost that you're at risk for. 

Daniel J. Marino:

We have worked with numerous organizations and clinical service lines or specialty providers where you know you look at cardiology, or you look at orthopedics. Or you look at neurosciences. The cost of care is different. Right? So you can create some episode based pricing models and then negotiate those structures around that. But I guess I've always kind of struggled with how then you would pull that into some type of a capitation Pnpm structure, right? Because you're not necessarily managing the primary care piece of that. If you're saying orthopod per se, or even maybe a cardiologist, you would. If there's you know you have some patients who are seeing their cardiologist as more of their primary care. Physician? But pure specialists, I think it becomes difficult. Ho! How are you? How are you seeing those structured? 

Lynn Carroll:

Yeah? So I think what we have typically seen is scenarios to make sure that if there's a global risk component the stratification of the population identifies where there are high touch, high need patients as well as who are sort of low, touch, low need patients and then trying to address where there may be high touch needs you know. What are what is sort of the bucket of services? Are there ways to control the cost of those services. 

And I think, probably, as you've seen pretty closely in your work, that the network driven components start to get narrowed, they start to get narrowed. The question starts to become, what's in it for the patient? And when you start to take a look at reduced choice, there has to be a value proposition from a care, coordination standpoint to make sure that those care transitions across different types of needs medical, behavioral and social are met otherwise, one of the tenants, we typically say, is that for value based contracting the patients, your best partner. II think what we mean by that is that you have to consider the holistic view of what's going to happen underneath global types of programs to see if you can create some kind of synergistic alignment from the care, coordination, patient experience, side of things rather than taking sort of a more traditional approach to say, you know, I'm going to limit utilization or I'm going to attack length of stay. For, you know, inpatient 

Daniel J. Marino:

Right, that'll never work. You're going to get. You're going to get pushed back. And is that often said in a lot of the presentations and the models that you know discussions I've had with physicians a big difference between capitation these days and capitations of the nineties. Right? And certainly I lived a lot through there as I was managing practices. Quality wasn't a component of capitation. So it seems to me in in the discussion, there's really 3 areas that become really critical as you're starting to think about capitation type of of models. I think one is understanding the risk of the population to what's the utilization trends and really making sure that you're managing the the out migration, right? Or maximize your domestic utilization. And then third to that is, what are your performance outcomes? Look like of your of your network.

Lynn Carroll:

Yeah, so it's definitely the case. And so, as we've kind of alluded to, and some of the discussion so far. This, you know, concept notion or approach of Pcp, or primary care, and especially alignment, becomes an important part of avoiding sort of the unnecessary spending side of things, trying to see if you can get a hold on duplicative services, and it's easier said than done. Okay, but essentially you have to look at the network structure who's participating and look at trying to control things so that you can gain market share by, you know, keeping folks in house and sort of reducing that leakage component that then improves a couple of things and improves care coordination for the patient, and it also addresses those quality opportunities that we're sort of talking about and the use of, you know, looking at the referral patterns and high value provision of services is a big component to that. And part of that is sort of stratifying patients to know who are the high need high touch folks. And when we kind of think about high touch, these may be patients that need, you know, as much as a daily interaction gets into sort of a more care, navigation sort of component.

Daniel J. Marino:

All these become the patients who are more complicated patients and patients who absolutely, you know, they need that care. If you're just tuning in. I am Daniel Marino. You're listening to Value-Based Care insights. I'm here today talking to Lynn Carroll. Lynn is the COO of HSBlox. They have a discussion on understanding capitation contracts, and what drives their success. 

Lynn, let me ask a question, though. There was an interesting quote that caught my attention in your article. and it was around incentives and creating the right incentives. And one of the things that I've I've talked about many times on the program, and a lot of the work that I've done in helping organizations kind of advance their clinical integration capabilities, if you will is you need to have the right level of incentives? I wanna I wanna read this, quote real quick and then ask a question around there. But the quote is “these newer competition models are designed to better align incentives between primary care providers and specialists, but if the specialty care under value, base or fixed price type program isn't harmonized or primary care. Providers may fail to meet the cost containment or the program goals in order to reduce unnecessary or duplicative services.” 

An interesting statement. I think nobody would argue with the fact that that alignment has to occur. What have you seen in terms of the solutions around these types of capitation models that does begin to align primary care and specialists. 

Lynn Carroll:

Yeah, so you know, I think a big portion of this sort of gets into the care, coordination, aspect of things. and an emphasis on the care management pieces. So you think about the transitions and care that occur. Primary care can't go it alone right? If you have a quarterback, if you will, in a primary care, physician, and you have a poly chronic individual. Effectively, a significant amount of the care is actually being managed by multiple specialists. Number of those cases which can do a couple of things. One. It can create a poor patient experience. 2. It can also result in unnecessary leakage and sort of the third part of it is that when you look at how the interactions occur, you can have a lack of visibility between what I would call different pods.

Daniel J. Marino:

Absolutely. And II think that's an interesting point, because physicians undoubtedly do a great job of managing patients that are sort of within their within their realm, right within their 4 walls, and especially if you've got a complex patient who's seeing multiple different specialists, it's hard to understand which each of the specialists are doing. And how do you coordinate that care longitudinally around that whole care plan for the patient?

Lynn Carroll:

Right, So what we see sometimes happen is in a poly chronic scenario. Let's say, a patient is quote unquote, enrolled into a particular program. And let's say It's, you know, either a diabetic program or it's a Copd program or something. Well, sometimes they will be assigned into, you know, a care management path, and in that care management path the care manager or care coordination component may be unaware that they just had an admission last week. And so part of this is sort of understanding how you're going to share data effectively for those and important and sentinel types of events. So if, for example, you have a poly chronic patient, they may be actually enrolled in 3 different, you know. Programs those programs can't be siloed in nature. And so this and you mentioned that yourself, this longitudinal view of who all is involved in seeing this patient today, and what's going on across the continuum of services they may be procuring, because what we have seen is a need to. If you have a value-based program that's got a significant cohort to it. You're going to have poly chronic individuals that you need to share information on information sharing piece is really what you're going to be talking about in terms of a care team that needs to be informed of what's happening when they're not the ones seeing the patient?

Daniel J. Marino:

Well, so just building on that, I think, you know, that's I think that's really the key point. So if you're going to start to align primary care and specialists and even specialists and the sub specialists, an important element of success, at least in my mind is that you need to have the right level of data. You need to be able to share that data with the different providers and with their respective care teams and then have sort of an oversight care management individual. Maybe this is, you know, with input of the primary care physician, to really allow the quarterbacking of that care, right? So maybe in influencing it. So you never gonna tell a provider what they need to do. But you should be able to influence what they provide to that patient. So it does meet the objectives, both for that patient and for the performance outcomes related to that patient in that contract.

Lynn Carroll:

Yeah, that's right. Because, you have to kinda understand where our referrals going right? And part of this is if you're taking risk. You wanna manage sort of that leakage component to make sure. And that's also a market share component, too. 

Daniel J. Marino:

Yeah, because leakage, I'll tell you from the analysis that we've done, Leakage is the biggest cost driver. Leakage, and you know, redundancy of care services. But you know, one of the things when we've done some analysis, and I'll be interested in hearing your thoughts on this. We did actually advise providers not to necessarily get involved in competition contracts until their leakages really less than 10%. Because if it's more than that one, you don't have the ability to manage, do to proactively manage the patients appropriately to drive the contract performance. But, second, and probably more important, you're adding an extra layer of costs onto your care model that you're responsible for right? And I'm not sure you can be successful. Are are you seeing the same thing?

Lynn Carroll:

Yeah. So sort of along those same lines you have the scenarios where and I think some of the documentation out there will say things like in a hospital system, for example, they may experience as much as you know. 30 or 50% leakage. And you know, a good goal sort of is You know. Let's try to keep in house you know, or reduce that leakage by anywhere from 10 to 30 of that number type of scenario. Well, you know. What you just said is, let's get it even further down, right in that particular scenario. And part of this, too, is looking at. Well, what? What can also help drive that and part of that is again. Well, what's in it for the patient? 

Daniel J. Marino:

Right? Why do they need to do it? What's the right level incentives and also to you know, II want to be sensitive as well to the market, you know, in a rural community they may have 95% of the patients go into one facility. So their leakage is 3 to 5 .In a metropolitan area where you have a little bit more competition, you know maybe 20 is as good as you can get because of the level of competition. But I think to really focus on that, and to have a pretty prescribed approach to how you're managing and steering the patients, particularly those that are high cost. You know you. You need to have that as part of your care model and your care management approach. Otherwise I think you're really vulnerable.

Lynn Carroll:

Well, I think that's a good point. I think you know from a pure, patient perspective, too is the benefit design that a patient is under, you know, depending upon what type of a program or what type of coverage they have. Is that benefit design going to be, you know, congruent with the program design. So one of the things that we have seen, you know, in this, probably, is a little bit more relevant, probably in some of the more commercial side of things. But is, you know, let's say I have a high, deductible program as a plan as a patient. And I have a significant out of pocket cost, and yet from A, you know value-based program scenario. If I'm in a value based cohort. The question for a provider is, well, there's still a large financial collection from the patient. And yet I'm responsible for an outcome that I have a fixed, you know, revenue stream on and from the flip side of that scenario is the patient saying, Well, if you're going to reduce my choice or narrow my set of choices, why do I have any out of pocket costs?

Daniel J. Marino:

Well, like you said, you've got to be able to show to patients, because at the end of the day patients are gonna have decisions. You've got to show the patient what's in it for them? Well, Lynn, this has been. This has been great, and I know you know many providers. Many of our listeners, for that matter, are really given a lot of consideration to moving into capitation arrangements, and I think his folks become more proficient and successful under these risk based contracts moving into global cap is the is the next step.  

You know, if if real quick, if you were able to give, you know, 30 second piece of advice to our listeners who are interested in, and maybe entertaining or or considering, moving into a capitation based model. What would it be? 

Lynn Carroll:

Well, I think, the first thing certainly is, if you're taking risks, know what you're taking risk on, and that that means you. You definitely have to look from a population health perspective to know of the cohort that's you're suggested to take risk or considering taking risk on. You know what's in there. 

Daniel J. Marino:

Right, understanding it.

Lynn Carroll:

Yep. And sometimes that's a challenge, right? Which is, you know. Say, a proposal comes in, or you're holding up your hand even and saying, I wanna take risk you better know who you're taking it on. So from that perspective, you need to have the data to be able to kind of stratify that population. And again, kind of group it into those buckets of you know who's high touch, high need? Who are, you know, lower need lower touch types of scenarios, so that you can put in the care coordination as well as data sharing pieces that are necessary for success. 

Daniel J. Marino:

Well, I think the data is absolutely key as well as understanding the different aspects of the population. I would also add understanding what's occurring with your participating providers, you know their and so forth. 

A great discussion. Fascinating. I commend you on the work that you're doing, and you know. II think it's I think it's great. I if any of our listeners are interested in getting in touch with you, or learning a little bit more about maybe some of your services, or just sort of connecting with you and your article. How could they get a hold of you? 

Lynn Carroll:

So we always encourage folks to go to our website. HSblox.com. We have a good lot of good content out there. We have a series of 2 min videos where you can learn more about what we do. It's always an important aspect of kind of entertaining dialogue with folks if they can take a quick look at a 2 min video se tends to kind of set up the discussion Pretty good. Also, we tend to publish a lot on Linkedin as well about VBC developments and what's happening.

Daniel J. Marino:

Wonderful. Well, thanks again, Lynn. Fascinating discussion. And you know, obviously, we'll keep this going. Because an area. Again, II see this is kind of the future. So thanks again for coming on the program.

Lynn Carroll:

Yeah, it's great to be here, Dan. Thank you so much.

Daniel J. Marino:

I want to thank our listeners for tuning in today to value based care insights until the next insight. I am Daniel Marino, bringing you 30 min of value to your day. Take care.

About Value-Based Care Insights Podcast

Value-Based Care Insights is a podcast that explores how to optimize the performance of programs to meet the demands of an increasingly value-based care payment environment. Hosted by Daniel J. Marino, the VBCI podcast highlights recognized experts in the field and within Lumina Health Partners