Jayson Slotnik on the Challenges of 2-Sided Risk and Value-Based Contracts

The organizations that can take on 2-sided risk are usually bigger and that’s not always better for health care, said Jayson Slotnik, partner, Health Policy Strategies, Inc.


Do we need more organizations willing to take on downside risk in order to make real progress in transforming care delivery and realize substantial savings with value-based contracts?

So, value-based cancer care works in 1 of 2 ways. Either you’ve got 1-sided risk or you have 2-sided risk, right? That could be, either one could fit into a value-based contract. One-sided risk is just that, where one side is taking the risk, and usually there’s not a lot of skin in the game on either side. CMS did this with something called the Oncology Care Model [OCM]. And it [produced] some savings, but after a while, quickly flattened out. However, on the other side is the 2-sided risk of value-based cancer care, which CMS tried to do through the OCM. It works somewhat, but again, didn’t have a huge success.

At the end of the day, though, right, to take risk, you need to be big, you need to be large, you need to have sophisticated infrastructure to ascertain the risk, measure the risk, and understand where it’s coming from and correct quickly. On one hand, that sounds great. On the other hand, my personal opinion: that’s actually bad for health care. Because what has occurred over the last, let’s say, 10 years, ever since policies were put in place to incentivize double-sided, 2-sided risk vis-à-vis accountable care organizations, is that these organizations have gotten much bigger.

Hospitals have purchased lots of physicians’ offices in the community, the health payer has gone vertical, and you have 2 very large entities sitting down for a contract. And because they are each large, one can’t live without the other. And so, there is actually an escalation in prices, certainly on the large provider side who says to the payer, “You can’t have a health plan without me being in the network. So here are my rates.” And that’s where they start. And they don’t go right to a value-based contract. It takes a real stiff back pay to push back and try to push it. We have not seen that yet. Because they haven’t gotten that far. They have the flexibility of increasing premiums. And that’s what’s been done so far.

So, at the end of the day, do we need 2-sided [risk] in more organizations? Yes. Do they have to be bigger? I don’t know that that’s a success. Maybe what we need are more affordable tools for a smaller entity to be able to use, to equitize leverage with the health plan, in order to have a value-based contract without increasing premiums.


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