Reconciling ASO Bundled Payment Contracts in a Multi-Employer Setting

Submitted by hci3-usr on Friday, October 30, 2015 - 12:00

Newtown, CT – October 30, 2015

It’s pretty difficult for providers to change if more than half the market sits out payment reform – While Medicare and Medicaid (in many states) are stepping up their payment reform implementations, private sector payers are still lagging behind, despite notable exceptions. In a recent blog post, Brad Wilson, BCBS NC’s CEO, urges his colleagues to move faster, and he’s right to do so. The challenge many private sector payers have, however, (and especially the national carriers) is that their book of business is mostly composed of self-insured employers. While in the fee-for-service world that doesn’t matter much, it matters a lot more in new payment models. That’s because the effect of those models can result in the employer owing a bonus to providers at the end of the year, or potentially being owed money. The process of reconciling the plan’s experience with that of multiple ASO accounts is quite challenging and made more so when, rightfully, employers don’t want their individual experience to be “co-mingled” with that of others. Employers that have aggressive and well-designed value based insurance designs or other employee engagement programs might feel that the effects of those programs could be responsible for a better medical cost experience than that of an employer that doesn’t have the same pro-active programs. This partitioning of experience can create a significant barrier to employer participation in new payment models and significantly reduce the pace of transformation of the industry.

What this means to you – When a health plan enters into a risk-based contract with a provider, the implied relationship is one-to-one (provider to payer), and as with most contracts, the volume of business is a factor in the negotiations. When employers look at these risk-based contracts, they also want a one-to-one (provider to employer) to avoid the potential for subsidizing another employer’s bad risk pool, for example. This creates a dilemma for two reasons. First, the many-to-one can result in overpayment of providers in some circumstances, and second, the employer’s individual experience can be potentially biased by a small sample effect. In order to resolve this dilemma and provide a mechanism for health plans to engage employers and employers to actively participate in new payment models, we’ve authored a new Issue Brief. While the focus of the Issue Brief is around bundled payments, it is applicable to other new payment models, including trend rate-based ones. The mechanisms we describe are an accounting construct that enables any employer’s individual experience to be fully reflected in the reconciliations of the new payment models to their ASO accounts, all the while leveraging the health plan’s purchasing clout, and appropriately reflecting the providers’ overall experience with all employers and the health plan. This is not light reading, and will seem complicated for those who are always looking for the magic simple silver bullet, but for those who are serious about finding and implementing real solutions to real problems, we encourage you to read the Brief and to send us your comments and suggestions. There are always solutions to real or perceived barriers to accelerating change, and this one is essential to getting the majority of the market engaged in payment reform.