BHB Value Panel: A Discussion with Polsinelli

This article is brought to you by Polsinelli. This article is based on a discussion that took place during the BHB Value conference with Lori Oliver and C. Ryan Morgan, shareholders at Polsinelli. The discussion took place on April 26, 2022. The discussion has been edited for length and clarity.

Behavioral Health Business: I’m joined by Lori Oliver and Ryan Morgan. Before we really dive into it, I want to give you guys just a few seconds to introduce yourselves and the area of expertise that you’ll be bringing to the conversation. Lori, why don’t you go ahead and get us started here.

Lori Oliver: Hello everyone. I am a healthcare lawyer who has specialized in value-based care for about the last 15 years. It runs the gamut from physical health through behavioral health and in particular integration of the two.


C. Ryan Morgan: Similar to Lori, we overlap a little bit. I do managed care work primarily. Everything from strategy, contracting disputes, and some deal work. If it involves managed care, I’m involved in it. That’s mostly on the commercial side. By the way, Lori is our more reimbursement-focused expert.

BHB: For our first question, what are the most important legal considerations in value-based care right now?

Oliver: We’re focused on the law for this discussion, so part of it is how are you going to negotiate your contracts in value-based care, but really what are the goals you want to achieve in that? Are you moving towards a population health model? Are you trying to address social determinants of health? All of that is going to determine your strategy.


Morgan: I’m surprised you all showed up to be honest, but our job is to be the bad guy on behalf of our clients. Things like asking what if this worst-case scenario happens is a question that often doesn’t get asked when payers and providers get together talking about partnerships in value-based care because the goal is to provide the highest clinical care to the patient and people see opportunities both clinically and financially to succeed together. Then we come into the room and ask these awkward questions about, “Well, what happens if X, Y, and Z.”

That’s where rubber hits the road for us because all of these value-based care arrangements get papered at the end of the day. No one is doing this on a handshake, and there’s a reason for that. It’s because the contracts matter and details matter, because if that scenario happens you go back to the contract to figure out who’s responsible for it.

BHB: Is there a way that you can see that makes sense to you for behavioral health providers to ease into value-based care?

Oliver: Yes, we get that question a lot from our clients, and I think it’s important to start with what are your goals? It’s easy to say, “Oh, I want to get into the space,” but the ‘why’ you want to get into this space matters, and what do you hope to achieve? For example, if you were saying I want to be structuring the care that I’m delivering within the context of whole person care, and I want to tackle barriers and social determinants of health and marginalized populations, that might lead you to one approach as you dip your toe in the water versus, you’re in a place where you don’t know your numbers and you don’t have good data yet on how you are doing on certain quality metrics, or what are the quality metrics I should be tracking? That approach informs whether you want to dip your toe in the water by forming a partnership with community or medical providers to be part of a clinically integrated network, or do you want to focus on what is the functionality that I need to build to succeed on showing that I provide high-quality care, and be paid for that. A little bit goes back to where you are in your continuum on building the data analytics and the other functions you need to succeed.

The other piece I think about is how do you balance the risk? Because if you’re not getting incentivized to make the journey, it’s harder to get started. You must start somewhere and upside opportunities that you’re chasing, to me is a good place to start. Whether that’s care coordination or quality metrics or both.

BHB: Ryan, in your work, where are you seeing some of the better ways for people to ease into a value-based care approach?

Morgan: You all have probably seen these visuals of the spectrum of value-based care, and I always think of that as a nice little thing that someone can put up on a PowerPoint slide, but really, it’s real. You can’t jump right into population health management as a single facility provider that’s done fee for service for 30 years and hasn’t been looking at your data very closely. It’s not realistic. It’s not going to be successful for anybody. The continuum is there because it works.

The first step for many folks who are thinking about value-based care for the first time is quality payments, just pure cash bonus payments that are on top of, or maybe a little bit at risk through withholding type of payments for achievement of simple quality outcome metrics that are agreed upon. That’s a good first place to start because you can start transforming your care model as a provider from one that had developed for whatever reason in the fee for service environment to one that now thinks about quality as a material component to reimbursement.

BHB: I’m sure you have clients that will come to you with great ambitions, big plans about what they want to do around value. What are some ambitions that you’re seeing that are more common that may be a little unrealistic for people breaking into the space?

Morgan: Well, one that comes to mind for me is providing clients who have a care model that they believe works effectively, and there’s a unique component to it. Maybe they think “We follow-up with our folks after discharge via telephone for three or four weeks, or three or four months or whatever just because it’s the right thing to do, and we would love to get paid for that.” That’s a value-based care effort, but going to a payer and saying, “Hey, we do this thing that’s not in your benefit plan, and we would just love to get paid more for it.” Is usually not a realistic conversation to have.

BHB: Lori, any thoughts to add along that line?

Oliver: Yes, I would add, I’ve worked with a lot of providers for whom it’s their first value-based care contract. They’re very excited about what they can do or what they’re going to do or maybe you’re working with a self-insured employer – avoid too much variation. If you’re driving to evidence-based practices that you can execute across your enterprise, you don’t want to have a lot of payer-specific variation where for one payer you’re tracking X, another payer you’re tracking Y, because as you grow your value-based care portfolio, that variation is going to undermine your ability to succeed.

It’s just very resource intensive, so trying to determine upfront what are the right things that you think you should be tracking, reporting on, and do you have the data to do it? That would be the biggest thing. It is having the data to do what you’re envisioning, and then taking financial risk when you can track and manage it.

Morgan: I think that’s a good point Lori, and it still underscores how new value-based care is in behavioral health, because there isn’t a one right way to do it, and one industry standard way to do it. Making sure that your program isn’t too unique and too much of an outlier is an important consideration for long term success, because you’re setting it up today. Often these programs take a while to realize true financial success and if three or four years from now you realize that that value-based model is something that no other payer is doing, then it can be a headache to have to retool everything to course correct to be where everyone else is.

BHB: Jumping off of the data aspects in value-based care, what are the legal challenges that are present in trying to figure out how to measure the appropriate things? What kind of legal considerations need to come up when a behavioral health organization is trying to figure out the whole data aspect? Is there any legal consideration when it comes to who’s providing the data, who’s sharing the data? When do you share the data?

Oliver: I break this down in four or five buckets, so to speak. First, you obviously have to comply with HIPAA and state law and any unique laws, like CFR Part 2 as you’re sharing data and using it. You’ve got just a fundamental legal framework you’re working within for data sharing from a privacy perspective, and you’ve got all the security pieces because these are large data sets. There’s the third bucket of whose data is it? A lot of people leave their data discussion to the end of the negotiation and I always encourage people to frontload it because the “your data, my data, our data” conversation takes a very long time and you’ll run into antitrust arguments and other types of considerations will be thrown up for why you can’t get the data from a payer and in what form can you get the data.

Can you really manipulate the data in a data analytics platform so that you can be searching proactively for improvement opportunities? Somewhat related is the question around is the overall relationship that you are engaged in put you in the position of being an insurer under state law? You really have to think about: are you a health care provider from a state law perspective or are you tripping into being an insurancer because of the nature of what you’re doing and taking risk?

Morgan: I would focus on the contracting pieces and note that things like agreement on metrics and clearly defining those metrics is important. An earlier panel mentioned empathy as key to success in value based care. But how do you measure empathy? It can be a very important metric and being very clear in advance and aligned with the payer partners and providers on what you’re measuring is extremely important. I’ll just throw in a couple others since we’re talking about contracting, definitions are important, attribution methodologies are important. No provider wants to set up an at-risk model and then get funneled the sickest patients in the payer’s portfolio.

All of these things and the mechanics of how the model works all need to be fleshed out in a value-based contract. Here is just my rule of thumb: if you see a value-based care reimbursement attachment to your contract that’s two pages long, that’s not enough. It’s not even close.

BHB: Then, how should a behavioral health provider go into a negotiation with a payer with confidence? We’ve already outlined a lot of things that should be done on the front end. Is there anything else to add or are there any other highlights that will really give that extra oomph once negotiations get started with a payer?

Oliver: One is really to be honest within your organization about where you are at in the journey. You can have a lot of confidence as you go into a negotiation, if you know what you’re able to do: the good, bad, and the ugly so that you’re negotiating to your strengths and setting the stage for a journey. Staging it with the payer is one approach. Another piece is arm yourself with the right experts, so obviously, lawyers are one of them but actuaries can be very helpful if you have access to the data sets to help you understand the impact of the risk model. I think it’s always helpful to bring your quality person to the table directly who’s able to really talk about what works and what doesn’t in the evidence-based practices world. There are a lot of tips, but I think all of those things can make you feel more prepared that you’ve got the right team at the table at the right point in time.

Morgan: It’s been said over and over, but data, you have to know your data. Providers can make this process go smoother if they have robust data that they can show a payer to convince them that whatever you’re measuring is not just regression in the mean, but something more, it is a quality benefit to the model of care. Having that data before you enter in those negotiations and understanding the strengths and weaknesses of your treatment model will make everything much more fruitful on the negotiation standpoint, because at the end of the day, the payer’s going to want to work with you if you can demonstrate that you can save money. That’s the key but you have to demonstrate it and not just to your standards, but to their standards.

BHB: Before we move on to another question, I wanted to actually drill down on what we talked about already on making sure that a health care provider doesn’t find itself waltzing into acting as an insurer, according to state law. It maybe shouldn’t be to me even as a novice, so surprising that when you’re trying to arbitrage risk in a value-based care model that you’re acting in a way that’s relatively similar to an insurer, but what are some red flags? Is there anything that you can highlight here that would be some warning signs that maybe this arrangement is starting to get close to a typical state definition of what an insurer actually is? I understand its high variability across all 50 states, but any commonalities?

Morgan: That’s a good question, and you hit on one of the keys which is that every state approaches it a little bit differently. But as far as red flags go or at least things that you should consider, one of the common triggers for being an insurance company is paying claims. If you find yourself in a large behavioral health organization that is getting involved in total cost of care, the fiscal health side of things, or you might be entering into unique arrangements with medical providers. The other thing on my mind is not a red flag, it’s just a state, it’s California.


BHB: California.

Morgan: If you know California, you probably know DMHC and they just view regulation differently and there are some special unique licensure categories in California.

Oliver: If you’re taking downside risk, I think you have to pause and ask in the state I’m in,. what does that mean? Particularly if you’re taking risk at a level that you’re looking to reinsure that risk, or you’re looking for actuarial models, I think it’s just worth pausing and saying, does that change my status under state law? In the early days, that question was posed to a lot of state insurers and their answer is evolving as they see the models evolve. I don’t view it as necessarily a barrier, it’s just then you have a whole other layer of regulation you have to comply with.

BHB: Got you. When you are working with investors in the space, do you see a lot of appetite from them when they’re looking at providers that may be to partner with or invest in that are participating in, or at least exploring value-based care? To put that in a specific question, how does a provider either participating in or exploring value-based care impact their potential prospects with an investor?

Oliver: At our firm, I think many of you probably know we have a large M&A practice in behavioral health. We also have a large value-based care practice so we are definitely seeing the intersection in that private equity or others are assessing as they’re looking at targets, where someone is on the value-based care journey, because it takes time and how are they situated with the tools and the data analytics, for example, to do that and is their management team equipped to do that? All of that goes into, at some level, the valuation process. I think it’s an important consideration, particularly if you’re in this space where you’re betting that we actually are going to transform a majority of the market to these spaces then if you’re acquiring behavioral health providers, you either want to know you can help them with that journey or they’re already on the journey.

Morgan: I completely agree. I have started seeing questions about where a target is on the journey or in the behavioral spectrum start to become part of the routine diligence questions – the standard diligence questions that get asked at the beginning of a transaction. I think investors are certainly aware of it, they’re thinking about it, and are at least asking questions.

BHB: Does that in the end help at least a little bit with some valuation? Are investors seeing that as something that’s valuable enough for them to maybe pay a little bit more for or maybe it’s just part of the diligence that you got to ask now?

Oliver: I think of it as going into the assessment of risk. By that I mean, oftentimes when you talk to a lawyer about risk, they’re thinking about how you mitigate the risk. I think private equity is asking, how do I optimize for risk? What risk can this business take that has a reasonable upside that would go into my evaluation assessment? It’s risk oversight – enterprise risk management for lack of a better term, but it’s not how am I mitigating the risk? I think that’s a new emphasis. It’s always been in other areas of the business. Is this good for growth now? Is it good for growth in value-based care and why?

BHB: Ryan, any thoughts there?

Morgan: There are certain organizations out there, private equity and others that are looking to build behavioral health platforms to take advantage of value-based care and to expand population health models. From that sense, absolutely, it’s going to play into valuation. We’ve talked so much about how much of an operational change it requires to go from standard fee for service to value-based care. If you can demonstrate that you’re halfway along that journey or at least somewhere along that spectrum, then that’s less work that the company has to do to integrate a target into a current platform.

BHB: All right. Have you seen any examples of value-based contracts go wrong for behavioral health providers that maybe our attendees should be aware of?

Oliver: Yes.

BHB: Can you guys spill the tea? No, I’m kidding. In all seriousness, we want to know specifically what can go wrong so people can account for it on the front end.

Oliver: Well, I think a lot of the time you overestimate where you’re at in your journey. You have agreed to criteria and metrics that inform how you’re going to be reimbursed and you weren’t quite as ready as you thought. The other is you go into the risk too soon and it goes back to the same issue of not being as ready as you thought you were. There’s a piece in there that no one’s talked about today, and that’s benefit design. Are the incentives properly aligned between the payer and the provider and also the patients?

How are they incentivized to participate in the interventions that you think will add to the triple aim or the quadruple aim? Especially with self-insured employers who have an ability to tailor benefit design a little, it’s worth thinking about how you incentivize the patient to be an active part in their recovery and other places through the benefit design. The copay or deductible percent of the care.

Morgan: Well, none of the deals that I’ve worked on have ever gone bad but I have heard that they do. I echo what Lori says. Folks who get out in front of their skis a little bit and either are overconfident in their own ability to perform or rush into something without understanding what they’re agreeing to. That goes back to my earlier point about being clear in the contract about, what are the targets? There could be a very reasonable and understandable disagreement about what a metric actually measures in hindsight. The two parties could just be thinking about it differently when they sign the contract and it’s important to flesh that out beforehand.

BHB: Lori, any other thoughts?

Oliver: I have one because it does come up a lot and I’m not sure it always leads to failure, but it goes back to the data piece. Even if you have an agreement and you’re getting claims data, and let’s assume you’re on an electronic health record, you have the clinical data, but you’ve got to get it integrated with claims data. That integration process, depending on the tools you use, takes time and may not get to the population health questions you have. Again, it’s like, know how long it’s going to take to optimize that so you can achieve your goals.

BHB: Following up Lori, on your comment on benefit design. If I were imagining myself as a payer trying to talk to a behavioral health provider, and all of a sudden they’re talking about how I should be specifically designing my benefits package, I might be taking a little back like, hey, you take care of the people, I’ll worry about how to set these benefits up.

Are payers receptive to that? Is there going to be a lot of progress on trying to say, “Hey, if there’s a specific population, they need a low deductible to get in our office or no copays, for example, to get into our office in the first place?” Are they open to that in the first place?

Oliver: I think that goes to the partnership that you’re building with the payer. Obviously, if we use the classic, maybe emergency room visits, how do you incentivize a patient to seek urgent care or some other vehicle rather than the most expensive care location they can. I think those are conversations you can have with a payer. If you’ve identified a pattern of utilization that is not actually the best way for them to access care, then asking, is there a barrier to the pathway that you want them to access care is important? With someone here, we were just talking about high deductible plans.

If you’re on a high deductible plan that includes behavioral health so there’s the first catch that it includes it, but is that benefit design discouraging you from seeking certain care because at that point it’s out of pocket versus wellness visits that tend to be covered once a year. Are there things like that in the behavioral health space that you should remove the barriers to because they will get treatment sooner resulting in a hypothetically lower cost?

BHB: Got you. Ryan, any thoughts?

Morgan: I want to ask our payer folks here that type of question because it seems obvious to me that as value-based care grows in this space, the benefit design will have to change. It seems it would be very simple to set up a tiered benefit design where the first tier would provide low copays, low deductibles, maybe even no copays. Then the first tieris populated by preferred behavioral health providers that have robust value-based care programs.

If someone wants to go to a fee-for-service provider for more that is great, they still have that opportunity at a higher co-pay. That just seems something that payers do on the medical side all the time and they could easily implement them. It’s an easy benefit design change that would promote value based care.

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