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Fee-for-service reimbursement models have contributed to a fragmented behavioral health industry. Substance use disorder (SUD) providers are set to evolve current reimbursement models to alternative payment systems in 2024.
Alternative payment models, which include risk-bearing, bundled payments and shared savings, offer a brighter future for the industry. But taking on risk and working with payers to develop alternative payment models requires strategizing and careful discussion with payer partners, industry insiders told Behavioral Health Business.
SUD treatment provider Recovery Centers of America (RCA) plans to make substantive progress toward alternative payment models in 2024.
The company plans to transition at least 30% of its arrangements with payers to alternative payment models by the end of the year, according to Peter Barbuto, vice president of business development at RCA.
“I would love to exceed that goal,” Barbuto said in a Behavioral Health Business webinar. “I think it’s important for us as providers to understand that we need to take on risk. We need to put our money where our mouth is and allow our outcomes to tell the story.”
Not just value-based care
Recovery Centers of America (RCA) provides treatment for SUD and co-occurring mental health conditions. The company has 10 inpatient facilities and is backed by the private equity firm Deerfield Management Company.
Bundled payments are among the ways providers are looking to upset traditional payment models. Still, these arrangements are distinct from value-based payment models, according to Joe Bond, founder and CEO of Cedar Recovery.
“There is not a value to that,” Bond said. “The payers may have an underlying value to it, but it’s not a reward or risk-based contract.”
Cedar Recovery has nine physical locations in Tennessee as of September 2023. Patients receive both medication-assisted treatment (MAT) and behavioral therapy as part of individualized recovery plans. The company has a telemedicine branch, Studio Health, which offers online mental health treatment.
Value-based care has become the “north star” of behavioral health. Barbuto sees taking on risk through these alternative payment models as a way for providers to maintain and innovate relationships with payers.
“We need to show our worth, and we need to continue to develop these partnerships with our payers because ultimately, at the end of the day, they’re our number one customers,” Barbuto said. “As providers, we want to move and innovate with them.”
Value-based care has already come to the fore in 2024 with the recent release of a new model by the Centers for Medicare & Medicaid Services (CMS).
CMS’s Innovation in Behavioral Health (IBH) Model aims to connect adults with mental health conditions or substance use disorders (SUDs) to physical, behavioral and social supports through “reverse integration,” or the integration of primary health care into behavioral health care.
A fact sheet released by CMS to accompany the announcement of the IBH model specified that the model was created with a transition to value-based care in mind.
“Through a predictable mix of investments and learning supports, [the IBH Model] will create a glide path for community-based BH practices to progress from fee-for-service (FFS) to value-based payments,” the fact sheet states.
The challenges of value-based care
Creating value-based arrangements may be more difficult for existing providers who have historically operated exclusively through fee-for-service models. Companies that “grew up” with value-based arrangements may have an easier time taking on risk and negotiating with payers.
Cedar Recovery also sees opportunities with payers to develop value-based contracts. However, Bond said its outpatient-only model makes a transition to alternative payment models distinct from providers like RCA.
Creating value-based arrangements for companies like Cedar Recovery requires establishing gradual goalposts based on good performance, Bond said.
“We’ve had situations where we’ve done really well and overperformed and then the next year, they move the goalposts on you,” Bond said. “It causes challenges for staffing because then you’re looking at maybe reduc[ing] staff to maintain any sort of healthy business that we were trying to run.”
Other challenges for value-seeking SUD providers include lack of a universal language of outcomes-based measurements, sluggish progress toward necessary technological advancement and potential lack of benefits for payers who experience high patient churn to different health plans.
A leading hurdle for both payers and providers is the lack of industry-level consensus on what measures best reflect the value of care.
There is a hesitance or inability to make the technology changes needed to track care and outcomes. And many payers cite the difficulty of developing a widely applicable reimbursement strategy. Further, value-based care strategies may not translate to benefits for the payer, given the churn of patients in and out of health plans.
Conversations around value-based arrangements need to happen with all types of payer-partners, Bond said, including commercial insurers, Medicaid and Medicare.
“I would say some of the smaller, more boutique managed behavioral health organizations are a bit more laser-focused on [alternative payment models] because they can be,” Bond said. “So we’ve certainly been spending a lot of time with those folks.”
Larger commercial operators are also focused on alternative payment models, however. The “lion’s share” of Cedar Recovery’s value-based contracts are with commercial payers, Bond said.
Meanwhile, RCA has found greater opportunities among government payers.
“The commercial payers are a little slower to move to this,” Barbuto said.
