Before competing in Olympic swimming, it’s important to start with basic lessons; similarly, behavioral health providers may consider taking strategic intermediate steps before becoming fully at-risk providers.

The move from a fee-for-service model toward risk-based value-based care can be gradual for behavioral health providers. There are a number of alternative payment models that providers can start with to dip their toes into the value-based water. Examples of alternative payment models include everything from bundled payments to pay-for-performance to capitation. 

“I think of value-based care as a continuum. And I don’t think you go from fee-for-service to risk-based value,” Brian Holzer, CEO of Aware Recovery Care, said at Behavioral Health Business’ VALUE event. “I think folks complicate the discussion by thinking it’s zero to 60 without a continuum as you sort of ramp up your speed towards more of a true value-based payment.”

Wallingford, Connecticut-based Aware Recovery provides in-home addiction treatment and operates in Connecticut, Florida, Georgia, Indiana, Kentucky, Maine, Massachusetts, New Hampshire, Ohio, Rhode Island and Virginia. The company has raised a total of about $60.5 million, including a $3.5 million raise in July and a $35 million Series B round in 2023.

Aware Recovery has used a bundled payment method since 2016. Holzer noted that Aware has a home-based model averaging seven months of stay, which makes it very well set up for a monthly approach to billing one bundled payment.

Still, different alternative payment models will fit different types of business. For example, bundled payments may not be a good fit for all outpatient therapy.

“We support people with mild to severe mental illness, but really at the mild end, that’s probably more about performance pay, actually, and saying, let’s ensure we’re delivering high-quality care and  discharging people as quickly as possible,” Jenny Welling-Palmer, chief strategy officer at Thriveworks, said at VALUE. “That’s not appropriate for a bundled arrangement, so I think it’s also very unique to the kind of services you’re providing.” 

Lynchburg, Virginia-based Thriveworks operates 340 offices and has a staff of more than 2,200 clinicians in 49 states and D.C. Founded in 2008, Thriveworks provides online and in-person mental health care to adults, teens and children.

Defining quality

Anytime providers begin to discuss moving beyond fee-for-service models, it’s important to consider how payers and providers define quality in mental health.

Welling-Palmer noted that there are many players in outpatient behavioral health, but it’s hard for payers to differentiate if one is providing exceptional care. These kinds of conversations could help move towards alternative payment models, like bundled arrangements.

“Payers are ultimately trying to reduce their utilization and cost,” Welling-Palmer said. “That’s a lot easier to do if you have higher-acuity members, where you can start saying, ‘If we intervene from the mental health side, we get X outcomes on the physical health side.’ But there is a mild population that still accesses a huge amount of mental health care, and so how are you incentivizing a contract to say, ‘This isn’t going to help you with your total cost of care problem, but we want to ensure is that you’re delivering care in the most efficient way possible, and discharging.’ That’s where you can think about a bundle as well — in that low-acuity population. Payers can say, ‘Get people out in X sessions. We’re not paying for rent-a-friend.'”

While behavioral health still lacks industry standards for behavioral health, moving to a fully risk-based model is difficult for both payers and providers.

There is also the issue of data transparency between payers and providers. For providers to truly understand the value they are bringing to the table, payers will need to share claims data.

“I’m just a little bit skeptical about how we’re going to drive towards a shared view of quality when the discrepancy of data is going to persist until the end of time,” Holzer said.

Holzer explained that providers largely measure clinical outcomes such as GAD-7 and PHQ-9. However, few are able to report utilization reduction data because the payer owns this information. Without this information, providers cannot communicate outcomes data to payers.

“Until it happens, you have providers reporting on qualitative patient-reported, self-reported patient data, and you have providers and payers reporting on utilization reduction data based on their own claims, and they only trust their own claims, not claims from other payers they might have access to,” Holzer said. “So this discrepancy of data, I think, is unfortunately going to delay the path towards access to the lower unit cost and also a shared view on quality.”

As these payer conversations progress, behavioral health providers and insurers may establish new standards for alternative payment metrics.

“One of the measures that typically payers want to look into is your PDC, or proportion of days covered,” Dr. Manjola Van Alphen, chief medical officer at Author Health, said at VALUE. “And when you think of PDC, the standards and the benchmarks are not really built looking at patients with mental illness. They’re built looking at the general population. … Let me challenge the payer even further. Let me take that to somebody who has serious mental illness or who has dementia. Does that benchmark … still actually make sense? No, it doesn’t. So we have large opportunities to start building benchmarks.”

Author Health is a senior-focused mental health company that works on value-based care arrangements. In 2023, it landed $115 million in funding.