If you’ve ever negotiated a payer contract, you probably focused on convincing that insurer to simply bump up your rates. However, with healthcare reform moving full steam ahead, this might not be the best—or most lucrative—approach. Rather, therapy practices may want to put risk-based proposals on the table (i.e., those that allow for larger or smaller payments based on outcomes). After all, value-based payment models will soon be the new norm, and it could pay—literally—to be ahead of the curve. Looking for a new angle to negotiate—or another way to combat shrinking reimbursements? Keep reading to learn more about implementing a risk-based payment model. Then, be sure to reach out to a healthcare attorney who specializes in these types of arrangements before you embark on any negotiations—or sign a new deal. After all, risk is in the name for a reason.

The New Rules of the Game

Healthcare spending is out of control.

As we wrote in this whitepaper, “healthcare spending in the US has already reached a staggering $3.8 trillion per year. By 2021, that amount is projected to skyrocket to $4.8 trillion—a sum equal to roughly one-fifth of the nation’s gross domestic product (GDP).” If those figures weren’t frightening enough, consider this: “According to this report, ‘Wasteful spending likely accounts for between one-third and one-half of all U.S. health care spending.’ That means Americans are spending somewhere in the neighborhood of $1.5 trillion on health services they don’t need.”

The shift toward pay-for-performance has begun.

So, it’s no wonder that the healthcare powers that be are doing everything possible to curb this out-of-control spending before it gets worse. And that just isn’t possible in a fee-for-service healthcare paradigm—which is why we’re all moving in the direction of a pay-for-performance environment, specifically one where providers are compensated for the quality, rather than quantity, of their services. In other words, the rules of the game have changed, and those providers who can demonstrate that they know how to play—by putting their compensation where their performance is—may very well be in a profitable position.

Outcomes Tracking

Without quality outcomes data, you risk negotiating blind.

But, in order to negotiate a payment model where your compensation is based on your performance, you must first know your, well, performance. Otherwise, you’ll be negotiating blind, and that could lead you into a deal that doesn’t go in your favor. And the only way to know your performance is to establish a comprehensive outcomes tracking program that produces enough objective data about the quality and efficacy of your services that you not only know your own strengths and weaknesses, but also can use that information to support your negotiation efforts.

Outcomes data can prove your value.

As WebPT’s Lauren Mulligan wrote in this post, before this push toward payment reform and comprehensive, provider-initiated outcomes tracking, “…there’s never been a way to tell which providers are higher quality—and thus, worthy of a higher cost.” And WebPT’s Brooke Andrus explained here that payers “measure cost and value using their own data indicators,” which Mulligan said results in “most payers see[ing] physical therapy as a cost to be reduced rather than a valuable treatment option to be leveraged.” But that’s all changing, because with consistent outcomes tracking, PTs can now “indisputably prove that they deliver great results, low cost of care, and high patient satisfaction levels.” If that’s not worth a reimbursement bump, I don’t know what is.

The sooner you start collecting that data, the better.

So, how do you go about implementing a solid outcomes tracking program in your practice? Here are a few tips:

  • Start tracking outcomes now, if you haven’t done so already. Soon enough, your reimbursements will be inextricably tied to your outcomes, whether or not you’re proactively negotiating a deal that works in your favor. In this post, Andrus quotes a Graham Sessions attendee as saying “the providers who will be successful in the new payment environment will be ‘not just those that can adapt, but those who have adapted.’”
  • Opt for standardized tests that providers across the healthcare continuum can use and understand (as opposed to using industry-specific outcome measurement tools). That way, the data you’re collecting remains applicable within the rehab therapy community and beyond.
  • Adopt software that enables you to compare your clinic’s data against national numbers—software such as WebPT Outcomes. As Mike Manzo, PT, MPT, wrote in this post, “The functionality of WebPT Outcomes is incredible. We have 13 outpatient PT offices, and we are now measuring our outcomes as a company against the outcomes of the nation. Each clinic gets a report card and a ranking against the more than 1,200 clinics around the country that are collecting data through this database.” While Manzo uses his clinic’s “strong ranking as a marketing tool when [they] meet with referring physicians, as it illuminates to them the fact that their outcomes will be significantly better (statistically and subjectively) when their patients come to our company versus the competition,” you can also use this type of data—as well as patient satisfaction levels—to negotiate better-than-standard terms with your payers. After all, it’s likely that their beneficiaries will have better outcomes with you than they would with the competition—and thus require less future care (i.e., spending).

The Negotiation Table

Your optimum, minimum, and target goals should drive your negotiation efforts.

Once you’ve collected enough data to know where your clinic stands in terms of its performance, you’ll be in a better position to not only make any necessary improvements internally—such as implement additional training or target your marketing efforts to patients with a specific diagnosis—but also decide on the contract terms you’d like to work toward. In this post, Andrus quoted a Journal of Oncology article in which the author recommends providers establish “an optimum, minimum, and target goal. The optimum is your starting point…the terms you consider ideal…the minimum is the point that must be met for you to sign, and the target is the point at which you would like to end up after negotiation.”

Practice makes perfect.

Then, practice your pitch with a trusted colleague—a pitch solidly backed by the outcomes data you’ve been collecting. If you can demonstrate to a payer that your services are more valuable than those provided by other therapy practices in that payer’s network—and thus, that you will save the payer money in the long run by producing better outcomes and reducing overall healthcare spending—then you’re in a much better position to ask for commensurate compensation. Just remember that a “risk-based proposal” inherently involves risk—as I pointed out at the beginning of this post. So, while you may earn more money for positive outcomes, you may also lose money if your patients’ outcomes don’t stack up. That has to be a gamble that you, your practice, and your practice’s legal counsel are willing to take.

Here’s an example.

Curious as to what a risk-based proposal might look like? According to this resource, it could go something like this: A payer knows that the Affordable Care Act and rising healthcare costs have shot its financial risk through the roof, and it can’t continue to shoulder that burden alone. Instead, the payer wants to share that risk with its providers. As a result, the company may “agree to pay you a base amount for delivering care. If you achieve a higher outcome, [it] will pay you a bonus.” However, “if you achieve a lower outcome, you will only get your base payment. On top of that, if you can show you helped reduce [its] total cost of care relative to last year, [the payer] will share some of that savings with you.” To receive that benefit, though, “you must provide measurable value to [the payer’s] enrollees and [the payer].”

Whether you proactively push for this type of payment model now or wait until it becomes standard, pay-for-performance is coming, and that should be all the motivation you need to get your outcomes collection efforts—and actual patient outcomes—in top form. Sooner or later, your bottom line will reflect the quality of your care.


Have you successfully negotiated a risk-based payment model with a payer? Would you consider doing so? Tell us your thoughts in the comment section below.