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Value-Based Payment Arrangements During the COVID-19 Pandemic

The ongoing pandemic caused by the novel coronavirus has upended the American health care system in many ways. One of the many effects of COVID-19 will likely be substantial disruption in value-based payment arrangements between health plans and providers. Though this is an issue that is not on the top of providers or payors minds as the health care system prepares to respond to the crisis, there are some simple steps that providers can take now to avoid issues in the future.

Any iteration of value-based payments (“VBP”) is likely to be disrupted by COVID-19; be it shared savings, shared risk, or full risk arrangements. Quality targets and reporting deadlines are likely to be missed as providers move many routine and preventative services to telehealth services or suspend them entirely for the time being, as well as turn the bulk of their clinical focus to COVID-19. Cost savings targets are likely to be missed or at least distorted as providers focus on building out their capabilities to address the pandemic. How will these sudden and substantial changes affect the parties participating in value-based arrangements?

CMS has already announced that it will amend its quality reporting requirements from the fourth quarter of 2019 through the end of the second quarter of 2020.[1] The announcement covers a variety of quality reporting requirements and payment programs with the stated purpose of alleviating reporting requirements and disregarding unrepresentative data created during the emergency. States may choose to follow suit for Medicaid programs. How these government steps would flow down into VBP agreements between managed care plans and providers is not clear and requires analysis of the specific agreements.

Few existing VBP arrangements address how an emergency situation like this pandemic affects quality or cost provisions built into payment methodologies. Some contracts include force majeure clauses – it is a case by case analysis of such clauses to determine whether it excuses performance and, if it did, what the impact of that excused performance would be on payment obligations. Another possible relevant provision in some cost savings formulas in VBP arrangements might be the exclusion of high cost outlier cases.

For parties entering into new VBP contracts, a force majeure argument is unlikely to be useful, because the current crisis is not an unforeseeable event; rather, the parties are entering into the agreement with knowledge of it. It is likely too substantial a task at this urgent time to fundamentally change value-based arrangements that providers have been negotiating up to this point. The parties should, however, at the very least acknowledge that at least the first and second quarters of 2020 will represent highly abnormal performance by providers, and agree that the parties will negotiate in good faith to address that issue when the current emergency subsides. By doing so, the parties can at least enter into value-based arrangements in the normal course of business with some assurance that the parties will act in good faith in recognizing a period that will likely represent a substantial deviation from normal performance.

While assessing the impact of the pandemic on VBP arrangements may not be a priority in the midst of the COVID-19 pandemic, acknowledging the effect it will have in those VBP arrangements and memorializing the need to address this issue after the fact will go a long way in addressing future issues.


[1] https://www.aha.org/advisory/2020-03-22-coronavirus-update-cms-grants-blanket-exceptions-and-extensions-across-its

©2020 Epstein Becker & Green, P.C. All rights reserved.National Law Review, Volume X, Number 90

TRENDING LEGAL ANALYSIS


About this Author

Jackie Selby, Epstein Becker, Health Care Attorney,
Member

JACKIE SELBY is a Member of the Firm in the Health Care and Life Sciences practice, in the firm's New York office.

Ms. Selby:

  • Negotiates agreements by and among managed care companies, insurers, hospitals, health systems, physicians and ancillary providers

  • Advises clients on compliance with state and federal health care laws and regulations

  • Counsels clients on third-party payor reimbursement and operational...

212-351-4627
Gregory R. Mitchell Epstein Becker Health Care Lawyer
Associate

Gregory R.  Mitchell is an Associate in the Health Care and Life Sciences practice, in the New York office of Epstein Becker Green.

Mr. Mitchell:

  • Negotiates and drafts managed care agreements by and among managed care companies, insurers, hospitals, health systems, independent practice associations (IPAs) and similar provider organizations, behavioral health and substance use disorder treatment providers, physicians, and ancillary providers relating to Medicare Advantage, Medicaid managed care, as well as fully-insured and self-insured lines of business
  • Negotiates and drafts agreements relating to innovative payment models, including full-risk/capitation, bundled payment, and shared savings/losses models
  • Prepares agreements relating to the delegation of management functions by managed care entities to third parties
  • Negotiates and prepares managed care agreements between health care providers and managed care entities and insurers for reimbursement in traditional reimbursement models
  • Advises health care clients on general corporate and business transactions

In addition, Mr. Mitchell has spoken and coauthored articles on various health care topics including social determinants of health, encounter data, and the Affordable Care Act’s impact on health insurance and providers. 

Before joining Epstein Becker Green, Mr. Mitchell was an attorney in the Health Services and Corporate Practice Groups of a Long Island law firm.

While attending Emory University School of Law, Mr. Mitchell interned with the general counsel’s office at the Centers for Disease Control and Prevention and with the general counsel for a multinational pharmaceutical company. He was the recipient of the American Bar Association Health Law Section and Bureau of National Affair’s Award for Excellence in the Study of Health Law. Mr. Mitchell also obtained a Master of Science in Bioethics, focusing on clinical ethics, from Union Graduate College and the Icahn School of Medicine at Mount Sinai.

212-351-4763