Leveraging Social Risk To Ensure Equitable, Value-Based Payment

Social risk and healthcare payment

There's a growing recognition of how social determinants of health influence one's health and wellbeing. At the same time, the health system is increasingly moving toward value-based payment models (VBP) which reward quality and efficiency of care over quantity of services.

Amid these developments, researchers and health policy advocates have heightened calls to better incorporate SDoH in VBP models.

“Social risk adjustment is an important way to avoid exacerbating inequity in the healthcare system," write the authors of a Health Affairs article.

Social factors matter for healthcare access

Social determinants of health (SDoH) refer to the conditions and environment in which people are born, grow, live, work and age. From steady work to personal relationships, social, environmental, and economic SDoH factors can greatly influence health outcomes.

Academic research is increasingly documenting these connections. Social factors, including socioeconomic status, were linked to delays in care access for certain knee injuries, impacting knee reconstruction outcomes, pointed out a 2022 study published in Arthroscopy. Social factors, such as loneliness and social isolation in older adults, can increase one's risk of poorer health outcomes, including significantly higher rates of emergency department visits.

Movement to address social factors in healthcare grows

Value-based payment programs often require physicians to assess and address SDoH, explains the American Academy of Family Physicians (AAFP). But VBP models do not adequately adjust or account for how these factors might affect patient outcomes and performance.

Amid growing research on the SDoH, policymakers and health stakeholders are evaluating how these alternative payment models can better account for these factors.

“Research on the impact of social risk factors on health status and outcomes, coupled with the movement toward value-based payment, has created new policy opportunities and imperatives to address SDoH," the AAFP notes in a policy statement.

How do value-based payments incorporate risk?

Value-based payments refers to healthcare payment models that create financial incentives for quality of care and patient outcomes. The model is intended to motivate providers to focus on the quality of healthcare vs. the quantity.

These programs account for patients' health risk factors, such as whether someone has a chronic disease like diabetes. If these baseline health differences are unaccounted for, providers could be financially penalized for accepting sicker patients. That could encourage providers to avoid certain patient populations, further exacerbating healthcare inequities.

Concerns about quality value-based programs mount

As pay-for-performance programs have grown, so has evidence that already beleaguered safety-net hospitals are losing money under these quality-based programs.

For example, there are concerns these value-based care programs unfairly penalize safety-net facilities, which play a major role in caring for the country's most historically underserved populations. The systems that care for a higher proportion of racial and ethnic minority patients are disproportionately shouldering financial risks.

Could adding social risk factors help?

One study has found that adding social risk factors to risk-adjustment models could reduce differences in readmissions and penalties between safety-net hospitals and other hospitals.

“These findings support the use of social risk adjustment to improve provider payment equity and highlight opportunities to enhance social risk adjustment in value-based payment programs," according to a 2022 analysis published in Health Affairs.

Data challenges complicate efforts

But it's not as simple as adding social risk factors into the equation, insist other researchers. The data on social risk factors is not typically collected in a systematic and consistent way, notes this issues briefing from State Health and Value Strategies, a program of the Robert Wood Johnson Foundation. Obtaining the right data for social risk adjustment models “is no small challenge."

Indeed, a Health and Human Services report analyzing the role of social risk in value-based health plans also pointed to the lack of information on beneficiaries' social risks. In the healthcare setting, these factors may be documented in different ways, through screenings or via the notes section of electronic health record forms.

Better and more standardized data collection could help shed light on what's still unclear: Which risk factors are the most powerful predictors of poorer health outcomes and greater costs?

How to address low healthcare utilization

At the same time, other observers caution against relying too heavily on historic data as a predictive tool. The historic data used to predict healthcare spending needs for marginalized communities likely underestimates the true need, point out authors of a 2023 Health Affairs article.

To advance equity, payments for historically marginalized groups must be set above current levels of spending. That's because these patients might use less healthcare resources, despite having greater health needs.

A way to address this discrepancy is to set payments higher for historically marginalized groups in an effort to address the gaps between historic utilization and actual needs. Since the differences likely range by population and circumstance, more research is necessary to differentiate the findings and adjust risk to an appropriate level, study authors say.

Gathering more data & evidence

Those findings coincide with a 2022 white paper from the Duke University Margolis Center for Health Policy, which holds that "incorporating social factors into risk adjustment based solely on historical associations with spending (the approach generally used for other risk adjusters) could reinforce existing structural inequities in access and care despite similar health needs."

Those authors suggest various steps for improving data, such as developing alternatives to measuring healthcare utilization and resources instead of basing them strictly on fee-for-service, traditional Medicare claims.

Adjusting up-front healthcare provider payments

Another approach is to adjust upfront payments to providers who care for people with greater social risk through VBP models. That adjustment provides a response to the extra resources required.

Rewarding providers caring for more at-risk populations who achieve the same performance as peers caring for more advantaged populations is also an approach.

Government looks to new strategies

In March 2023, the Medicare Payment Advisory Commission (MedPAC) called on Congress to adjust aspects of the government's healthcare options, including accounting for beneficiaries' social risk factors, describes a recent article in Healthpayer Intelligence.

The Centers for Medicare and Medicaid Services (CMS) has also suggested a health equity index as part of proposed changes to Medicare Advantage plans. Under the proposal, social risk factors would be considered as part of a health plan's Star Rating, a system that helps consumers select a plan.

ACO initiative could be model for health equity

Another recent initiative looks to improve health equity in Accountable Care Organizations (ACOs). The ACO Realizing Equity, Access, and Community Health (REACH) Model encourages healthcare providers to deliver high-quality, coordinated care to Medicare beneficiaries in underserved communities. This model includes collecting individual-level data on social determinants and directly ties financial incentives to health equity goals.

“More broadly, ACO REACH underscores a call to action for healthcare stakeholders to take several steps as part of a broader framework for addressing equity by going beyond traditional approaches to value-based payment," write the authors of a Health Affairs paper describing the new effort.

Data collection could educate future efforts

More robust data is a key step toward identifying which beneficiaries face social disadvantages, and how different payment approaches could impact health outcomes, the authors write. Given the current gaps and variation in data, ACO REACH is “particularly important."

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