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AHLA's Speaking of Health Law
Cracking the Code: Unlocking the Power of the Value-Based Exceptions and Safe Harbors
Scott Strickland, Shareholder, Hall Render Killian Heath & Lyman PC, Jim Carr, Co-Founder and Partner, InHealth Advisors, and Rachel Polzin, Assistant General Counsel, SSM Health, discuss the value-based enterprise (VBE) framework and the associated exceptions and safe harbors. They cover why the uptick in the framework has been a bit slower than anticipated, ways for health care organizations to take advantage of the VBE exceptions and safe harbors to mitigate risk, the future of traditional co-management arrangements, integrating new compliance processes, and how the Transforming Episode Accountability Model might promote the adoption of VBE. Scott, Jim, and Rachel spoke about this topic at AHLA’s 2025 Annual Meeting in San Diego, CA.
Watch this episode: https://www.youtube.com/watch?v=VBfiNQ8_Aow
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SPEAKER_03:Welcome everyone to our latest uh AHLA podcast recording titled Cracking the Code: Unlocking the Power of the Value-Based Exceptions and Safe Harbors. My name is Scott Strickland. I'm a shareholder with Hall Render in our Raleigh office. And I'm delighted to be here along with my two co-presenters. We previously presented this same topic at the AHLA annual meeting in 2025 in San Diego. So so delighted to be back with my good friends Jim and Rachel to talk more about VBEs.
SPEAKER_04:Hi, everybody. My name is Jim Carr. I am a co-founder and partner of InHealth Advisors. And my work at InHealth focuses on helping folks with uh alignment, compensation, and partnership strategies, and have found that the value-based enterprise framework is a fantastic model for that. So I'm excited to be back with uh Rachel and Scott talking to you today.
SPEAKER_01:Nice. My name is Rachel Paulzine. I'm assistant general counsel with SSM Health. Um I'm here today, though, in my personal capacity, kind of chatting with these guys again about VBEs. And prior to that, I was at CMS, where I, Scott and I, our paths didn't cross, but I just wanted to put it back to Scott so you can kind of give your background as well.
SPEAKER_03:Oh, yeah, absolutely. I'm glad you mentioned it. So we have Once Upon a Time, um, I worked with the HHS Office of General Counsel in our CMS division in the program integrity branch. So that was a mouthful um for the title, but um that was a wonderful experience. And yes, indeed, uh Rachel and I um we did not overlap, but we I think worked with similar folks in the government in advising our client CMS on a range of issues, including with respect to some issues that are similar to the ones where we're that we're gonna discuss here today. So um why don't we jump right in? I think Jim and Rachel, I'd do you think it'd be a good idea to just briefly touch on just what the heck a VBE is for those that may be coming into this like fairly new. We won't spend a lot of time on this. We promised to get into some of the the good stuff as soon as possible, but um thinking it might be helpful to uh just briefly go over that framework. What do you think? Sounds great.
SPEAKER_02:Sounds great.
SPEAKER_03:Um so let's just touch on some highlights here. So VBE, a value-based enterprise, uh, I think the way that I think about it is it's it's a network of participants that are engaging in value-based activities. Um, it doesn't have to be a separate legal entity, although it can be. So it might be an ACO or a clinically integrated network, um, but there are a range of structures uh that can be used to form and establish a VVE. Uh, and it can be formed just uh via contract, and so this can be uh as simple as a hospital and a physician group establishing a VBE through a value-based arrangement and a corresponding governing document. Um I think one of the, well one of the reasons why I think folks were excited when the um final rules came out at the beginning of 2021 that established the value-based enterprise framework and the corresponding um value-based safe harbors and exceptions for the kickback statute and Starquaw, is that this um this allowed providers to come up with arrangements and really be creative in how they how they did this. They could design their own model, their own value-based model. And if they um met the threshold requirements for uh establishing the VVE and um made sure they were um working towards uh permissible value-based purpose. We can get into that in in a second, but um as long as we were meeting these threshold requirements, there were exceptions and safe harbors they could take advantage of, which did not have some of the or do not have some of the traditional safeguards that you would find in the more traditional um safe harbors and exceptions. And so, for instance, these exceptions and safe harbors do not contain a requirement that the arrangement be set at fair market value. Um, there is no set in advance requirement. There's also the parties to the arrangement can potentially allow for and make compensation contingent upon directed referrals to particular providers for the patients in the target patient population, so long as there are there's a series of conditions and exceptions that go along with that. Um, and there's not a broad prohibition on remuneration under the arrangement, taking into account the volume or value of referrals. And so that's I think probably the main reason why folks were excited about these, and it allowed for some increased flexibility in establishing these arrangements that otherwise we wouldn't necessarily have if we were just looking to say the personal services and management safe harbor or in the companion exception in the Star Claw. So that is, I think, um hopefully that's a solid foundation on what a VBE is and why uh it's potentially useful to healthcare organizations. Um, Rachel, I wanted to bring you in because we were talking before the recording, and we this is one of the things we covered in San Diego, is why, even though I think adoption of these safe harbors and exceptions, the use of these safe harbors and exceptions, and adoption of this BV framework is trending upwards over the last few years, it's probably not where we thought it would be at the beginning of 2021. And I wondered if you might speak a little bit to why you think that is, um, maybe through your lens of an in-house counsel to a sophisticated health system, um may or may not be um crazy about going down this road.
SPEAKER_01:Right. Thanks, Scott. So I think too, you know, we've been, I think the VBE, the VBE exceptions are intended to kind of really start a lot of value-based care. But I'll also just admit we're already doing a lot of value-based care. The problem is we're doing it within kind of the traditional framework of the fraud and abuse laws, and I think we're doing okay. So I think there is a little bit of a mindset of, you know, it's working. Yes, we could definitely, you know, I think I'm not trying to say that the traditional fraud and abuse framework doesn't stifle some of the goals of value-based care. It definitely does, and that's why these value-based exceptions have been created. But I think there is a lot of fear of, well, it's it's working for us pretty well. You know, we've been able to do some things. So why would we kind of jump into this unknown? And then, like the three of us have talked about quite a bit. And I think Jim says, you know, the the guidance has been pretty vague. The regulators did a good job of kind of, as Jim says, giving us a nice blank canvas. But I will say that makes us very nervous. So, you know, we're in this space of it's working, yes, there's barriers. We could jump into this new world, but it's a very unknown world. Um, so kind of on the same, on the same token is we we don't really know how regulators are gonna be looking at a lot of this stuff. We don't have very prescriptive guidelines, which gets at least in-house council attorneys a little bit nervous. Um, and then I think too, in a lot of our value-based, our current value-based care models or programs that we're working in, whether they be super complex, like you guys are gonna get into or kind of basic stuff, you know, we do fear complexity and we kind of want to keep it as easy to comply with as we can. And I think sometimes with these new exceptions, you know, there's some of the nuances go away, but we get new nuances, I guess, or new requirements. And again, it could it in some ways, I know you guys will talk about this, but you know, some of the quality metrics and the tracking, that's daunting. And you know, for our compliance teams, it could seem like a whole new world for them. And again, that's complexity, which is gonna create compliance issues with these new arrangements. So that's that's scary. And I think too, just the last thing I'll say is um, you know, the front abuse laws, we've all we're all in this space, so we know them backwards and forwards. And again, I'm not trying to say they're not stifling innovation and value-based care. We all agree they are, but we've also developed a certain level of comfort with those safeguards. And I think for me as in-house counsel, like it's great news. Oh my goodness, we can do directed referrals. That's that seems great, right? That's really gonna help this value-based model succeed in a lot of its goals and purposes and metrics. But that's a really, you know, the safeguards that are going away for that really do create a lot of angst for us. And I think we're trying to balance, okay, those safeguards are gone, but what new ones do we need and what are they gonna look like? And then just trying to trying to balance that, you know, is is this new, these new flexibilities in this new world worth kind of figuring out the new world? And I think it is, but but again, for my seat on the bus, that's a lot. That's a lot to think about. You know, these are packaged as really exciting things, and I know they are, and you guys are gonna share all kind of the exciting things they can do, but it still just seems like a lot for people in in my seat, I think.
SPEAKER_04:I think those are fantastic points you raise, Rachel, and and definitely things that I hear on a daily basis in terms of like sort of the reticence to to go there, if you will. Right. Um, you know, a couple of other things that that stand out. I think number one, and you you kind of hit on this a little bit, is just like I'm not comfortable being, I don't want to go first. I don't want to be the I don't want to be the test case for, you know, this if something about what we're doing is not perfect and and and we get called on, we don't we don't know what's gonna happen because there hasn't been any precedent set for how this is gonna be handled. And so there's like I think a little bit of gunshine maybe is the right word to to say I I don't want to test um the government's willingness to challenge these types of arrangements. Absolutely. I also think there's a little bit of, you know, and and we can talk about this in more detail, but there's a little bit of difference between the stock exceptions and the and the kickback safe harbors, and that's necessary given um what they're intended to do. But I think that has caused a little confusion in terms of do I have to meet, you know, but both a stock exception and a safe harbor, or do I need to fit within a safe harbor? And if it if I do, am I going to be able to? Because the requirements are pretty strict, particularly on like the the care coordination safe harbor where there's a no-cash compensation requirement there, it has to be in-kind compensation. So I think that definitely raises um some concern as well. And then um maybe this is a good transition for us kind of in terms of where we're going with our presentation. But I mean, I I feel like there's this perception that anything you have you do with a VBE has to be complex. And like there's this level, yeah, there's this level of complexity that that comes along with a value-based enterprise. And that can be the case, um, but it certainly doesn't have to be. And I think that was kind of where we were going with our presentation in San Diego was to really try to highlight some cases that really mimic very closely arrangements that folks are doing today, but just putting the protection and the the sort of the belt and suspenders, if you will, of the VBE framework around those.
SPEAKER_03:Yeah, absolutely. I'm glad you mentioned that, Jim, because I do think the I have experienced with uh advising clients, I think some confusion and a little bit of frustration on their part. The confusion is um, well, what the heck what the heck is this VBE um concept? Once they learn a little bit more about it, they get really excited, but sometimes then they get frustrated when they realize, oh, well, what we're doing is not going to fit squarely within the any of the applicable kickback safe armors because we're not no one's taking on risk, or at least not any risk with respect to a payer arrangement. And we would like to provide cash compensation to providers to do certain things. And so I think that is part of, and I promise we've we promised to crack the code and and unlock the possibilities. So we we won't hang on this um this point for too long. But I do think that if we're thinking about reasons why um the um maybe the uptake has been a little bit slower than we would have thought, I think it is that um difference between how the kickback statute and the stark law views um the sets of requirements and what's permitted. And in a lot of arrangements, you're very likely to be able to structure the arrangement in a way where you take um full advantage of a stark exception, but then much like the more traditional world, you're outside of a safe harbor, and then it's just a matter of risk tolerance for the organization. And I think sometimes creating the VBE and getting as close as you can to one of the applicable safe harbors gets you pretty far down the road to a place where you can with a straight face make an argument that there is really no improper intent here and and really it'd be hard to infer in proper intent intent. But without the safety of the safe harbor, I think a fair number of clients that I'm working with are scratching their heads and wondering, well, is this really worth it given what Rachel mentioned as far as like the lack of real history with respect to any enforcement in this area or guidance? So um but with that, I would love Jim um to go down the road a little bit of just um talking through some of maybe the the low-hanging fruit or the maybe the easier ways for um healthcare organizations to actually take advantage of these exceptions in safe harbors and and meaningfully um mitigate or even eliminate risk for some arrangements that they are already in.
SPEAKER_04:Yeah, that sounds great, Scott. Um, you know, I think the the thing that really stands out to me, and you you hit on this in the outset, is is the tremendous flexibility that this framework offers, whether it's in the purposes that you're accomplishing. You know, it can be the traditional, hey, we want to um improve quality, we want to reduce cost, but there's also a value-based purpose around care coordination, and we want to improve uh the care coordination for a given patient population. And there's a fourth one that is, you know, about transitioning to payment based on value instead of payment based on volume. And man, talk about immense flexibility there. I mean, like, you know, this is really just saying, hey, this is this is where we get our sea legs. We we build the muscle memory to be able to succeed when we get to value-based payments. And so we don't have to be taking on a bunch of payer risk um to get into a value-based enterprise. We can use it to do things that help us get there. And so um, to me, those are really like the the introductory use cases to try to figure out, hey, what do we have to do to be successful if we're going to be taking on payer risk in five years or whatever? You know, I mean, let's figure out some pathway to get there so that when we get to that point and somebody comes to us and says, hey, we need you to take risk, or or maybe even better, you've developed the capability that you can go to the payer and say, hey, we're ready to take risk, give it to us, um, which is really where the successful organizations are right now. Um I think that's where you know this framework really positioned you for success. So um I'd be curious to hear from from you, Rachel. You know, kind of what what are you hearing from maybe your colleagues um about um how they might consider utilizing this? Um and um, you know, in general, do you think they're like simple use cases or are they kind of gravitating to the more advanced end of the spectrum?
SPEAKER_01:Well, I was gonna say I think as a starting point, everyone always kind of starts at the advanced, which is maybe why it's so slow, is they think that's what we need to do. We need to think big, we need to kind of jump in head first. But what you both have taught me over the presentations we've done on this and kind of prepping on this is that it actually doesn't need to be a from scratch new thing. It can actually be used to solve a lot of I'll say traditional problems that we all face. You know, call you guys went through examples, but call coverage and your, you know, your troublesome doc that's always an outlier. Like I think that is huge for organizations like mine in terms of I think Word is getting out from your experience of working with clients, and you guys are kind of showing that. And I think that's for some organizations, not all, but I think sometimes that's a a good way to start is that kind of showing them the problems it can solve that you're currently facing and how to how to fix those. And then, like you're saying, Jim, once you get good at it, you kind of have a track record and you get again more comfortable, then you can kind of advance. But that's kind of what I'm hearing recently as people are starting to better understand how they can be used in that way, I guess.
SPEAKER_03:But yeah. I'd just to put a maybe a finer point on one of the examples. I mean, this we talked about in San Diego, one of the examples was the the employment VBE, where you've got, you know, again, like a lot of times when clients are coming to me with an idea for a VBE, we need to pause and think, well, what problem are we trying to solve for? And and do we really have like a because really the the purpose of the VBE is to allow for uh to me the the increased uh flexibility and protection under these new exceptions at safe harbors. And so do we have like a fraud and abuse issue that we feel like you know needs to be addressed? One potential issue for an employee position might be he or she is receiving really increased compensation from these value-based arrangements that that they're participating in through like a health systems ACO or CIN. Uh so they're getting more payments from shared savings, more quality bonuses. And over time, the system is starting to get nervous that, well, this particular position, we were already pretty high with respect to their total compensation. And now here we are, we're moving north of maybe um you know 90% of the um you know relic percentile. And so um we're a little nervous now that we might be actually outside of the um protection of the employment exception. I think that Jim as we and Rachel, as we talked about in San Diego, seems like a great um area for um where VBE can be really helpful. And again, the VBE there is really just the employer, say the hospital and or the system and the physician employee. And we're building in um the value-based arrangement into the employment agreement, and it's really a belt and suspenders approach where we're still using the employment exception. We're also protecting that value-based compensation by using the either the Stark law no-risk value-based exception, or if we're putting some of that compensation at risk for the physician, then maybe the meaningful downside risk exception. And then in that case, for that piece of the compensation, then we're we're not worried about fair market value. And so I think that's a to me, if we're thinking about ways that organizations can think about using these in a very non-complicated way, that's that's certainly one.
SPEAKER_04:How does that approach strike you, Rachel?
SPEAKER_01:I think it's great. You guys, I mean, when you guys, when we started working through examples, I think that was that was goal for me, because admittedly, I did not think they could be used for that. I only was thinking these complex, integrated, integrated models. And so I think that is huge, and I think it's really helpful. And I also one thing we've talked about a lot too is it's somewhat of a role reversal, a little bit for in-house counsel to kind of be thinking, hey, you know, we've got all these foreign abuse laws that we've been harping on you for for years, and now we kind of have an option of maybe throwing some of that out the window, and it is a big role reversal, and again, we're kind of skittish to do that sometimes, but I think this is a great starting point because again, these are problems that we're all dealing with nonstop every single day. And now we do have a great solution that I think is going to be I don't want to say easy to obtain because you guys deal with kind of probably all the heavy lifting it entails, but I think it's kind of like you said, low-hanging fruit and kind of easy wins to get your to get your feet wet.
SPEAKER_03:Yeah. Jim, you I know have um covered this in San Diego, but um the traditional co-management arrangement. Um do you think that is is right for review and maybe transitioning over to a value-based arrangement under a VBE framework?
SPEAKER_04:Yeah, I I almost think that's a perfect use case, Scott. And and I think um, you know, you have to be careful in your selection of value-based purposes and what you're trying to achieve there, because you know, many um co-management arrangements are set up for you know purely internal cost savings. And obviously that's not a permissible value-based purpose, and and the the regulations and the commentary are very explicit about that. Um, but if you're able to, through that co-management arrangement, improve care coordination, improve quality, uh, reduce the cost or the growth in cost to payers, um, transition to payment-based on value instead of volume, then you're hitting the value-based purposes that you need to set up a value-based enterprise. And so, you know, at its core, a co- a service line co-management agreement is really about improving the efficiency of that service line and making sure that the patients of that service line get the best possible care. And that is exactly in line with where the value-based enterprise framework was designed to help. And so the use cases we're seeing out of that really are kind of taking existing co-management arrangements, if you will, and kind of converting them into sort of a VBE-based co-management arrangement. Um, gives you a little bit more flexibility in terms of the compensation. One of the biggest things, you know, physicians hate tracking hours. And with the traditional co-management structure, um, we we're often requiring them to track hours and we're paying them a pretty paltry rate for those hours compared to other things that they do. And so in their mind, they're they're underpaid for that time. And frankly, we don't always do a great job of making sure we've got all those hours tracked and and and it becomes a compliance issue. So um just the flexibility to get away from the you know, hours tracking in and of itself is is huge. Um, and then to be able to more creatively fund the pool, distribute the pool in different ways based upon the value created as opposed to, you know, just ProRado or something along those lines, um, is also things that um seems to be gathering a lot of interest from from clients that we're working with.
SPEAKER_01:Yeah, the one thing I'll add to that too is you know, we said that some of the new VBEs are going to kind of necessitate a little flipping of its head on the in the compliance world. But I think this is an example of where it would be it's just a win-win for everyone. Because like you're saying, right now, the compliance for these arrangements are tracking hours and it's just kind of plug and chug. It's a little bit just kind of making sure we're all doing what we said we'd do under the agreement, but turning it into a VBE arrangement, it really, yes, there's still going to be tracking, but it's I feel like it's more meaningful. You know, the groups are gonna be coming together saying, is this working? Is this going well? Because I think sometimes these relationships can just get kind of you're in it, they take forever to negotiate, you're in it, you're making sure you're in compliance with the agreement, and that's kind of it. But this almost requires this like better engagement to check on it more, I guess.
SPEAKER_03:Yeah, for sure. Oh well, I just want to say that as a as a lawyer in private practice, um, I I feel their pain with respect to tracking hours. Maybe that's a topic for another podcast, but uh for my therapist, I'm not sure.
SPEAKER_04:Um you know, Rachel, I think you raise a really good point there, though. Just and and I don't want to get too far afield from from the you know basis of of our presentation here, but you know, I do think that the compliance processes for um traditional physician arrangements are the word I always use is they're hardwired, right? I mean, like everybody knows what to do, they've got the process ironed out, you go through it, you do all those things, you check the boxes, you you put it in the drawer, and you hope nobody misbehaves and everything's good. And that is really the um the opposite of the value-based arrangement and and the post-effective date monitoring for compliance that you have to do. And and I don't want to minimize um the change that requires to to compliance practices to be equipped to you know, be monitoring outcome measures and and quickly identify if you're not going to be able to achieve the outcome measure, that the outcome measure isn't advancing the value-based purpose anymore. I mean, you've got pretty tight windows to be able to rectify those things. And so, you know, it really requires a very different process. And and I'm curious from your perspective, is that um a daunting thing to take on? And and and Scott, I would love to hear from you in terms of you know clients you've worked with, like how how are they doing that?
SPEAKER_01:That's I'll just start off with I'm curious what Scott's hearing too, because that is a huge piece of this. That's I think that's why we're, you know, like I said, it's it's the best thing for the arrangement. That's what we need. We need to stop these set it and forget it arrangements. It needs to be genuine assessment. Is this working? But that's not the current world, and that is going to ask a lot of us. And I think so much of value-based care is data heavy. So organizations are getting good at data, right? We're we're we're getting good at it, but it hasn't fully translated yet to compliance. You know, we're still trying to figure out what that means, how does how does this all work? How can we pull this and pull that and check this? And so it's a lot. It's it's very daunting. And I think that's why sometimes those smaller arrangements, you know, if the less we need to do, the better. But if we really want to get good at this, you know, it's gonna get complex and we're gonna have to figure it out. So yeah, I'm curious to you guys, what have you been hearing with some of your clients who have who've been in this space for a while? What's working? What's what's gonna be just that thing that everyone's gonna struggle with?
SPEAKER_03:Or I yeah, I think this one is, and it's funny, like um a lot of these arrangements are are in their early stages, and so we're we're we're planning for this. But one of the one of the crucial questions at the outset for me when I'm discussing this with clients is you know, we I mean this is a requirement for just establishing the VVE, but it's critical to land on the appropriate accountable body or person that is um meant to be responsible for financial and operational oversight of the VVE. And you know, that doesn't necessarily have to mean a board, but we've got to, at the front end, make sure that we're identifying the right folks who are truly going to be plugged in with the arrangement and who are who know a little bit um more than say your average person within the system about what's going on on the ground with respect to the arrangement, because they're likely to be the ones that are going. Going to be conducting this really what's an audit at the end of the year to make sure that the value-based activities are furthering the purposes of the arrangement, not resulting in material deficiencies in quality of care. And as Jim, you mentioned that there are some pretty tight windows to review and if you've addressed an issue to change the outcome measure or transition to another one or just scrap the arrangement entirely. And so, yes, I think to me, like one of the key issues with maintaining compliance is to make sure that you've got you've identified up front the appropriate group or person that's going to serve in that role at the outset. Yeah. It's different for different organizations, I think. Um, and it depends too on who the target patient population is and what the purposes of the arrangement are. But so it's it's probably there are going to be different answers depending on what the VBE is intending to accomplish.
SPEAKER_01:And I think too, like we've all agreed and kind of started the presentation on because the regulators haven't really done anything yet. They gave us they gave us pretty broad guidance and they haven't really taken any action on anything, knock on wood, that's good news. But it's also then hard for us too. So I think organizations are probably gonna err on the side of being really conservative with some of this, um, the these requirements. And like I had mentioned to you too, is when we have these flexibilities and the old they they kind of created their own new nuances and the new safeguards, but we're probably gonna maybe overkill some of that, right? You know, we're gonna be heavy on the documentation, making sure we we're documenting that we're doing all this. Maybe in a couple of years we'll realize that's not required. But until the regulators say otherwise, we're probably gonna be, at least from our perspective, you know, we'll be going heavy, heavy on heavy on the documentation, because compliance is kind of unknown right now.
SPEAKER_03:But it's also, I think, important. And so I think I forget whether it was Jim or Rachel, one of you um, I think mentioned just that the you know, there's already a robust like system within health systems for the more traditional compliance um um reviews with respect to maybe physician comp and and just some things that are on the internal work plan probably year over year. But this is something that I think compliance departments they may not even be aware that there is a VVE. And so I think like making sure that you're looping in the appropriate folks in compliance and that this is part of the audit plan or process within the organization. And so there are some folks that know that this exists and can come in the independent of the accountable body, but just as an organization, yeah.
SPEAKER_02:Right.
SPEAKER_03:And it'd be pretty important because otherwise I think they it's probably gonna fly under the radar.
SPEAKER_01:Well, they don't know what they don't know, right? Yeah. And knowing that this looks different, you know, your risk assessment every year, this didn't get caught, this didn't fall into it. Yeah.
SPEAKER_04:Scott, was there a particular um use case that we that we covered in San Diego that that you wanted to highlight today, whether it was um, I think there was one related to um ACO distributions and things like that?
SPEAKER_03:I think well, actually one of them um, because we were talking earlier about just the flexibilities of um these new exceptions in safe harbors, and I think one one of the flexibilities to me is the how many ways there are to establish the target patient population. And that, you know, unlike um say the waivers that CMS and the OIG have come out with with respect to specific Medicare alternative payment programs, here organizations have the flexibility to define the target patient population in a way that cuts across payer. And so we can include commercial patients, Medicare Advantage, Medicaid, Medicare. Um and so one thing I was thinking about, Jim, was just the team model and for hospitals that are participating or and have been mandated that they must participate in team, you know, there there are some um existing mechanisms to protect those sharing payments uh within the context of the team model that live outside of the VBE framework. And so you don't necessarily need the VBE for that piece. But if you're going to, you know, if it makes sense for the organization to put together similar funnel payment arrangements with other payers for these same episodes of care, then all of a sudden I think the VBE framework becomes something that I think could be of great use to organizations as they um are spurred on to um uh to look outside of that Medicare population um with these physicians. And so I wondered if you would have been advising folks on that. I know you've been advising some folks on probably complying with or just getting ready for that team model, but um what do you think about the VBE as a potential mechanism to um protect similar programs outside of team?
SPEAKER_04:Yeah, I I've honestly I feel like team might be sort of the the tipping point for the adoption of VBEs. I really, I really do. I think it's it's that important to the success. Maybe not during track one where it's upside only, but when you get to track two and track three where there's downside risk, um I think it's really gonna be important for folks. I mean, we're talking about 20% plus a quality adjustment. So you know, it can be like negative 22% if you don't perform well. Um, that's massive on some of the most commonly utilized episodes of care in in an acute care hospital. So um seeing tremendous interest in how do we do this better. And we talked about co-management agreements before, and that that's perfect overlay for sort of what you do within the confines of the hospital. But even more than that, um, and and I'll be really curious to hear your thoughts on this, Rachel, is you know, what do I do when the patient gets discharged from the hospital? Because this is a 30-day episode of care in the team model. And so, you know, I've got folks leaving and going to rehab, I've got folks leaving and going to SNF, I've got folks leaving and going home. And I've got different providers in all those areas, and some of those providers are going to help me more in terms of my success in team than others. And so um the ability to sort of create, I know the narrow network is kind of a uh a dirty word, it seems like these days, but um, you know, a network that you know is going to help you succeed both in terms of quality and in terms of of cost um is going to be important for success. And so being able to sort of utilize the directed referral aspect of of the VBE, I think could become really important too.
SPEAKER_01:I I completely agree. And, you know, we've we've talked about this before. These relationships are so critical. I mean, dis to discharge in every in every aspect of the hospital is huge, but with this model, it's gonna be critical. And I think these relationships are key, but like we've talked about that directed referral is a little bit daunting, right? How do we make sure we're honoring patient choice, that things don't get hardwired, or you know, we we can establish these relationships that are going to be critical for the success of the program while also kind of maintaining patient choice, making sure that, you know, the full delivery of care is still compiled, that you know, everything outside of Teams is still being met in normal course. Um, so I think that to me is still kind of an outlying question and something that our, you know, organizations like ours who are participating in teams, I think are still trying to figure out, to be honest. Um, how can we use these and still be comfortable with these relationships in this new space? The other thing I'll say too, you you guys had kind of suggested it. Um yes, maybe the teams, the the waivers embedded in the teams program make some of the VBE arrangements not unnecessary, but you know, you're getting the same thing kind of through those waivers. But I think adding it to the commercial payers, I will say it's really hard to implement things payer specific. I mean, that that can cut both ways, though, right? Some or sometimes the organization is so grateful because, oh, we only have to worry about it for government payers, which is which is true sometimes. It's it's better because it's only them. But all things considered, when you think of case management and all the different parts of our providers that get involved in these processes, then payers specific things get really challenging to operationally.
SPEAKER_04:Tell a physician you want a separate workflow for your Medicare patients versus their own.
SPEAKER_01:My goodness, you guys, it's it's that's what I'm saying. Sometimes, sometimes they want that, right? Oh, we only have to do it in this instance, but operationally it is so challenging. And so I'm always excited to hear things that can do it across the board. It's it's for every patient. Um, so yeah, I think that's a really great point, especially if if people start thinking, oh, we don't need to worry about that anymore because it's all part of the team's program.
SPEAKER_04:So Scott, do you think those gain sharing provisions in in team are as flexible or as useful, if you will, as as potentially the options available to you through a VBE?
SPEAKER_03:Um that is a good question. I think that I believe they're potentially easier to satisfy just in the team context. Um I think they're a little bit clearer uh in the in the reg with respect to the sharing arrangement, and there's a very specific um detailed uh reg titled sharing arrangements that that relates to the team model, and and if we're so I'm feeling a little bit better about um satisfying that regulation with respect to the sharing payments within the team model. But I do think to Rachel's point, and this is where what I was thinking earlier, that I think it's it's hard to just do this for one set of patients and one payer. And so I'm wondering if over time it's going to make sense for hospitals that are in-team to start thinking about doing encouraging or incentivizing the downstream providers to take some of the same actions with respect to other patient populations. And again, if we're talking about financial incentives outside of the team model, then I think the VBE is like very useful to potentially protecting. Now you still you're still going to need to involve the the payer in that, but I think it's it's it's going to make it easier to do the the same things for a broader set of patients. Um I think that's where um I think that's where it could be beneficial. Um any other pearls of wisdom from this group or or uh last words before we uh wind things up.
SPEAKER_04:I I would just say, you know, I I would encourage folks to uh, you know, as problems arise, and and Rachel mentioned this, you know, in-house counsel has really uh developed the ability to become sort of like an internal consultant um with the advent of of this framework. And um you know, don't you don't have to take on your most daunting use case, but when when you identify a problem that, hey, maybe this could be solved um using some of the the flexibilities of the value-based arrangement, explore it and and and see where you can take it.
SPEAKER_01:That's what I was gonna say, is just be be curious, right? Even if it doesn't mean 2026, we're gonna do three new VBE arrangements. It's just get educated, talk to people like you guys who are dealing with this every single day. You know, people just need to get curious, get informed, and then start kind of you know getting your feet wet a little bit.
SPEAKER_03:But hey, I I love ending on that because that seems like good advice just for live in life.
SPEAKER_00:Right.
SPEAKER_03:Yeah, it's me. Forget about the BBE context. Let's let's end on that note. Let's be curious. Yeah.
SPEAKER_02:Yeah.
SPEAKER_03:Um well, uh, I think this was a lot of fun. Uh, I know that I enjoyed it. I'm and speak for Jim and Rachel. I think we we all enjoyed this conversation. Um please uh note that AHLA is having its next annual meeting um in 2026, summer of 2026, probably late June or early July, uh in New York for the first time, um, I think in at least 10 years. And so uh hopefully uh the three of us will be there, but um please consider um joining AHLA at the annual meeting in New York. It should be a lot of fun. And with that, I think we'll sign off. But thank you everyone for listening. We we had a good time.
SPEAKER_02:This is great.
SPEAKER_03:All right, take care.
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