Dr Michael Sherman on Performance-Based Risk-Sharing Agreements

Michael Sherman, MD, chief medical officer at Harvard Pilgrim Health Care, discusses the challenges of moving towards performance-based risk-sharing agreements and where they would work best for certain treatments.

Transcript (slightly modified)

What are the challenges of negotiating performance-based risk-sharing agreements?

We’ve been doing risk-sharing agreements with providers for many years. Pharmaceuticals stand out as being a bit different than all other parts of the care delivery continuum. The fact is there is an existing status quo and just as it’s hard to move away from fee-for-service with providers, moving from pay-for-pills to paying for outcomes feels a bit hard. Part of the reason is that pharmaceutical companies haven’t felt the need or the urgency to move in this direction. Now that we have some successes, I think many of them are seeing them as an opportunity, not just as a threat.

Are there certain treatments or disease states where performance-based, risk-sharing agreements work best?

Absolutely, one of the constraints is the disease state. First, there have to be diseases where there is an outcome measure, like reduced cholesterol, like improved hemoglobin A1C for diabetes, like reduced hospitalization. They need to be things where there are objective measures and where they are not impossible or hard to collect. Also, where there is a clear relationship between the treatment and that measure. For cases where there are multiple drug regimens it may be complicated, in cases where the natural course of the disease may be variable it may be hard to do this, and where the impact is many years outed, it’s very hard to do. I estimate there is probably 20% to 25% of drugs where this is a good approach.