Relentless Health Value
EP511: The Tension When Clinical Teams Take On Risk for Policymakers and Others Looking to Rustle Up Future Perverse Incentives, With Dr. Siva and Monica Lypson, MD, MHPE
Why It Matters
The conversation reveals how misaligned financial incentives can worsen health disparities and drive unsustainable cost inflation in Medicare Advantage and other bundled‑payment models. For providers, policymakers, and employers, grasping the true cost of care is essential to design contracts that reward quality without encouraging patient selection, making the episode timely as bundled payments and risk‑adjusted reimbursements expand across the U.S. healthcare system.
Key Takeaways
- •Medicare Advantage pays per member, incentivizing upcoding for higher reimbursements.
- •Time-driven activity-based costing essential for physicians to assess true costs.
- •Without cost transparency, providers risk cherry‑picking patients under bundled payments.
- •Sliding‑scale bundle payments can reduce perverse incentives with cost data.
- •Fee‑for‑service drives disparities; holistic value‑based models improve outcomes.
Pulse Analysis
The episode dives deep into the financial mechanics of Medicare Advantage, a capitated program that pays a fixed per‑member‑per‑month rate. Because reimbursement rises with higher clinical complexity scores, plans have turned to upcoding—assigning sicker diagnoses to boost payments. This creates a feedback loop where health systems also upcode visit complexity, only to face automatic downcoding by the same insurers. The hosts compare this to the risk‑adjustment factor (RAF) used in Medicare, warning that handing a sliding‑scale RAF to large health systems will likely reproduce the same coding wars, driving costs upward while premiums climb.
Against this backdrop, Dr. Siva champions time‑driven activity‑based costing (TDABC) as the only way clinicians can see their true cost structure. By layering patient‑specific and procedure‑specific confounders into a prospective model, physicians can predict the financial impact of bundled payments and avoid being blindsided by "bundle busters." When cost data are transparent, providers can negotiate sliding‑scale bundle rates that reflect complexity, reducing the incentive to cherry‑pick low‑risk cases or lemon‑drop high‑need patients. Without such granular costing, risk‑based contracts become a game of speculation rather than value.
Monica Lipson expands the conversation to the broader promise of value‑based care for underserved populations. She argues that a whole‑patient, "whole‑health" approach—integrating social determinants, preventive services, and mental health—can counteract the disparities amplified by fee‑for‑service incentives. Real‑world examples, such as housing a homeless patient to prevent costly readmissions, illustrate how aligning payments with true outcomes yields both clinical and fiscal benefits. The hosts conclude that sustainable value‑based models require robust data infrastructure, transparent costing, and leadership committed to patient welfare over revenue maximization.
Episode Description
In this episode, Dr. Monica Lypson and Dr. Ahilan Sivaganesan join the conversation to dissect the complexities of value-based payment models and the "perverse incentives" that often follow. By examining the parallels between Medicare Advantage upcoding and sliding-scale bundled payments, Dr. Lypson and Dr. Sivaganesan provide a masterclass on the systemic friction between financial risk and clinical equity.
Key Discussion Themes
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The Upcoding/Downcoding Tug-of-War: An analysis of how Medicare Advantage plans and health systems navigate risk adjustment, and why current models often incentivize "grading your own homework."
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The TDABC Solution: Dr. Sivaganesan explains why physicians cannot truly manage risk without Time-Driven Activity-Based Costing (TDABC) to identify condition-specific costs.
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Selection Bias in Care: A deep dive into the "cherry picking" (selecting low-risk patients) and "lemon dropping" (avoiding high-risk patients) dilemmas that threaten healthcare's moral compass.
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Equity vs. Efficiency: Dr. Lypson explores how value-based care can either bridge the gap for underserved populations or inadvertently widen disparities through structural barriers.
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The Path Forward: Why "whole-person health"—including non-clinical factors like housing—is the ultimate cost-saver, and the necessity of neutral, third-party risk scoring.
=== LINKS ===
🔗 Show Notes with all mentioned links:
https://cc-lnk.com/EP511
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00:00 Introduction to this episode.
01:53 Upcoding problems: a previously unpublished clip from EP505 with Dr. Siva.
05:22 What is the minimum requirement for physicians to go at risk?
07:22 How sliding scale bundle payments can reduce risk for physicians.
10:43 The question covered in the upcoming episode.
13:19 Is value-based care good for underserved communities?
15:01 "If you create perverse incentives, you actually might make known healthcare disparities worse … to meet the demand's value." —Dr. Lypson
16:18 "There actually might be systematic and structural ways that the healthcare system might say … we're not interested in taking care of you." —Dr. Lypson
16:51 "The incentive to have a good outcome is not there; the incentive to have another visit is there." —Dr. Lypson
17:15 EP485 with Cristin Dickerson, MD.
17:49 "The only indictment I have on the fee-for-service system is that it's gotten us to where we are right now." —Dr. Lypson
18:41 "If you don't have any connection in that system, even the provider trying to … provide a good outcome might be disconnected because the system is not in place to … connect the dots." —Dr. Lypson
19:15 EP436, EP491, and SUMS9 with Elizabeth Mitchell.
19:28 What are the must-haves for a value-based system that create the patient outcomes we need?
19:51 What is a whole health model?
22:00 EP462 (Scott Conard, MD), EP319 (Grace Terrell, MD), EP431 (Kenny Cole, MD), EP409 (Larry Bauer, MSW, MEd), and EP495 (Mick Connors, MD).
22:23 LinkedIn post by Mark Weber.
25:05 EP484 with Dave Chase.
25:31 Why we need to fix the structural issues if we want to fix health.
26:00 Why a patient's bias is the one we want in the room.
27:36 Stacey's conclusion on this week's episode.
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