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
This episode explores the deep tension in value-based care between providing fair payment for clinical complexity and creating perverse incentives for upcoding, cherry-picking, and lemon-dropping. Hosts and guests Dr. Siva and Dr. Monica Lypson argue that physicians cannot fairly take on risk without transparent cost data, and that risk-scoring patients must be handled by neutral third parties rather than biased stakeholders. The conversation ultimately lands on whole-person health and detached arbiters of patient complexity as potential paths forward.
Summary
The episode opens by revisiting a prior discussion on Medicare Advantage upcoding, where plans receive higher per-member-per-month payments for sicker patients, creating incentives to overstate patient complexity. The host notes the irony that some of these same plans then automatically downcode health system billing, leading to an adversarial 'bot war' of competing upcoding and downcoding that does nothing to reduce premiums or improve care.
A clip from a previous conversation with spine surgeon Dr. Ahilan Sivaganesan (Dr. Siva) introduces time-driven activity-based costing (TDABC) as a prerequisite for physicians entering at-risk contracts. Dr. Siva argues that without knowing their true costs prospectively and at a patient-specific level, physicians are 'jumping blind into an abyss' when accepting bundled payments. He proposes sliding-scale bundle payments tied to verified cost distributions as a way to avoid cherry-picking the easiest patients while still being compensated fairly for complex cases.
The host then surfaces a core tension: the very mechanisms promoted in value-based care — provider risk, patient selection, sliding-scale payments — are structurally identical to the cherry-picking and lemon-dropping behaviors that critics use to oppose physician hospital ownership and other arrangements. This contradiction, the host argues, has not been confronted directly enough in healthcare policy discourse.
The conversation with Dr. Monica Lypson extends this tension into health equity. She argues that value-based care, in theory, is better suited than fee-for-service to address social determinants of health, but that poorly designed incentives could worsen disparities by enabling systems to systematically exclude hard-to-serve populations — not always overtly, but through structural choices like limited office hours. She uses the example of a homeless patient with recurrent infections whose care costs far exceed what housing him for a year would cost, yet siloed funding streams prevent the obvious fiscal solution.
The host synthesizes these threads by arguing that 'whole person health' — already practiced in settings like the VA and some FQHCs — represents a better framework, because it reframes social spending as a cost-saving measure rather than a charitable one. Critically, the host and Dr. Siva conclude that risk adjustment frameworks and sliding-scale bundle payments must not be self-reported by the entities being paid. Instead, neutral third-party arbiters — analogous to credit scoring agencies or weights-and-measures bodies — should calculate patient complexity using ground-truth data that cannot be gamed. The host speculates that predictive analytics using behavioral and geolocation data may already be more accurate than chart reviews for this purpose.
Key Insights
- Dr. Siva argues that physicians cannot ethically or practically enter at-risk contracts without prospective, patient-specific cost data, making TDABC a prerequisite — not a luxury — for value-based care participation.
- The host identifies a foundational contradiction in healthcare reform: the same patient-selection incentives used to condemn physician hospital ownership are structurally embedded in the provider risk-taking models being promoted as the solution to fee-for-service failures.
- Dr. Lypson argues that value-based care can worsen health disparities if incentives are poorly designed, noting that systemic exclusion of complex patients often happens structurally — through office hours or access policies — rather than through overt discrimination.
- Dr. Siva contends that handing health systems sliding-scale bundle payments based on self-reported clinical complexity is functionally equivalent to giving them their own risk adjustment framework, and predicts the same upcoding abuses seen in Medicare Advantage would follow.
- The host and Dr. Siva conclude that risk-scoring patients must be handled by detached, neutral third parties using ground-truth data outside the control of financially incentivized parties — drawing an analogy to credit scoring agencies — as the only structural way to reward honest actors.
Topics
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