DiscussionOpinion

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

Relentless Health ValueMay 14, 202629m 37s

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.

About this episode

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 - 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." - The TDABC Solution: Dr. Sivaganesan explains why physicians cannot truly manage risk without Time-Driven Activity-Based Costing (TDABC) to identify condition-specific costs. - 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. - 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. - 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 ✉️ Enjoy this podcast? Subscribe to the free weekly newsletter: https://relentlesshealthvalue.com/join-the-relentless-tribe 🫙 Support the podcast with a small donation to the Tip Jar: https://relentlesshealthvalue.com/join-the-relentless-tribe 🎤 Listen on Spotify https://open.spotify.com/show/6UjgzI7bScDrWvZEk2f46b 📺 Subscribe to our YouTube channel https://www.youtube.com/@RelentlessHealthValue 🎤 Listen on Apple Podcasts https://podcasts.apple.com/us/podcast/feed/id892082003?ls=1 === CONNECT WITH THE RHV TEAM === ✭ LinkedIn https://www.linkedin.com/company/relentless-health-value/ ✭ Threads https://www.threads.net/@relentlesshealthvalue/ ✭ Bluesky https://bsky.app/profile/relentleshealth.bsky.social ✭ X https://twitter.com/relentleshealth/ 00:00 Introduction to this episode. 01:53 Upcoding problems: a previously unpublished clip from <a href="https://relentlesshealthvalue.com/episode/ep505-the-death-of-the-what-is-value-guessing-game-for-clinical-and-plan-decision-makers-ready-to-move-on-with-ahilan-sivaganesan-md" rel="noopener" target="_blank">EP505</a> 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 <a href="https://relentlesshealthvalue.com/episode/ep485-imaging-costs-6-to-11-of-plan-sponsor-spend-how-direct-contracting-can-save-money-and-improve-access-with-cristin-dickerson-md" rel="noopener" target="_blank">EP485</a> 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 <a href="https://relentlesshealthvalue.com/episode/take-two-ep436-lets-talk-about-tpa-and-health-plan-inertia-instead-of-jumbo-employer-inertia-with-elizabeth-mitchell" rel="noopener" target="_blank">EP436</a>, <a href="https://relentlesshealthvalue.com/episode/ep491-incumbent-tpas-and-consultants-getting-called-to-jumbo-employer-client-hq-to-answer-awkward-questions-with-elizabeth-mitchell" rel="noopener" target="_blank">EP491</a>, and <a href="https://relentlesshealthvalue.com/episode/the-euphemism-that-has-become-value-based-care-with-elizabeth-mitchell-summer-shorts-9" rel="noopener" target="_blank">SUMS9</a> 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 <a href="https://relentlesshealthvalue.com/episode/ep462-managing-populations-of-whole-actual-people-who-are-not-the-sum-of-a-bunch-of-different-body-parts-with-scott-conard-md" rel="noopener" target="_blank">EP462</a> (Scott Conard, MD), <a href="https://relentlesshealthvalue.com/episode/ep319" rel="noopener" target="_blank">EP319</a> (Grace Terrell, MD), <a href="https://relentlesshealthvalue.com/episode/ep431-how-accountability-for-outcomes-works-in-the-real-world-with-kenny-cole-md" rel="noopener" target="_blank">EP431</a> (Kenny Cole, MD), <a href="https://relentlesshealthvalue.com/episode/ep409-3-really-cool-innovative-primary-care-bright-spots-and-a-few-notes-for-policymakers-and-payers-with-larry-bauer-msw-med" rel="noopener" target="_blank">EP409</a> (Larry Bauer, MSW, MEd), and <a href="https://relentlesshealthvalue.com/episode/ep495-wait-flip-that-a-crazy-revelation-i-had-about-trying-to-fix-us-healthcare-with-mick-connors-md" rel="noopener" target="_blank">EP495</a> (Mick Connors, MD). 22:23 LinkedIn <a href="https://www.linkedin.com/posts/webermark_its-much-cheaper-to-take-care-of-people-activity-7455586828352675840-AVhM/?utm_source=share&utm_medium=member_desktop&rcm=ACoAAADCWwsBIAvCWvZkUAp_-6C1sQe8tXIX5y4" rel="noopener" target="_blank">post</a> by Mark Weber. 25:05 <a href="https://relentlesshealthvalue.com/episode/ep484-what-are-the-3-most-burning-questions-that-plan-sponsors-have-right-now-with-dave-chase" rel="noopener" target="_blank">EP484</a> 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.

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

Medicare Advantage upcoding and downcoding dynamicsTime-driven activity-based costing (TDABC) for physician risk contractsCherry-picking and lemon-dropping in value-based careHealth equity and social determinants of health under value-based paymentNeutral third-party risk adjustment as a structural solution

Transcript

Episode 511, the tension when clinical teams take on risk for policymakers and others looking to wrestle up future perverse incentives. Today, I speak with Dr. Siva and Dr. Monica Lipson. American healthcare entrepreneurs and executives you want to know talking relentlessly seeking value. Last week, we talked Medicare Advantage with Betsy Seals, and we talked about finding members who a plan can serve well. This makes sense because Medicare Advantage is a capitated program. In other words, Medicare Advantage plans get paid by CMS a per member per month, and they have to keep their expenses lower than the per member per month payment that they are receiving. Now, they will get more money if the patient is coded…

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