CEO Power Panel poll shows broad sup­port for value pay

Modern Healthcare - - NEWS - By Joseph Conn and Michael San­dler

More than three-quar­ters of a rep­re­sen­ta­tive sam­ple of the na­tion’s top health­care lead­er­ship back the on­go­ing shift to­ward value-based pay­ment sys­tems, which re­ward providers for what they achieve rather than what they do.

Yet only 20% are will­ing to do away com­pletely with the in­dus­try’s still dom­i­nant fee-for-ser­vice re­im­burse­ment model, ac­cord­ing to the first quar­terly poll of Mod­ern Health­care’s CEO Power Panel.

The 55 mem­bers who par­tic­i­pated in an on­line sur­vey in April are nearly unan­i­mous in their be­lief that Amer­i­cans will see their health­care im­prove as gov­ern­ment and pri­vate in­sur­ers switch to a value-based re­im­burse­ment sys­tem, which was de­fined for par­tic­i­pants as capped, per-pa­tient re­im­burse­ment, bun­dled pay­ments and pay-for-value re­wards or penalty pro­grams. While es­ti­mates vary, any­where from a quar­ter to half of all hos­pi­tal and physi­cian pay now in­volves some form of value-based re­im­burse­ment.

“We should be com­pen­sated for re­sults, not just for do­ing some­thing,” said Chris Van Gorder, CEO of Scripps Health in San Diego.

“I’m en­cour­aged by the early pay-for-value work,” said Dr. Gary Ka­plan, chair­man and CEO of Vir­ginia Ma­son Health Sys­tem in Seat­tle. The switch to value-based re­im­burse­ment is “a good thing,” he said, not­ing that the cur­rent and still-dom­i­nant fee-for-ser­vice pay­ment model con­trib­utes to the high cost of care.

Power Panel mem­bers se­lected value-based re­im­burse­ment as the topic for the first of what will be a quar­terly se­ries of Power Panel sur­veys by Mod­ern Health­care. Be­cause of the time­li­ness of the is­sue, they were also asked about the pos­si­ble out­come of the U.S. Supreme Court de­ci­sion in King v. Bur­well and its ef­fects on their or­ga­ni­za­tions. (See side­bar, p. 8.)

The 55 Power Panel mem­bers sur­veyed rep­re­sent 23 hos­pi­tal sys­tems and in­te­grated de­liv­ery net­works, and seven free-stand­ing hos­pi­tals with a com­bined 85,000 beds; 14 med­i­cal, pro­fes­sional and trade as­so­ci­a­tions; and four in­sur­ers, which, com­bined with the in­te­grated de­liv­ery net­works, cover 87 mil­lion lives.

The group also has mem­bers from three physi­cian or­ga­ni­za­tions, in­clud­ing a clinic, an in­de­pen­dent prac­tice as­so­ci­a­tion and an am­bu­la­tory surgery cen­ter; and a small group of ven­ture cap­i­tal, health in­for­ma­tion tech­nol­ogy, re­tail and ser­vice firms.

While the panel was al­most unan­i­mous in sup­port­ing the move to­ward value-based pay, the fact that just a fifth sup­port elim­i­nat­ing fee-for-ser­vice en­tirely wor­ries some. “I’m con­cerned that we’ll dab­ble around the edges,” Ka­plan said.

Of course, in­te­grated de­liv­ery net­works are among the most will­ing to do away with fee-for-ser­vice, since they al­ready have the skills in­house to man­age ac­tu­ar­ial risk and use an em­ployed-physi­cian model.

“If this is suc­cess­ful, and I ex­pect that it will be over time,” said Bernard Tyson, CEO of Kaiser Per­ma­nente in Oak­land, Calif., “it will change the whole eco­nomics of the value chain about how we think about health­care and the fi­nanc­ing of health­care, which is still pre­dom­i­nantly on a fee-for-ser­vice ba­sis or pay-for-vol­ume.”

When Power Panel CEOs were asked, “Which state­ment best de­scribes your at­ti­tude to­ward value-based re­im­burse­ment mod­els?” more than 3 in 4 (78%) se­lected this choice: “Value-based re­im­burse­ment mod­els should play the dom­i­nant role in health­care re­im­burse­ment, with fee-for-ser­vice medicine play­ing a de­clin­ing and mi­nor role.”

“Every­body feels that the days of fee-for-ser­vice are com­ing to an end,” said Dr. Ram Raju, pres­i­dent of the New York City Health and Hos­pi­tals Corp. “It’s a great idea” to shift to value-based re­im­burse­ment, but “some are quicker to adapt” than oth­ers. Those “on the lower part of the value chain” are still strug­gling to reach the next level, above re­port­ing clin­i­cal qual­ity mea­sures, Raju said. “We need to bring every­body to­gether. We need one glide path.”

Even large physi­cian groups are em­brac­ing the move to pay-for-value, in part be­cause they be­lieve it will im­prove pa­tient out­comes. “I don’t see our cur­rent sys­tem lead­ing to bet­ter care,” said Dr. Joseph Vasile, CEO of the

“We are def­i­nitely mov­ing in the right di­rec­tion.”

Bernard Tyson, CEO Kaiser Per­ma­nente, Oak­land, Calif.

Greater Rochester (N.Y.) In­de­pen­dent Prac­tice As­so­ci­a­tion. He backs a mix of value-based re­im­burse­ment and fee-for-ser­vice. “I still see ar­eas of medicine that lend them­selves bet­ter to fee-for-ser­vice re­im­burse­ment,” Vasile said. “At some level, you’re still go­ing to have to man­age providers and there still has to be some mea­sure for pay­ment and pro­duc­tiv­ity based on how hard you work. Fee-for-ser­vice is still a good mea­sure of pro­duc­tiv­ity.”

When asked about the im­pact that value-based re­im­burse­ment will have on qual­ity of care, the vast ma­jor­ity sur­veyed also be­lieve care im­proves when fi­nan­cial in­cen­tives are bet­ter aligned with pa­tient out­comes. Over half (53%) said the switch to value-based re­im­burse­ment will yield “some­what” higher qual­ity of care, while 40% said it would im­prove care qual­ity “a lot.” Only 7% said qual­ity will stay “about the same.”

“We have been do­ing bun­dled pric­ing on hips and knees since 2010,” said Curt Ku­biak, CEO of the Or­tho­pe­dic & Sports In­sti­tute of the Fox Val­ley, Ap­ple­ton, Wis. Based on his or­ga­ni­za­tion’s ex­pe­ri­ence run­ning an am­bu­la­tory surgery cen­ter,

he be­lieves value-based re­im­burse­ment pay­ments will force providers to im­prove qual­ity “a lot.”

“In our surgery cen­ter, we were able to con­trol vari­abil­ity much bet­ter,” Ku­biak said. “If some­one fixes the pay­ment on you, there isn’t room for er­ror. The qual­ity dramatically has to im­prove to make that care vi­able.”

The group was nearly evenly split on their per­cep­tions about the pace of change. Slightly more than half (51%) ob­served that the U.S. “is ad­vanc­ing rapidly” to­ward value-based re­im­burse­ment, while 49% said value-based pay is “just be­gin­ning” and “is mov­ing slowly.”

There was a sim­i­lar split among CEOs in their at­ti­tudes to­ward the pace of change, with 42% be­moan­ing that pay­ment re­form is mov­ing “too slowly” and 49% see­ing it as ad­vanc­ing “at the right pace.” Only 9% think gov­ern­ment and pri­vate in­sur­ers are mov­ing too quickly to­ward value-based pay.

“I have to go with what I see around me,” said Dr. David Bai­ley, CEO of Ne­mours Chil­dren’s Health Sys­tem in Jack­sonville, Fla., where there is very lit­tle move­ment to­ward value-based re­im­burse­ment. Health­care sys­tems “don’t have the in­fra­struc­ture to eval­u­ate risk yet. We’re not there, ei­ther.”

As an ex­am­ple, Bai­ley said most health­care providers can­not cal­cu­late the real cost of see­ing a pa­tient with lower back pain and his sys­tem can’t ei­ther. “Un­til we know full cost, (we) can’t go full bore,” he said.

“This is cer­tainly not a slow evo­lu­tion,” added Vasile of the Greater Rochester IPA. “Right now, I think we’re bor­der­ing on a revo­lu­tion. Any faster, and things will fall apart.”

On the fi­nan­cial front, health­care CEOs are di­vided over whether the shift to per­for­mance-based pay will im­prove their or­ga­ni­za­tions’ top and bot­tom lines. Us­ing rev­enue as the mea­sure, a nar­row ma­jor­ity (52%) of ex­ec­u­tives in­di­cated value-based re­im­burse­ment will in­crease rev­enue ei­ther “some­what” (43%) or “sub­stan­tially” (9%). But a sig­nif­i­cant mi­nor­ity (27%) in­di­cated they ex­pect their or­ga­ni­za­tion to “lose a lit­tle” (19%) or “lose a lot” (8%). An­other 21% said they will “not be af­fected one way or an­other.”

Raju of New York City’s public hos­pi­tal sys­tem is among those who worry value-based pay will af­fect top-line rev­enue “a lot,” since many pro­grams tie re­im­burse­ment rates to pa­tient-sat­is­fac­tion scores. “We’re try­ing our best to im­prove,” he said. “Qual­ity, that’s no prob­lem. We’re very good at that. Chang­ing the pa­tient-sat­is­fac­tion scores is a very heavy lift.”

The pic­ture gets a bit darker when as­sess­ing the switch’s im­pact on over­all profit mar­gins. While 39% of CEOs en­vi­sion their or­ga­ni­za­tions will ben­e­fit some­what and 6% will profit sub­stan­tially from value-based pay, fully 31% ex­pect to lose some money be­cause of pay-for-value ar­range­ments, while 2% ex­pect to lose a lot.

“In the short run, value-based re­im­burse­ment can re­move waste, al­low­ing you to do things more ef­fi­ciently,” said Bai­ley of Ne­mours. “You’ll have money left over.”

Scripps Health could see a dip in rev­enue and a nar­row­ing of its mar­gin be­cause of value-based pay, ac­cord­ing to Van Gorder. He re­cently an­nounced a switch to a new elec­tronic healthrecord sys­tem for Scripps’ four hos­pi­tals and 37 am­bu­la­tory clin­ics, in part to deal with chang­ing re­im­burse­ment mech­a­nisms.

De­spite their en­thu­si­asm for val­ue­based pay, the Power Panel CEOs see a num­ber of po­ten­tial road­blocks ahead. Head­ing their list is a “poorly de­signed health IT in­fra­struc­ture,” which drew con­cern from 22% of re­spon­dents.

“Right now, most health­care sys­tems have mul­ti­ple elec­tronic health-record sys­tems in place,” said Matthew Aug, CEO of Cox HealthPlans, Spring­field, Mo. “On top of that, they prob­a­bly have mul­ti­ple an­a­lytic tools.”

The Power Panel CEOs also pointed to groups over which they have lit­tle di­rect in­flu­ence when asked about the big­gest road­blocks to value-based re­im­burse­ment. They ranked poor physi­cian en­gage­ment (21%) and pol­icy un­cer­tainty (21%) just be­hind poorly de­signed health IT sys­tems among their con­cerns.

“Right now, most health­care sys­tems have mul­ti­ple elec­tronic health-record sys­tems ... and mul­ti­ple an­a­lytic tools.”

Matthew Aug CEO, Cox HealthPlans, Spring­field, Mo. “Value-based re­im­burse­ment can re­move waste, al­low­ing you to do things more ef­fi­ciently.”

Dr. David Bai­ley CEO, Ne­mours Chil­dren’s Health Sys­tem, Jack­sonville, Fla.

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