CEOs weigh the risks and re­wards of pay­ment re­form

Modern Healthcare - - NEWS - By Alex Kacik

This (higher) level of risk ac­cel­er­ates im­prove­ments in qual­ity and cost, and that’s good for pa­tients.” Dr. Marc Har­ri­son In­ter­moun­tain Health­care The chal­lenge in mov­ing from vol­ume to value is do­ing more with less. It’s not just the providers, physi­cians and pa­tients have in­creased fi­nan­cial risk as well.” Dr. Su­san Tur­ney Marsh­field Clinic Health Sys­tem

Hos­pi­tals and health sys­tems have been slowly wad­ing into al­ter­na­tive pay­ment mod­els and many ex­pect to take a deeper plunge in the next few years. About half of re­spon­dents to Mod­ern Health­care’s most re­cent CEO Power Panel sur­vey said less than 5% of their rev­enue is cur­rently tied to al­ter­na­tive pay­ment mod­els. Within two to five years, nearly 40% of the CEOs ex­pect more than 25% of their rev­enue to be tied to bun­dled pay­ments, ac­count­able care or­ga­ni­za­tions, pop­u­la­tion health ini­tia­tives, value-based con­tracts and other pay­ment re­forms.

“We’ve moved to­ward tak­ing on more risk, now about a third of our to­tal vol­ume,” said Dr. Marc Har­ri­son, CEO of Salt Lake City-based In­ter­moun­tain Health­care. “This level of risk ac­cel­er­ates im­prove­ments in qual­ity and cost, and that’s good for pa­tients.”

Hos­pi­tals have tra­di­tion­ally op­er­ated in a world that re­warded them for each pro­ce­dure and test per­formed. The push to­ward value-based pay­ment mod­els has caused providers to make larger in­vest­ments in in­for­ma­tion tech­nol­ogy, im­prove co­or­di­na­tion across the con­tin­uum and de­liver bet­ter out­comes at lower costs. Ide­ally, suc­cess­ful pay­ment re­form trans­lates to re­duced vari­a­tion, the elim­i­na­tion of un­nec­es­sary tests and pro­ce­dures, and man­ag­ing a pa­tient’s to­tal health, rather than do­ing it episode by episode.

“It forces us to look at the care con­tin­uum dif­fer­ently,” said Julie Tay­lor, CEO of Alaska Re­gional Hos­pi­tal in An­chor­age. “If you are go­ing to get the best out­comes from a value-based pur­chas­ing per­spec­tive, it can’t be done in a silo.”

The shift to value isn’t easy, though. Nearly two-thirds of the CEOs sur­veyed said they are still wary of the fi­nan­cial risk in­volved across all pay­ment re­form. En­gag­ing physi­cians and staff (63%) and re­vamp­ing clin­i­cal pro­cesses (57%) were the next big­gest ob­sta­cles in im­ple­ment­ing new mod­els, ex­ec­u­tives said.

“The chal­lenge in mov­ing from vol­ume to value is do­ing more with less,” said Dr. Su­san Tur­ney, CEO of the Marsh­field (Wis.) Clinic Health Sys­tem. “It’s not just the providers; physi­cians and pa­tients have in­creased fi­nan­cial risk as well.”

Nonethe­less, ex­ec­u­tives are man­ag­ing the grow­ing pains. “We re­or­ga­nized, par­tic­u­larly with our pop­u­la­tion health di­vi­sion, so we can com­pre­hen­sively look at how we are do­ing pay­ment re­form,” said Dr. Rod Hochman, CEO of Ren­ton, Wash.-based Prov­i­dence St. Joseph Health, a 50-hos­pi­tal sys­tem cre­ated by last year’s merger of Prov­i­dence Health & Ser­vices and St. Joseph Health. “It is a jour­ney.”

The CEO Power Panel sur­veys ex­ec­u­tives and lead­ers of hos­pi­tals, in­sur­ance com­pa­nies, physi­cian groups, trade as­so­ci­a­tions and other not-for-profit ad­vo­cacy groups. Of 123 queries sent, 57 re­sponded to Mod­ern Health­care’s sec- ond-quar­ter sur­vey on pay­ment re­form.

Nearly half of the re­spon­dents said they have formed ac­count­able care or­ga­ni­za­tions or are link­ing with other health­care providers to co­or­di­nate care and share fi­nan­cial re­spon­si­bil­ity in qual­ity out­comes.

“New pay­ment mech­a­nisms like ACOs and bun­dled pay­ments, as long as there are qual­ity indi­ca­tors and not just cost mea­sures, can be ef­fec­tive ve­hi­cles for driv­ing change,” said Cathy Ja­cob­son, CEO of Froedtert Health, a Mil­wau­kee-based sys­tem.

ACO pro­po­nents ar­gue that they have great po­ten­tial to en­sure care is de­liv­ered at the right time while avoid­ing re­dun­dant or un­nec­es­sary treat­ment. Yet, wide vari­a­tion ex­ists in how ACOs take on fi­nan­cial risk and set bench­marks for costs and pa­tient out­comes.

“ACOs through the Medi­care pro­gram have had limited suc­cess in pro­duc­ing sav­ings and the sav­ings gen­er­ated that have been shared with providers are of­ten in­ad­e­quate to cover the in­vest­ments providers had to make to be an ef-

We re­or­ga­nized, par­tic­u­larly with our pop­u­la­tion health di­vi­sion, so we can com­pre­hen­sively look at how we are do­ing pay­ment re­form. Dr. Rod Hochman Prov­i­dence St. Joseph Health

Pay­ment re­form may hurt some health sys­tem providers within the in­dus­try that can­not meet the bun­dled pay­ment obli­ga­tions in terms of cost, or qual­ity stan­dards.” Curt Ku­biak Or­tho­pe­dic and Sports In­sti­tute of the Fox Val­ley

fec­tive ACO,” Ja­cob­son said. “Ob­tain­ing timely claims data, whether from a com­mer­cial in­surer or Medi­care, is still an ob­sta­cle we have ex­pe­ri­enced. With­out this in­for­ma­tion, it is very dif­fi­cult to iden­tify high-cost ar­eas to ad­dress or to show you are mak­ing progress.”

About 43% of sur­vey re­spon­dents said their or­ga­ni­za­tions have value-based con­tracts in place; roughly 40% have im­ple­mented bun­dled-pay­ment ini­tia­tives. Nearly 3 out of 4 CEOs said they would con­tinue to sup­port bun­dled pay­ments as long as they were vol­un­tary.

The CMS in March de­layed ex­pan­sion of a ma­jor bun­dled-pay­ment pi­lot, the Com­pre­hen­sive Care for Joint Re­place­ment, and the im­ple­men­ta­tion of its bun­dled-pay­ment ini­tia­tives for car­diac care from July 1 to Jan. 1, 2018. The agency also de­layed the ef­fec­tive date for joint re­place­ment and other bun­dled-pay­ment pro­grams, from March 21 to May 20.

Hos­pi­tal groups have lob­bied for mak­ing the pro­grams vol­un­tary, ar­gu­ing that many hos­pi­tals don’t have the re­sources to ef­fec­tively tackle the care-man­age­ment ser­vices and health in­for­ma­tion tech­nol­ogy the mod­els re­quire.

“Pay­ment re­form may hurt some health sys­tem providers within the in­dus­try that can­not meet the bun­dled-pay­ment obli­ga­tions in terms of cost or qual­ity stan­dards,” said Curt Ku­biak, CEO of the Or­tho­pe­dic and Sports In­sti­tute of the Fox Val­ley, based in Ap­ple­ton, Wis. “High in­fra­struc­ture costs re­lated to fa­cil­i­ties or ad­min­is­tra­tive ex­penses may make it dif­fi­cult for cer­tain health sys­tem providers to com­pete in this new pay­ment struc­ture.”

Even so, man­dated change is com­ing. The Medi­care Ac­cess and CHIP Reau­tho­riza­tion Act re­quires physi­cians to par­tic­i­pate in one of two re­im­burse­ment tracks: the Merit-based In­cen­tive Pay­ment Sys­tem or ad­vanced al­ter­na­tive pay­ment mod­els. About 60% of re­spon­dents said they ex­pect most physi­cians to par­tic­i­pate in the former.

While MACRA could re­duce vari­a­tion and drive qual­ity out­comes over time, it also poses chal­lenges for physi­cians in small prac­tices, said Dr. Gary Ka­plan, CEO of Seat­tle-based Vir­ginia Ma­son Health Sys­tem.

“It could lead to con­sol­i­da­tion of small prac­tices, as they may not have the size needed to drive align­ment of qual­ity mea­sures and in­for­ma­tion sys­tems,” he said.

As health­care lead­ers search for pay­ment mod­els that best fit their or­ga­ni­za­tions, they are keep­ing a close eye on how new poli­cies and reg­u­la­tions could trans­form the health­care land­scape. Around 83% of the CEOs ex­pect the cur­rent ad­min­is­tra­tion to bring more un­cer­tainty into the pic­ture.

“We re­ally don’t know what el­e­ments of the Af­ford­able Care Act will be sus­tained or mod­i­fied,” Ka­plan said. “We just need to fo­cus on our pa­tients and cre­ate value.”

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