The Key to Transitioning from Fee-for-Service to Value-Based Reimbursement

The switch to value-based reimbursement and value-based care models turn the traditional model of healthcare reimbursement on its head, causing providers to change the way they bill for care. Instead of being paid by the number of visits and tests they order (fee-for-service), providers’ payments are now based on the value of care they deliver. And while the industry waits for the final policy from the federal government, one thing is certain—the trend for value-based approaches will continue.

Much of this change is long overdue and quite exciting because it’s driving improvements to the delivery of care by mandating better care at a lower cost. But for providers and health systems that can’t achieve the required scores, the financial penalties and lower reimbursements create a significant financial burden.

Shifting Revenue Mix: The Rise of Medicare and Medicaid and Value-based Care

The first hospital challenge, shifting revenue mix, is demonstrated in the graph below. The percentage of commercial payers will continue to shrink, while payer types with lower reimbursement rates will increase.

Medicare expenditures continue to grow as the baby boomer population ages. But over the same time period, Medicaid has grown at an even faster rate. This trend will most likely continue as baby boomers continue to age and the Medicaid expansion authorized in the Affordable Care Act is fully implemented.

This change in revenue mix impacts a hospital’s bottom line because Medicare and Medicaid patients generally aren’t profitable. In 2011, the average hospital margin on Medicare patients was -5 percent. A growing proportion of Medicare business puts considerable strain on hospital revenues.

Transitioning to Value-based Payments: Three Key Challenges

The transition from a fee-for-service (FFS) reimbursement system to one based on value is one of the greatest financial challenges for health systems. Although there are too many transition-related challenges to sufficiently cover in one article, here are the top three:

Challenge #1: Reconciling Value-Based Payments in a Fee-for-Service Environment

基于价值的支付合同还处于起步阶段，大多数合同都是根据共享储蓄模式构建的。共享储蓄安排各不相同，但它们通常通过向医疗提供者提供他们实现的任何净储蓄的一定比例来激励他们减少特定患者群体的支出。TheMedicare Shared Savings Programis the most well-known and standardized example of this new model.

Tracking performance in this kind of arrangement is a significant challenge for health systems because it requires keeping track of two very different payment systems simultaneously. Medicare continues to reimburse health systems on an FFS basis; then, at the end of the year, shared savings bonuses are calculated. Medicare benchmarks each provider against the rate of increase for the overall FFS population. If a hospital did better than the FFS population, they get a piece of the savings. Hospitals must operate in the FFS world while attempting to anticipate this value-based bonus.

Tracking shared savings reimbursements that come in at the end of the year requires health systems to be much more sophisticated in their accounting capabilities than most are today. It simply won’t work to account for all payers and all patients in the same way. A hospital has to know every patient in the accountable care organization (ACO), what services they’re getting, and what it costs. An ACO environment requires asking important questions, such as, “For each defined population of patients, what was our financial performance and how did it compare to the contract?” The ability tomeasure performance在这种粒度级别上，将需要比大多数卫生系统更复杂的IT能力。

Challenge #2: Tracking a Wide Variety of Quality Measures

今天许多基于价值的激励和惩罚都依赖于质量衡量。For many years, providers have submitted quality measures for programs such asHospital Inpatient Quality Reporting(IQR),Hospital Outpatient Quality Reporting(OQR), and Physician Quality Reporting System (PQRS). The fact that these measures are now tied to penalties and incentives is new. These new value-based models require providers to prove that they’re meeting quality standards and benefitting patients while cutting costs.

Providers need sophisticated analytics to help them measure financial and quality performance for each patient population. They don’t want to learn that their reimbursement is going to be poor when it’s too late to do anything about it. Providers want to know in the first quarter, so they can improve their performance before the end of the year.

To do this, they need to be able tomeasure performance在连续的基础上。此外，如果他们没有达到质量标准，他们需要能够查明原因:性能是否因设施而异?哪些提供商表现最好，可以从他们那里学到什么?

处理单个患者群体或单个质量测量的这种水平的表现分析是一回事;当你考虑到一个卫生系统必须追踪的措施数量成倍增加时，这就是另一回事了。例如:跟踪30天内的再入院——这是绩效测量中一个很小但很重要的领域。在过去的几年里，医疗保险要求医院跟踪心脏病发作、心力衰竭和肺炎患者的30天再入院率。医疗保险在这一要求上增加了三个额外的人口。许多私营支付人要求卫生系统对其合同中涉及的人群跟踪这一措施。卫生系统还必须跟踪90天的再入院率。这个30天再入院的例子由于无数潜在的质量测量和患者数量而进一步复杂化，表明这个过程可以变得多么复杂。

Challenge #3: Optimizing Margins as Revenue Drops

The transition from FFS to value-based reimbursement will take years—and it will hurt in the short run. Meeting value-based goals requires hospitals to reduce utilization among their populations, therefore reducing their procedure volume and revenue. The following simple graph illustrates this trend:

No specific units of time have been included in this graph because we don’t know how long this process will take. But we do know there will be a transition period, during which time to total revenue will likely decrease because the pressure on a hospital’s FFS revenue will increase faster than it can grow its revenue through value-based reimbursement. And that can be scary.

The Key to Transitioning from Fee-for-service to Value-based Reimbursements

The ultimate key to success in this transition—and beyond—is to constantly wring out costs. With decreasing revenue, hospitals have to improve margins as much as possible. To do so, hospitals need to focus on three key things:

#1: Effectively Manage Shared Savings Programs to Maximize Reimbursement

Hospitals must manage shared savings contracts with expertise to qualify for every possible bonus. Effective management of these contracts not only gets shared savings payments, but also improves quality and lowers costs.

#2: Improve Operating Costs to Deliver Care More Efficiently

In a value-based environment, any investment in streamlining operations andeliminating wastefrom the system goes directly back to the hospital, not the payer. Hospitals must develop the sophistication to understand their cost structure in granular detail. Reducing every category of waste—waste that stems from work that isn’t standardized, unnecessary orders, and patient injury—is absolutely essential for improving margins.

#3: Increase Patient Volume

As hospitalseliminate waste, improve quality, and reduce costs, they will increase patient volume. Payers will see that a given hospital is a top performer and include it in their networks. Payers andeven large employers, such as Wal-Mart, are becoming laser-focused on this issue; they want their employees and members to go to the highest-performing facilities for care and incentivize them to do so. Increasing patient volume is key to counteracting the loss of procedure volume that comes with a value-based system.

An Analytics Infrastructure to Meet These Challenges

卫生系统面临的与过渡有关的挑战似乎是无法克服的。实现医疗数据操作系统(DOS™)创建了一个分析基础，使应对这些挑战成为可能。DOS can’t stop the influx of baby boomers into the Medicare ranks, but it can give the tools and insight needed succeed in the transition to value-based reimbursement:

• Understand the complete cost structure picture.
• Succeed in shared savings arrangements.
• 自动跟踪质量度量。
• Improve performance.
• 简化操作。
• Reduce waste.
• 提高利润率。

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