Hospitals Expect Rapid Change to Value-based Contracts
Hospitals are expecting a rapid shift to value-based contracts, according to results of a new survey by Kaufman Hall, a Skokie, Ill.-based management consulting and software firm.
Hospitals are expecting a rapid shift to value-based contracts, according to results of a new survey by Kaufman Hall, a Skokie, Ill.-based management consulting and software firm.
The survey of about 70 clients earlier this year found that many hospitals already participate to some degree in value-based reimbursement. Some 42 percent of respondents reported in February that value-based contracts represented 10 percent or more of their revenue, compared with only 21.6 percent six months earlier. Asked to project ahead 24 months, 22.4 percent of respondents said they expected these contracts would represent half of their revenue, compared with only 7.4 percent that had that expectation six months earlier.
A lot of hospital-centric provider models have been focused around fee-for-service, and their strategies revolved around that to drive profitability, says Robert York, senior vice president for the firm. Its no longer a question of why we have to change; people are moving in this direction. Theyre taking these arrangements in a trial-and-error fashion.
More providers are viewing the movement toward value-based contracts as inevitable, said Mark Grube, managing director of Kaufman Hall. As the shift from volume to value gains momentum, hospitals and health systems need to move quickly to understand the likely trajectory in their markets, to identify their desired role, and to make the significant structural and operational changes needed to succeed.
Also See: How Analytics Takes the Unknowns Out of ACOs
ACOs deals and other value-based payment approaches emphasize completely different incentives than fee-for-service contracts, which yield more money to providers when they give patients more medical services; traditionally, the higher the acuity level of services, the more money it costs. No payment mechanism over the past 30 years has been able to control volume-based reimbursement.
But payers, led by the federal government, are moving in the opposite direction with value-based payment approaches. For federal government health programs, the aim is to spend our health care dollars more wisely, so ultimately people can live healthier lives, the Centers for Medicare & Medicaid Services announced in late January. As of December, CMS reported that the Medicare Shared Savings Program (MSSP) had 405 ACOs serving 7.2 million people. The ACO approach was rolled out only three years before.
In its January announcement, Health and Human Services Secretary Sylvia Burwell said HHS has a goal of tying 30 percent of fee-for-service Medicare payments to quality or value through alternative payment models, such as Accountable Care Organizations, or bundled payment arrangements by the end of 2016, and tying 50 percent of payments to those models by the end of 2018. Further, HHS wants to tie 85 percent of all traditional Medicare payments to quality or value by 2016 and 90 percent by 2018 through the Hospital Value Based Purchasing and Hospital Readmission Reduction Programs.
Further, in March, CMS announced the creation of next generation ACOs, a model that asks participants to take on more financial risk with the possibility of obtaining a greater reward.
Provider organizations have struggled with some of the early ACO arrangements. CMS data found that only 15 of 32 ACOs that participated in an early test of the approach saved enough money to gain a share of the savings with the Medicare program. Further, only 19 of these organizations are still participating in the Pioneer ACO Model Program.
Providers were not ready in a couple different ways, says Linda Lockwood, advisory services solution director for CTG Health Solutions, a Buffalo, N.Y.-based consultancy. They were not ready within the structure of their physician practices, because they were used to living in a fee-for-service world. And they were not set up to deliver care in a comprehensive way, nor did they have the technology to support that shift.
Rethinking how care is delivered is a significant challenge for providers, Lockwood emphasizes. Its a mind shift, particularly for physicians. Where we have seen risk-sharing succeed, organizations have used a patient-centered medical home model, centered around having the patient in partnership with the provider.
The survey of about 70 clients earlier this year found that many hospitals already participate to some degree in value-based reimbursement. Some 42 percent of respondents reported in February that value-based contracts represented 10 percent or more of their revenue, compared with only 21.6 percent six months earlier. Asked to project ahead 24 months, 22.4 percent of respondents said they expected these contracts would represent half of their revenue, compared with only 7.4 percent that had that expectation six months earlier.
A lot of hospital-centric provider models have been focused around fee-for-service, and their strategies revolved around that to drive profitability, says Robert York, senior vice president for the firm. Its no longer a question of why we have to change; people are moving in this direction. Theyre taking these arrangements in a trial-and-error fashion.
More providers are viewing the movement toward value-based contracts as inevitable, said Mark Grube, managing director of Kaufman Hall. As the shift from volume to value gains momentum, hospitals and health systems need to move quickly to understand the likely trajectory in their markets, to identify their desired role, and to make the significant structural and operational changes needed to succeed.
Also See: How Analytics Takes the Unknowns Out of ACOs
ACOs deals and other value-based payment approaches emphasize completely different incentives than fee-for-service contracts, which yield more money to providers when they give patients more medical services; traditionally, the higher the acuity level of services, the more money it costs. No payment mechanism over the past 30 years has been able to control volume-based reimbursement.
But payers, led by the federal government, are moving in the opposite direction with value-based payment approaches. For federal government health programs, the aim is to spend our health care dollars more wisely, so ultimately people can live healthier lives, the Centers for Medicare & Medicaid Services announced in late January. As of December, CMS reported that the Medicare Shared Savings Program (MSSP) had 405 ACOs serving 7.2 million people. The ACO approach was rolled out only three years before.
In its January announcement, Health and Human Services Secretary Sylvia Burwell said HHS has a goal of tying 30 percent of fee-for-service Medicare payments to quality or value through alternative payment models, such as Accountable Care Organizations, or bundled payment arrangements by the end of 2016, and tying 50 percent of payments to those models by the end of 2018. Further, HHS wants to tie 85 percent of all traditional Medicare payments to quality or value by 2016 and 90 percent by 2018 through the Hospital Value Based Purchasing and Hospital Readmission Reduction Programs.
Further, in March, CMS announced the creation of next generation ACOs, a model that asks participants to take on more financial risk with the possibility of obtaining a greater reward.
Provider organizations have struggled with some of the early ACO arrangements. CMS data found that only 15 of 32 ACOs that participated in an early test of the approach saved enough money to gain a share of the savings with the Medicare program. Further, only 19 of these organizations are still participating in the Pioneer ACO Model Program.
Providers were not ready in a couple different ways, says Linda Lockwood, advisory services solution director for CTG Health Solutions, a Buffalo, N.Y.-based consultancy. They were not ready within the structure of their physician practices, because they were used to living in a fee-for-service world. And they were not set up to deliver care in a comprehensive way, nor did they have the technology to support that shift.
Rethinking how care is delivered is a significant challenge for providers, Lockwood emphasizes. Its a mind shift, particularly for physicians. Where we have seen risk-sharing succeed, organizations have used a patient-centered medical home model, centered around having the patient in partnership with the provider.
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