Despite efforts to move the healthcare industry rapidly to value-based contracts, it appears that provider organizations are struggling to make the transition.

Moving to the information systems and data requirements of the new reimbursement system, which rewards more coordinated, value-based care, is proving to be a daunting challenge, as organizations still try to remain economically viable in a fee-for-service world. A recent survey of provider organizations suggests that only a tiny percentage provide more than half of their care under value-based care arrangements, a target that federal agencies have set for the industry.

Meanwhile, nearly two-thirds of respondents said that 10 percent or fewer of their contracts are tied to value-based care initiatives.

The results stand in stark contrast to the hopes of the Centers for Medicare and Medicaid Services. In January 2015, CMS announced that it was rapidly moving to a payment system based on value not volume, setting ambitious near-term goals.

At the time, industry observers knew it would not be an easy transition for providers. Now, responses to a new survey, conducted for Health Catalyst, an analytics vendor, suggest providers are still amassing the tools and expertise they need to take on more value-based care contracts.

“Healthcare providers are struggling because this is a new way of doing business,” says Dan Soule, vice president of product management for analytics vendor Health Catalyst, which is focused on risk-based decision making. “It’s incredibly hard for these organizations to figure out how they provide care under value-based models and yet still support fee-for-service.”

The Health Catalyst survey of healthcare executives, representing 190 U.S. hospitals, shows that a mere 3 percent of health systems currently provide more than 50 percent of the target set by CMS, while just 23 percent expect to meet it by 2019—a year after the agency plans to have more than half of all Medicare reimbursements value-based.

The survey also found that 62 percent of health systems have either zero or less than 10 percent of their care tied to the type of risk-based contracts identified by CMS as “value-based,” including Medicare accountable care organizations and bundled payments.

Earlier this year, CMS reported that it had reached its goal of having more than 30 percent of Medicare fee-for-service payments linked to quality and cost outcomes by the end of 2016—about a year ahead of schedule. And, the agency says it is also on track to have more than 50 percent of Medicare fee-for-service payments in alternative payment models by 2018.

“In the payment arena, we were at zero percent alternative payment models then hit the 30 percent goal, and I think we will reach the 50 percent goal by the end of 2018—or before,” said Patrick Conway, MD, CMS acting principal deputy administrator and chief medical officer.

Conway made the remarks earlier this month at the ONC Annual Meeting in Washington, adding that health IT are the tools that will be used by providers—who are accountable for quality and total cost of care in alternative payment models—to drive better outcomes for patients, which he said is the ultimate goal.

Officials contend that the use of HIT, such as electronic health records, and healthcare analytics are critical pieces for providers to succeed with APMs. “If you want providers, in particular, to be accountable for their outcomes and for the cost of care, then there needs to be good communication among the various patient touch points,” Meena Seshamani, MD, director of the HHS Office of Health Reform, told the ONC annual meeting.

To succeed with risk-based contracting, 52 percent of respondents to the survey cited the importance of analytics; that was more than twice the percentage that mentioned quality improvement as the most important factor in delivering value-based care, the next most frequently mentioned answer.

Despite the importance that hospital executives say they place on analytics, Soule believes that it is a “big hole” in these organizations’ abilities to understand their respective businesses.

“It’s more than analytics. It’s also understanding their costs,” he says, adding that population health management is critical to controlling the high costs and outcomes that come from patients with chronic conditions.

As Soule notes, 5 percent of patients with chronic conditions account for 50 percent of the cost in the Medicare program. “You need to make sense of a lot more data to be successful,” he asserts. “You need to be able to look at the clinical data as well as at the claims or billable kinds of charges in order to determine who the patients are that you should focus your resources on.”

Regardless of the how they plan on achieving success, the survey of hospital executives paints a picture of broad support for the goals of value-based reimbursement. In fact, all but 1 percent of respondents expect their organizations to be engaged in at-risk contracts over the next three years.

When asked at the ONC annual meeting about the industry’s response to this “pivot” to value-based payment, Conway referred to a survey of healthcare CEOs conducted about five years ago in which he said “the majority of them were like ‘this value-based stuff is interesting but I’m not sure it’s real.”

More recently, according to Conway, another survey found that 90 percent now believe that value-based reimbursement is fast becoming a reality, while about a third of respondents admitted that they’re “not sure how to do it—especially, small rural providers.”

Not surprisingly, the Health Catalyst survey conducted in May 2016 found that small hospitals with fewer than 200 beds comprised the majority of those reporting that they didn’t have any at-risk contracts. According to the survey, smaller hospitals are five times less likely than larger organizations to have access to sufficient capital to make risk-based contracting work.

“Most organizations, particularly smaller ones, don’t have a lot of data with which to try and really understand their business—not the least of which is they have no idea what their costs truly are,” adds Soule. “They don’t have a clue.”

Still, Conway said the good news is the healthcare industry now has a health IT infrastructure in place to aid in the drive toward delivery and payment system reform. “The challenge is now how to use that infrastructure for maximal improvement in health,” he concluded.

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