Healthcare

Last week, the Department of Health and Human Services (HHS) and the Center for Medicare and Medicaid (CMS) revealed proposed changes to “modernize” and clarify regulations that interpret the Physician Self-Referral Regulations (Stark Law) and the Federal Anti-Kickback Statute. The Proposed Rule immediately highlights a focus on the transition to a value-driven healthcare system, which is in-line with the OIG’s priorities. 

As value-based payment models gain traction, healthcare organizations are feeling pressure to control costs and improve the quality of patient care, all at a time when the supply of physicians is falling short of demand.

Wary of factors that are outside their control, almost two-thirds of healthcare leaders would rather bail out of their accountable care organizations (ACO) than make the leap to a model that includes downside risk.

Risk tolerance is an interesting thing. Those who make the biggest bets often are actually control freaks—maybe because they know that, by having a strong grasp on the factors that influence the deal, they greatly increase the likelihood that they will come out ahead.

The previous installment of this blog series described the CMS Innovation Center and its mission to test innovative payment and delivery models and to implement the MACRA Quality Payment Program (QPP).

The QPP is designed to help achieve HHS’ goal of tying half of Medicare fee-for-service payments to quality or value through Advanced Payment Models (APMs) by 2018. Advanced APMs, one of the two tracks of MACRA, allows physician practices to earn more by assuming some financial risk related to patients’ outcomes. Certain Accountable Care Organizations (ACOs) in the Medicare Shared Savings Program (MSSP), including the new MSSP Track 1+ ACO, qualify as Advanced APMs.

Healthcare providers face $42 billion in cuts in 2018 under Medicare’s traditional fee-for-service program. Those payment rate reductions, which were put in place by the Affordable Care Act, are scheduled to cut deeper with each year—from $53 billion in 2019 to $86 billion in 2022.

Many physicians are subject to participation in the new Merit-Based Incentive Payment System (MIPS) through CMS’s ongoing payment model reform initiatives encouraging providers to deliver better healthcare at lower costs.

CMS is just the tip of the spear. Commercial payers are developing their own pay-for-performance contracts as they slowly transition away from fee-for-service reimbursement. Yet many independent practice physicians and even employed physicians lack a strong strategy to participate in a healthcare environment where the Triple Aim is the ultimate mission.

Last week, I had the privilege of attending the Health Care Advisory Board’s National Meeting in St. Louis, Missouri. One of the topics that really struck me was the last presentation about the importance of building a consumer-focused organization and increasing consumer loyalty.

Government and commercial insurers are transforming payment models from fee-for-service (FFS) to arrangements that include incentives for quality, outcomes, improved patient satisfaction, and reduced cost. In the FFS environment, hospitals, physicians, and other providers have been subjected to insignificant financial risk relative to the risk borne by payers; however, with time, transformed payment arrangements have encouraged, if not required, more providers to assume downside risk. Why? One reason is to hold providers accountable for the cost and quality of care. The table below by The Commonwealth Fund summarizes this need by showing where the United States ranks relative to other industrialized nations in health outcomes and risk factors:

As I help healthcare organizations create effective cost accounting systems, the number one complaint I hear is: “I don’t think this report is accurate” or its second cousin “This just doesn’t look right.” My own father gives me grief because he doesn’t trust accounting systems.

The healthcare industry has been buzzing about payment reform and pay for performance for some time now, especially since the release of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) and the introduction of the Merit-Based Incentive Payment System (MIPS) and Advanced Alternative Payment Models (APMs). The recent release of the MACRA Proposed Rule has further fueled the discussion and has those of us living in the healthcare industry focusing our sights on the items CMS says have value (or impact reimbursement).

Here’s a potentially disturbing statement: “Rural healthcare needs healthcare – not buildings.”

I’ve been watching rural hospitals closely as they cope with the changing healthcare landscape, and I’ve come to believe this statement is true. You might find it disturbing because of its implications – if rural hospitals don’t need buildings, what happens to their staffs, their service, their presence in the community and their stakeholders? And most of all, without a physical presence in a community, what happens to urgent care and its lifesaving role in rural areas? 

With the passage of MACRA in April 2015 we began to get some real clarity regarding Medicare’s plans for moving physician reimbursement from volume-based to value-based. With MACRA set to be implemented over the next few years, now is the time to begin addressing how changing reimbursement will impact physician compensation models. Because future reimbursement will be greatly impacted by physicians’ ability to deliver value and quality, hospitals will need to design compensation models that reward and encourage physician behaviors that support these goals.