by Peter Kinhan
There are significant changes underway in the healthcare reimbursement models. While changes are broad and rapid, it is becoming clear that this will feel more like a marathon than a sprint.
US healthcare system is facing significant cost, quality and access challenges. Recognizing these challenges, and catalyzed by the Affordable Care Act, a variety of alternative Fee-For-Value (FFV) reimbursement models have emerged. These models emphasize value (higher quality per unit cost) rather than volume, like one-sided and two-sided Medicare or private shared savings models, bundled payments, partial and full capitation reimbursement models.
But when will the tipping point happen? When will the majority FFV revenue outweigh that of FFS. If this was a marathon, I would say we are still in the early miles when the legs are strong and buoyant. There are still many tests and challenges to come in the mid to late stages of the race.
Early results suggest that the transition from volume to value has not been easy for many providers. CMS ACOs results from PY1 & PY2 show that only 25% of participating ACOs were able to realize shared savings1. Furthermore, ACO data tracked by the Leavitt Partners LLC shows that after an initial start that led to nearly 700 private and CMS ACOs in the last 2 years, the rate of new ACO formation has slowed down2. These ACOs cover less that 10% (nearly 23 Million) lives so far, potentially suggesting that providers are currently “dipping their toes” and large scale adoption is yet to come.
One could make the argument that this trend mirrors a “hype cycle” where the initial expectation from population health is giving way to the realities on the ground and we are in the “trough of disillusionment”. There is no shortage of potential roadblocks that may delay the migration towards of large scale adoption – lack of a clear long term value based care strategy with a predictable business model, misalignment of incentives (physicians, payers, others), ever regulatory landscape, capability gaps. Despite the challenges, there is reason for cautious optimism. The majority of the ACOs improved on 30 out of 33 quality metrics and 25% of ACOs were able to realize shared savings. Given that many of these efforts were essentially pilot projects it would be fair to assume that important capabilities have been built and lessons learned for greater future success.
As the landscape continues to evolve, in addition to internally developing some of the core capabilities, providers will need a dependable partner who will continue to innovate and invest in new capabilities and solutions to best meet the evolving needs. At GE Healthcare, we not only understand the market challenges but also have made population health a core pillar of our integrated care portfolio and strategy. Through CaradigmR, a joint venture between GE and Microsoft, we have augmented our CentricityTM portfolio to offer comprehensive industry-leading population health solutions. Looking ahead, we realize that the journey ahead will be difficult but ultimately rewarding. By continuing to innovate, grow our portfolio and collaborate with our customers, we are progressing to the finish line of transforming healthcare by improving care quality and population health outcomes.
- http://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2014-Fact-sheets-items/2014-11-10.html, December 12th, 2014
- Accountable Care Organization Market Landscape, Leavitt Partners LLC