The Tidal Wave (of Value Based Reimbursement) is here!

Michael Rose

After making it through Meaningful Use Stages 1 & 2 and ICD-10 (attempt 1), I thought that if ICD-10 is actually implement in October 2015, we would finally have room to breathe. For those who were also hoping for a respite, hang on.

I am attending the 2015 #HFMA2015ANI in Orlando, Florida and so far, the main topic on day 1 was Value Based Reimbursement (VBR) – both in the formal sessions as well as in the exhibit area.  As I mentioned above, for the last few years healthcare organizations have been addressing the clinical side of patient care.  Now healthcare reform is forcing a dramatic shift to focus from volume of services (often referred to Fee-For-Service) to value of the services delivered.

Recent government and private payer initiatives are accelerating the pace of change. Under these circumstances, payers are shifting risk to the provider organizations. To successfully manage the risk and VBR providers need to ensure high quality care is delivered to their patient population at a low cost. Hence, managing cost and utilization of care is important for healthcare organizations undertaking risk-based contracts.

Risk-based contracts can range from shared savings to global capitation models. Healthcare organizations are engaging in risk-based contracts with the government and commercial payers such as Medicare Advantage (MA), Medicare Shared Savings Program (MSSP), Bundled Payments, and emergence of narrow network Accountable Care Organizations (ACO).  These types of contracts place the onus of cost control balanced with quality of care on the healthcare organization. Moving to a risk-based contract can challenge organizations because it requires controlling internal cost and coordinating care across the care continuum rather than just the four walls of the organization. Successful organizations will have to control administrative costs to reduce the overall cost of care. Administrative functions such as claims management, member services (enrollment, communications, billing), and health services (case management, disease management, utilization review) need to be performed with minimal redundancy, high automation, and increased transparency.

Healthcare organizations engaging in risk-based contracts will be responsible for managing the delivery of care for a population of patients. The care delivered to the patients can range from routine medical checks to acute inpatient surgery. Such care will be delivered by a network of facilities under the risk-based contract. Managing delivery of care to a patient population in a cost-effective way can be challenging for organizations because they bear the down side risk of providing excessive/ inappropriate care to the patient population. Successful organizations will identify individuals’ care needs, track the care they do and do not receive (such as missed screenings and unfilled prescriptions), anticipate future risks and intervene with appropriate services. Moreover, these organizations will expand their networks for ambulatory and inpatient care, home care and other entities.

If you still not convinced that VBR is here to stay, look at the warning signs:

  • As much as 65% of the US population is expected to be covered by risk-based contracts by 20181
  • 85 percent of all Medicare fee-for-service payments will be based on quality and value in 2016 and set a goal of tying 85 percent of all traditional Medicare payments to quality or value by 2016 and 90 percent by 20182.
  • UnitedHealthcare’s total payments to physicians and hospitals that are tied to value-based arrangements have nearly tripled in the last 3 years. The trend is expected to continue. Payments are expected to increase 20 percent to $43 billion in 2015 and hit $65 billion by the end of 2018.3

Value Based Reimbursement is not a matter of “if” or a matter of “when”.  It’s here now.

  1. GE Analysis, Organization for Economic Co-operation and Development, Leavitt Partners
  2. US Department of Health and Human Services, 2015
  3. UnitedHealthcare Group, February, 2015.

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