In 2018, the Health Management Academy conducted phone interviews for its quarterly strategic survey among leading health system executives including CEOs, CFOs, COOs, CMOs and CNOs. Two key findings from the survey were:

1. Fee-for-service payments still account for the majority (78 percent) of care delivery among responding health systems.

2.Forty-six percent of responding executives described their organization’s pace of change toward value-based payments as quick or very quick, up 14 percentage points from the second quarter of 2018.

3. Health system executives expect a modest growth in value-based care, projecting an average of 25 percent of care to be delivered through value-based payment arrangements by the 3rd quarter of 2019.

The transition is not an easy one for many organizations. Value-based reimbursement models require extensive data analytics capabilities, population health management programs and the ability to successfully use electronic health records for documentation and reporting.

So just what is value-based care? It falls under the generic category of alternative payment models (APMs). One example of an APM is “pay for performance.” For providers dipping their toes in the value-based care pool, pay for performance models offer a straightforward approach to linking claims reimbursement for services using a fee-for service structure, but they can qualify for value-based incentive payments or penalties based on quality and cost performance. Providers in Medicare’s Hospital Value-Based Purchasing program receive positive or negative payment adjustments based on their scores on quality and cost measures. The Center for Medicare and Medicaid Services assesses participants using a variety of measures, such as influenza immunization rates, Medicare spending per beneficiary and performance on patient experience surveys.

Pay-for-performance arrangements do not require as much familiarity with robust health Information Technology (IT) and data analytics infrastructure compared to other alternative payment models, making them popular among small physician practices as well as rural practices that need time and resources to implement value-based care. However, providers do need to have the ability to monitor and report clinical and cost data.

The next level of value-based reimbursement is referred to as Shared Savings Arrangements. They offer providers a higher level of financial reward than pay-for-performance models. Providers are reimbursed under a fee-for-service model, but if a provider can reduce health care spending below an established benchmark set by the payer, they can retain a portion of the savings produced. Bundled payments are a common example of how shared savings are incorporated in value-based reimbursement models. Under bundled payment structures, providers are paid a fixed amount for all services performed to treat a patient during an episode of care, such as a specific condition (i.e. hip replacement surgery) or a defined period of time (i.e. 90 days from the encounter initiation). If providers involved in the patient’s episode of care are able to deliver treatment for less than the set reimbursement amount, then they can keep a portion of the difference, depending on their contract with the payer. However, if the health care costs exceed the set amount providers lose out on the revenue they would have received from a traditional payment structure.

On the furthest end of the value-based reimbursement scale is capitation payments. This payment model requires providers to take on full financial risk for the care of their patients. Capitation models pay providers a fixed amount per patient typically on a monthly basis prospectively to the provider (physician practice and or hospital) for furnishing a set of services or for all services. If the provider is able to provide care to all patients covered by the capitation contract at a cost that is lower than the total revenue received by the contract the provider keeps the access.

If the cost of providing care is greater than the revenue received by the contract then providers are fully responsible for the loss in revenue. Most capitation models also include value-based incentive payments and penalties based on quality and cost performance.

Providers may benefit from capitation models because reimbursements are prepaid typically on a monthly basis. Since revenue is already in the provider’s hands, organizations can invest in innovations that improve patient care.

However, a cautionary note from a member of the Sharp Ress-Stealy Medical Group stated “The lack of alignment of quality metrics across payers represents a costly burden and an opportunity for improvement”. Without standardized healthcare data and interoperability (the ability of different information systems, devices or applications to connect in a coordinated manner within and across organizational boundaries to access, exchange and cooperatively use data among stakeholders, with the goal of optimizing the health of individuals and populations) providers experience difficulties acquiring health data and reporting it for payments.

The College of Coastal Georgia, through its degree programs in Healthcare Informatics and Healthcare Administration, is preparing students to be successful in these new and emerging healthcare delivery and financing systems.

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