H. Alex Hunter, a managing director at Navigant Consulting and leader of the provider practice within Navigant's Healthcare team, makes four points about hospitals' awkward transition from fee-for-service payments to the new world of accountable care organizations.
1. Stay in the present payment world. While hospitals' future may be in bundled payments and shared savings, which reward low volumes and low-cost procedures, the current reality is still fee-for-service, which rewards high volume and high-cost procedures. "The market has not shifted yet," Mr. Hunter observes. "You'd better look at what the market is going to be like tomorrow, not the day after. If you are too future-oriented, you are going to have problems. You can't live yet in the bundled payment world of tomorrow."
2. Focus on specific initiatives. It's a good idea, however, for a hospital to get its feet wet and launch new initiatives that would mesh with the new payment systems. "We are encouraging hospitals to select specific clinical quality initiatives to develop excellence in a certain area," Mr. Hunter says. An example might be reducing 30-day avoidable readmissions by 2 percent or reducing electrophysiological implants (pacemakers) by 10 percent.
3. Make a deal with insurers. Hospitals that launch a clinical quality initiative can try asking insurers about collaborating on a focused payment initiative that would award the hospital for reaching its goal. "Ask the payor, 'Would you be willing to go at risk with us for this specific scope of service?' " Mr. Hunter says.
4. Cushion your insurance risk. Hospitals that don't have much experience with insurance risk should start off with limited forms of risk. For example, the insurer might agree to a fixed payment with risk corridors that protect the provider from excessive costs. For instance, if the targeted cost is $10,000, the insurer would create a risk corridor of between $9,500 and $10,500. The hospital would be rewarded for keeping costs within that range.
Learn more about Navigant's Healthcare Practice.
1. Stay in the present payment world. While hospitals' future may be in bundled payments and shared savings, which reward low volumes and low-cost procedures, the current reality is still fee-for-service, which rewards high volume and high-cost procedures. "The market has not shifted yet," Mr. Hunter observes. "You'd better look at what the market is going to be like tomorrow, not the day after. If you are too future-oriented, you are going to have problems. You can't live yet in the bundled payment world of tomorrow."
2. Focus on specific initiatives. It's a good idea, however, for a hospital to get its feet wet and launch new initiatives that would mesh with the new payment systems. "We are encouraging hospitals to select specific clinical quality initiatives to develop excellence in a certain area," Mr. Hunter says. An example might be reducing 30-day avoidable readmissions by 2 percent or reducing electrophysiological implants (pacemakers) by 10 percent.
3. Make a deal with insurers. Hospitals that launch a clinical quality initiative can try asking insurers about collaborating on a focused payment initiative that would award the hospital for reaching its goal. "Ask the payor, 'Would you be willing to go at risk with us for this specific scope of service?' " Mr. Hunter says.
4. Cushion your insurance risk. Hospitals that don't have much experience with insurance risk should start off with limited forms of risk. For example, the insurer might agree to a fixed payment with risk corridors that protect the provider from excessive costs. For instance, if the targeted cost is $10,000, the insurer would create a risk corridor of between $9,500 and $10,500. The hospital would be rewarded for keeping costs within that range.
Learn more about Navigant's Healthcare Practice.