5 Best Practices for a Successful Transition to Value-Based Payments

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As hospitals and health systems move from fee-for-service reimbursement to value-based payments, various obstacles and challenges can stand in the way of a successful transition.

HospitalA recent Robert Wood Johnson Foundation report authored by consulting firm Bailit Health Purchasing identified numerous challenges organizations can face during the transition to value-based payments. Some of these challenges include a lack of affiliations with payers and other providers, a state government apathetic about payment reform, selecting the wrong population to conduct a pilot test of the reform program and inadequate organizational size and resources.

Bailit President and Founder Michael Bailit offered five best practices to help hospitals and health systems looking to make the switch to value-based reimbursement avoid those roadblocks.

1. Partner with a trusted health insurer. In order to smoothly transition to a new payment structure, providers should find a payer to partner with, Mr. Bailit says. Although in some healthcare markets the best choice for a partner could be a large, self-insured employer, he says most of the time the best partner will be a health insurer. "Most often it's going to be an insurer with whom there's a relationship and a pretty good foundation of trust," he says.

Once they've found a partner, providers can work toward a measured transition, recognizing the fact that it will take time to build the necessary infrastructure and to bring about needed changes in culture and operations, he says.

2. Seek transformation assistance. Mr. Bailit says hospitals and health systems should seek out care delivery transformation assistance to ensure success under new payment models. This could come from the payer they have partnered with, or the state they operate in may have an ongoing transformation initiative and might provide transformation assistance resources. "I would look for help with transformation assistance wherever it can be found," he says.

3. Consider affiliations or partnerships with larger health systems. Providers that feel they aren't large enough and don't have the resources to transition to value-based payments on their own should consider affiliating or partnering with other healthcare organizations, Mr. Bailit says. They don't necessarily have to undergo a full-scale merger but might consider a collaboration such as an accountable care organization.

"Maybe hospital A and hospital B form Acme ACO for the purpose of contracting with insurers," he says. "They're all remaining independent hospitals, but they're jointly forming an ACO. That's allowing them to enter into new payment relationships that they really couldn't do on their own because they independently don’t serve enough covered lives."

4. Align performance measures for all value-based contracts. Once hospitals and health systems "get their feet wet" and have a bit of experience dealing with value-based contracts, Mr. Bailit suggests they work with employer groups, provider associations and state policymakers to achieve alignment where performance measurements are concerned. "It's very difficult to enter into multiple value-based contracts when the definition of value is different for every contract," he says.

Working to align all of the contracts will prevent a headache for providers who might otherwise end up attempting to monitor hundreds of performance measures associated with different contracts, he says.

5. Utilize any political influence to attract state support of transformation. State-based payment reform efforts can get a significant boost if the governor demonstrates a commitment to changing the system, but providers aren't necessarily out of luck if local lawmakers aren't excited about payment reform. "Hospitals are pretty strong forces in most statehouses," Mr. Bailit says. "I think hospitals can approach legislators and executive branch agencies or the governor's office and make a case for the role that state government might play to help facilitate transformation in an environment in which it might not already be happening." States can support access to data, align their Medicaid and public employee benefit programs and address regulatory barriers, for example. State hospital associations have considerable influence in state government and can increase the issue's visibility as well, he says.

Additionally, many states currently have planning grants from CMS, which creates an opportunity for hospitals to weigh in on the potential use of that funding. "Hospitals could say to the state, 'Hey, make sure that you use some of the state dollars to help us transition from where we are today,'" he says.

Overall, Mr. Bailit says the biggest challenges providers face on the road to a value-based payment system will vary depending on the region. "Individual markets are configured with different barriers and facilitators in a way that I don't think can be simplified," he says.

Still, he remains confident hospitals and health systems can overcome whatever barriers they face and make a transition to value-based payments.

More Articles on Payment Reform:
4 Key Payment Reform Facilitators and Barriers
5 Best Practices for Developing Value-Based Physician Compensation Structures
Jefferson Health System, Keystone First Ink Shared Savings Deal 

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