Destination value-based payments: 8 insights on the transition

The healthcare industry's move from a traditional fee-for-service model to value-and-risk-based approaches is not only going slower than expected, but also faces considerable challenges, according to a new report issued Oct. 1 by PwC's Health Research Institute.

Here are eight insights from the report on obstacles, progress and strategies for success in making the move.

1. Providers are reluctant to walk away from the predictable revenue streams of fee-for-service medicine. More than half of physician revenue (53 percent) is based on fee-for-service payments, with alternative models such as capitation, bundles and other incentive-based programs making up a much smaller percentage, according to a survey conducted by PwC.

2.  Early adoption results in success. A small, but growing, cadre of industry leaders push for early adoption, as they are convinced the shift is inevitable. The prevailing sentiment in the industry is a go-slow, dip-the-toe-in-the water approach. However, PwC found early adopters that master population health management and lock in consumers early could be in a more enviable position as the balance shifts away from fee-for-service.

3. Scale matters — not just size of the health system, but size of the market. Illustrated in this 50-state map, PwC found medicine-rich markets with multiple alternative payment efforts are making the most progress.

4. Early ACO formation often occurrs in communities with successful Medicare Advantage programs, piggybacking on established market norms. Data provided by CMS show clusters in communities such as healthcare-rich New England, where ACOs and bundled payment efforts exist in markets with large Medicare Advantage populations.

5. HHS' goals are seen as communications tools, not tangible targets. HHS called for 50 percent of fee-for-service payments to be in value-based reimbursement models by 2018, and 90 percent of payment to be linked to quality improvement efforts. Yet, the federal government has not provided full details on how it will measure progress toward value-based payment.

"Setting a percentage is a communication tool," Timothy Ferris, senior vice president of population health management at Partners HealthCare in Boston, told PwC. "But I personally don't think that whether or not we hit that percentage is actually an important metric. The important metric is what are we doing to transform care, and are we being successful in that transformation."

6. Purchasers, notably employers and the federal government, likely have the greatest leverage in moving healthcare markets toward a truly value-based system.

7. Patients and consumers should expect increased engagement from their healthcare providers. "If financial incentives and care transformation are tenets of value-based care, they will only go so far without patient participation. Making care available to consumers during off hours, and expanding locations will distinguish one health system from the next," PwC said in its report. "Identifying and closely working with consumers, especially patients with multiple conditions, improves outcomes and lowers costs."

8. Building Medicare Advantage, budgeting for losses and identifying the strengths and weaknesses of an organization's partners, such as insurers, were outlined as strategies for a successful transition.

 

More articles on healthcare finance:

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Florida governor calls for hospitals to be more transparent with their prices

 

 

 

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