As healthcare’s shift to value-based care advances, physicians are finding themselves faced with a payment model dominated by reimbursements that are tied to value and accountability. It’s a new world, one in which survival depends upon how well practices step up not only their clinical game, but also overhaul their approach to revenue cycle management in a way that engages patients in the financial aspects of their care.
The move represents a seismic shift in the payment paradigm for a healthcare system that has historically been based on a fee-for-service (FFS) model rewarding physicians for service volume rather than improved health outcomes. However, faced with costs that were edging toward unsustainable levels for care that wasn’t achieving expected outcomes, key stakeholders including employers and payers began pushing for value-based payment models that would incentivize improvements across the board.
Three VBC Models
The Rand Corporation defines three broad types of value-base care models currently in use by payers to drive improvements in quality and slow spending:
- Pay-for-performance, an arrangement in which physicians and hospitals are rewarded or penalized based on how well they meet benchmarks for measures of quality and/or efficiency.
- Accountable care organizations (ACOs), made up of physicians, hospitals and other healthcare providers coming together voluntarily to provide coordinated care and who agree to be held accountable for the overall costs and quality of that care for a defined patient population. Reimbursements are tied to performance on quality measures as well as a decline in the total cost of care. Participating providers agree to carry the financial risk in exchange for a share of the savings achieved through improved care delivery.
- Bundled payments, in which healthcare providers are paid based on the expected costs for a clinically defined episode or “bundle” of related healthcare services with reimbursements dependent upon financial and quality performance accountability.
For physicians in particular, the differences between value-based care models can make it difficult to determine which offers the best fit for their practice and patients. In “The Road to Value-Base Care: Your Mileage May Vary,” Deloitte researchers wrote that “…the transition is much like a road trip—different routes and modes of transportation can get travelers to their destination. By implementing a holistic process and leveraging robust supporting data—much like following a GPS system—a health care organization can develop payment models that work for individual situations and populations. There are many road tests, routes, and transportation modes available.”
Deloitte goes on to say that certain capabilities are needed to thrive in a value-based market. For example, robust administrative capabilities are necessary to support value-based care. Also required are a strong market, target population, and clinical data to determine what price points will result in a competitive rate. When evaluating payment models, a practice needs to understand its market position and core capabilities and should conduct a financial analysis. When combined, these steps will go a long way toward determining which model is the best fit.
Regardless of the model selected, success requires the typical practice to incorporate patient satisfaction, outcomes and quality of care metrics into their planning. While many practices are accustomed to monitoring the measures as part of the Physician Quality Reporting System, the fact that they are now tied to reimbursements makes it a new ballgame.
Exacerbating the challenge is the almost chaotic manner in which the industry is shifting. In “Strategies for Value-Based Physician Compensation,” published by the Medical Group Management Association, the authors note that different payers prefer different methods, which places physicians “in the awkward position of dealing with multiple and occasionally conflicting incentives.”
They continue, “Medical practices must rise to the challenge and opportunity of preparing for new payment systems while continuing to function under a largely FFS environment…Compensation formulas must be flexible to prepare for new reimbursement incentives while maintaining the volume that is necessary for the financial viability of the practice.”
Offsetting the Revenue Hit
A highly effective approach to offset the short-term revenue declines practices will likely experience as they transition to value-based reimbursements is leveraging technology and specific tools enabling advance payments of co-pays and more efficient collection of a patient’s share of amounts due for services rendered. The software should also include cloud-based payment portals and streamlined payment plans.
When these technologies integrate with a practice’s EMR or patient management system, they also serve to enhance patient loyalty through such value-added services as appointment reminders – which will also reduce no-show rates and improve patient satisfaction.
The value-based approach to reimbursement has already taken hold in healthcare and its grip will only get stronger. Physicians who want to succeed in this new environment must be willing to innovate their approach to payments and collections to keep pace with changing times and patient preferences.