Are You Ready for the Transition to Value-Based Healthcare?

This post excerpts an interview in the Q2 2016 Provider Advisor by Peyman Zand, Partner, Vaco Healthcare, and Bill Rector, Revenue Cycle Leader, Allscripts

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The next big change in the healthcare industry is the move to Value-Based Healthcare. Value-Based Healthcare (VBH) is the delivery of evidence-based treatments through which providers are compensated based on improved patient outcomes. Providers will no longer be paid based on the number of visits and tests they order (in a fee-for-service model) but will be expected to demonstrate the value of their care by achieving improved outcomes at a lower cost.

The Centers for Medicare and Medicaid (CMS) is taking numerous steps to encourage a transition to Value-Based Healthcare (VBH). One of the payment types being rolled out by CMS is called “bundled payments for episodes of care.” Beginning April 1, 2016 CMS initiated a mandatory bundled payment initiative for primary total joint replacement in 67 markets. Within this initiative, CMS agrees to pay a set amount over a 90-day period for the joint replacement. CMS expects hospitals, physicians, rehabilitation providers, home health agencies, and other involved entities to work together to deliver a positive patient outcome within this budget. By 2020, CMS expects some 50% of its payments to be for similarly bundled services.

One of the critical success factors for VBH is financial viability, which requires a thorough understanding of the transition from the current Fee for Service (FFS) model. To meet value-based goals, it will be necessary for hospitals to reduce utilization, which will in turn reduce revenues. Shrinking revenues will then encourage hospitals to improve margins and work to increase patient volumes. This transition requires a thoughtful and deliberate approach, with target dates, times, and a repeatable process. Establishing gateway check points along the way, with positively identified measures of success, is essential.

It is important to note that FFS will not entirely disappear, at least not for the foreseeable future. How the two divergent systems coexist to provide the best patient care, while financially viable for providers, is key.

Other important success factors in a value-based delivery model are the provision of appropriate and effective patient care as well as a responsible fiscal footing for providers. Understanding the “Quality/Cost/Time” relationship, the impact on patient health, and patient satisfaction with care and costs are essential to successful value-based healthcare implementation. Linking physician compensation to the financial well-being of your facility is also a recommended approach.

Your organization can institute a robust process to achieve success in a bundled payment, value-based environment by:

1. Standardizing pre-operative patient preparation and education for a successful surgery.

Use low cost testing and education to reduce patient complication post-surgery.

2. Streamlining processes.

From pre-op to 90 days post-discharge, create standard processes, protocols, and orders that help get the patient back to home and functional as soon as possible. This includes creating criteria for post-acute providers regarding high-quality treatment and outcome expectations.

3. Using data to improve outcomes.

Create a metric driven system that expects all providers and suppliers to maintain the highest quality to drive excellent outcomes. Sophisticated analytics will be needed to measure financial and quality performance for various types of patients.

4. Tracking and reporting efficiencies and cost to maximize revenue.

Offer reporting that tracks hospital/post-acute/ physician costs for the 90-day period as defined by CMS.

April 1, 2021