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Regardless of the Affordable Care Act, the way healthcare is delivered and reimbursed will change. Here are five things physicians should consider.
Many people within the industry are focused on the potential outcomes of the political battle related to the Affordable Care Act. While it remains unclear what upcoming elections might change, if anything, the underlying reality is that the way healthcare is delivered and funded will be different in the years to come regardless of the fate of the reform law. Hospital and physician leaders should focus on the knowns, rather than the unknowns, and begin to position themselves for the future.
What are the key changes that we can anticipate and what should we do to prepare?
Volume to Value
It is entirely likely that you have heard this phrase more times than you would like, but it represents a fundamental shift in how care is reimbursed. The reason for this shift is the need to reduce total spending, both government and commercial, for care but, at the same time, ensure quality of the care doesn't suffer. Essentially we need to eliminate duplicative and unnecessary services and monitor what remains. If the total dollars available are reduced, who will feel the most pain? Hospitals. CMS reports that, in 2012, total healthcare expenditures were $2.8 trillion and hospital care represented more than 30 percent of that. As the most expensive component of the industry hospital care also represents the most lucrative target for savings.
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This is really a component of the volume to value shift but the importance justifies a separate discussion. Commercial carriers are already directing patients away from hospital-based services and toward freestanding diagnostic facilities. The Medicare Policy Advisory Commission (MedPAC) has recommended the elimination of the differential cost incentives paid to hospitals for hospital-based services such as high-end imaging, infusion, and other services. The ability for hospitals to gain more revenue than is available to physicians and others who provide similar care is part of the justification for employed physician salaries, especially in cardiology, oncology, and orthopedics. If the revenue for related ancillary services declines what happens to physician compensation?
The days of negotiating for better reimbursement from insurance plans are clearly over. The best that can be expected is that reductions will be avoided. Revenue growth will come from incentives tied to outcomes, patient satisfaction, and cost reductions. The do-more / make-more mentality will need to change. Regardless of how quickly this shift occurs in various markets is somewhat irrelevant. Providers should aggressively look at the cost of the services they provide, identify ways to redesign the care process and reduce costs, and aggressively adopt best practices and outcomes monitoring as preparation.
Simple phrase; difficult process. Physicians are key to bending the cost curve and improving care outcomes. Without active and progressive physician leadership, prospering in a value environment is a dream. The difficult question is how to engage physicians in the process and assure that, once they are engaged, that their efforts are quickly translated to care redesign. Hospitals need to reduce costs, move patients through the process more efficiently, and assure that care is delivered in the appropriate settings. Expecting that physicians will suddenly change practice patterns that have proved successful for decades because it will benefit the hospital is naive. Physicians need to be compensated for their time and efforts and the success of the outcome needs to be shared. Creating this model is complex and, if not crafted carefully, can result in legal and regulatory issues.
In a value-based care world, payments will be tied to episodes of care. This means that those dollars will need to be divided among all that participate in that care. Payers won't dictate who gets what so those difficult negotiations need to occur before the sift takes place.
There is no future scenario that doesn't require a close hospital-physician partnership. The time and dollars invested in beginning this journey to collaboration is perhaps the best investment opportunity.
It is highly likely that not everyone will survive the shift in care and payment models. If the reimbursement field is leveled between hospitals and their competitors, who will be able to create the most attractive margin? If hospitals continue to expand their employed physicians and control referrals, what happens to independent providers even if they are low cost? If patients are responsible for a significant portion of their cost of care, will they become informed shoppers much as they are in the retail environment and seek out the best deals? If satisfaction and quality metrics are readily available to payers and patients will they avoid those providers with lower scores? These are critical questions that should be addressed before spending time on potentially distracting projects.
Once the shift to value occurs in a market it is too late to begin to plan on how to respond. More aggressive competitors will already have plans in place and will have begun to benefit financially. This does not mean that everyone needs to plan on building an accountable care organization. This is one of those things that could easily go away. CMS is continually introducing care models in an attempt to see what works and what doesn't. Don't focus on the vehicle, focus on the destination.
Physicians and hospitals both need to begin to prepare for the future. They don't need to wait on each other, but discussing and planning jointly is an excellent first step. Taking the time to gather data, educate colleagues, and identify points of strength and weakness will pay dividends as change continues.