Getting Paid for Value: Defining New Reimbursement Models

Fee-for-service reimbursement continues to fall. To survive, practices must explore new opportunities to boost revenue. Let us help you decide the right fit for your practice.

As payment for physicians' services continues its steady decline, practices across the country are exploring new ways to thrive. For pediatrician Jesse Hackell's five-physician practice, part of the solution was joining a large multi-specialty pediatric group.

"We found that payments were not keeping pace with inflation and hadn’t been for many, many years, and that was becoming an untenable situation," says Hackell, whose practice is located in Pomona, N.Y. "What joining a large group enabled us to do was finally level the playing field a little bit in negotiating with the insurance companies. It gave us some strength by virtue of our numbers."

But while partnering up might provide some practices with negotiating leverage, it may only be a temporary solution to a more permanent problem. The results of Physicians Practice's 2013 Fee Schedule Survey indicate that the downward reimbursement trend continues. Between 2012 and 2013, average commercial payer reimbursement for all new and established office visits fell nearly 9 percent. That's on top of a 10 percent decline that occurred between 2011 and 2012. (More in-depth survey data is available in the accompanying survey results and online at PhysiciansPractice.com.)

Editor's note: The results of our annual Fee Schedule Survey are in. See where your practice stacks up when it comes to payment for top codes.

Eventually, even negotiating higher rates with payers won't get practices very far.

But it's not all bad news. As fee-for-service declines, more payers are exploring value-based reimbursement models, in which practices receive higher pay if they provide high-quality, low-cost care. And while many physicians are hesitant to embrace such models - only 16 percent of our fee schedule survey respondents said the shift in payment methodology would be good for their practices - experts say a proactive approach is the best course. "The world's changing and the market's changing, and I think that all too often physicians like it the way it was, and it’s not going to be like that," says John Lutz, managing director at Huron Healthcare, a healthcare consulting firm based in Chicago. "I think that the sooner people start looking forward instead of looking in the rearview mirror, we'll be better off."

But finding the best path forward is not easy, and the broad array of emerging value-based payment models and incentives makes it even more difficult. Here's a closer look at some of the most prevalent value-based models and incentives, and what the experts say your practice can do to get involved.

Pay-for-performance incentives

Getting paid for value does not mean your practice needs to jump headfirst into a full-fledged value-based payment model, such as an accountable care organization (ACO) or a bundled payment arrangement. Many payers are offering smaller-scale value-based incentives, such as pay-for-performance incentives, to practices that reach quality and/or cost targets.

Though pay-for-performance incentives are nothing new, the bonus targets set forth by payers are becoming "much more sophisticated" as the shift toward value gains momentum, says Randy Cook, president and CEO of consulting firm AmpliPHY Physician Services.

For example, in the past, a practice may have received a bonus if it prescribed generic medication to a certain percentage of its patients. Now, a practice may receive a bonus if a certain percentage of its diabetic patients have their A1C levels under control. "That's what's called an outcome measure," says Cook, who is based in Columbia, Tenn. "[You] have to accomplish a whole lot of other things in order to create that outcome."

Medical home incentives

In addition to incentives for meeting performance targets, many payers are offering value-based incentives that relate to improved care coordination and case management.

Practices that have gained recognition as Patient-Centered Medical Homes (PCMHs), or that have met medical home recognition criteria set forth by payers, are most likely to be offered this type of incentive. Typically, medical homes must demonstrate improved care access, care coordination, and care quality to gain recognition.

The incentives offered to medical homes vary by payer, says Mary Witt, senior vice president of The Camden Group, a healthcare management and consulting services company based in El Segundo, Calif. They include funding for infrastructure development or care coordination, such as funding to hire a care coordinator in a practice; a percentage increase to a practice's fee schedule; a per member, per month stipend for care coordination activities; or even shared savings opportunities, for instance, when a medical home manages to decrease emergency department utilization or hospital readmissions.

Still, while medical-home-related incentives are gaining traction, not all practices that become medical homes experience them, cautions Lutz. "At the end of the day, the physician may actually see [fewer] patients and do better economically as a result of participating and sponsoring these kinds of initiatives, but they have to do it in collaboration with a payer that's going to be an active participant," he says. "Depending on where you go in the country, some of these things are very well implemented ... and in other parts of the country they're just barely getting off the ground."

To hear one physician discuss how her practice transitioned to a medical home, visit bit.ly/PCMH-transition.

Shared savings models

While not all payers are offering incentives to medical homes, transitioning to that model of care has other perks. Cook says it's a great way for practices to gain experience delivering value-based care, and it's also a great jumping off point for successful ACO participation.

In ACOs, groups of providers, including physicians, practices, hospitals, and/or larger healthcare systems, partner to improve the quality of care and reduce the cost of care provided to a particular patient population. If successful, the participants share in the cost savings with their payer partner. If not, in some arrangements, participants share in the losses.

Over the past two years, hundreds of ACOs have cropped up across the country. One is Coastal Carolina Quality Care, which has participated in Medicare's advanced payment model ACO program since 2012.

"We felt that it would help us better focus and prepare for the future," says Stephen Nuckolls, chief executive officer of Coastal Carolina Health Care, P.A., the multi-specialty medical group that formed the ACO. "We feel this type of aligned incentives is the way that medicine is moving and we wanted to go ahead and get some experience with that,"

Due to its ACO participation, Coastal, which is located in New Bern, N.C., has stepped up its focus on population health management, care coordination, cost control, and quality metrics, says Nuckolls. Those efforts may be paying off. Though CMS has not yet released Coastal's first-year ACO performance report, Nuckolls says that the health system's internal metrics are showing positive signs. "We are showing our emergency room utilization down year over year in excess of 30 percent," he says. "We're seeing hospital admissions down a little over 10 percent."

To hear a physician and her staff discuss how ACO participation has changed their practice, visit bit.ly/ACO-transition.

Payment bundles

Often confused with ACOs, bundled payment arrangements are another value-based reimbursement model gaining momentum. In these arrangements, participants receive one pre-determined payment for a bundle of services, such as those related to a hip or knee replacement. The payment models vary, but in general, if participants manage to keep the costs of services below the bundled amount, they keep the savings. If not, they pay the difference.

Today, specialists, such as cardiologists and orthopedists, encounter bundled payments more frequently than primary-care physicians. Still, that could change in the near future, says Witt.

"I think that where primary care might get pulled into the bundled payment is dependent upon the time that that the bundled payment covers," she says, noting that many of the current arrangements include the services that begin upon hospital admission and end up to 30-days post-discharge. "As they get broader and encompass more of the continuum of care, then I definitely think that primary-care physicians will be pulled into that process."

Getting involved

These are just a few of the emerging value-based payment models your practice might encounter in the coming years. Though they differ in many ways, they represent a broader theme: If your practice provides high-quality, low-cost care, it could experience higher reimbursement.

Here are some simple ways to ensure that if a value-based opportunity does head your way, you are prepared to take advantage:

Talk to your payers. Ask payers what value-based payment incentives they offer, what's coming down the pipeline, and what your practice can do to get involved. "You want to understand what the payers are thinking so that you can be proactive," says Witt.

Implement an EHR. An EHR that enables you to exchange information with a broader network is critical to improving care coordination and quality, says Brett Hickman, a partner in PwC's U.S. Health Industry practice based in Chicago. "[You've] got to build some type of infrastructure ... to start to move beyond the patients' experience within your four walls, to how well you can manage that patient when they are not within your four walls."

Focus on quality. Identify the metrics your payers are using to assess quality, and begin measuring your practice against those standards, says Witt. Then, take small steps to improve in those areas.

Cut costs. Consider how efficient your practice is in terms of the care it is providing patients. For instance, ensure that everyone in your practice is working to the "top of their license," and that your work flows are as efficient as possible, says Witt. "The second piece of that is understanding what the rest of the cost of care is for a patient that you are responsible for," she says. For instance, evaluate how your referral rates compare to others in your market, and how often your patients visit emergency departments.

Improve patient satisfaction. Patient satisfaction scores often play a role in value-based reimbursement, says Witt. Implement patient satisfaction surveys, assess the results, and take steps to improve when necessary.

For five easy ways to boost patient satisfaction at your practice, visit bit.ly/Patient-Pleasers.

Pay for value. Incorporate value into physician compensation plans, says Hickman. "They need to start to tie the material piece of their compensation to the things around population health so that they start to build the competency to work in that environment," he says. "If the switch flips, or the trend changes dramatically, they are in a better situation to perform in that type of environment."

Make a plan. Identify a practice-wide strategy to address the shift toward value. "One thing that’s really, really important for physicians that want to kind of migrate toward value-based processes is that they really need to have realistic goals," says Lutz. "I think that out of that comes the need to develop a strategy to meet those goals. Physicians need to be committed; they need to have the necessary administrative infrastructure to help manage and lead it; the staff has to understand it."

Making the most of fee-for-service

Here are four ways your practice can combat fee-for-service reimbursement declines:

1. Increase utilization. Many payers no longer require patient copays or deductibles for preventive services such as screenings, counseling, and wellness visits. Recommend these services to patients and explain that they are available free of charge, says Washington, D.C.-based practice management consultant Kip Piper.

2. Step up collections. Polish your collection efforts. Ensure that staff verifies insurance each time patients schedule appointments, and require staff to collect copays and deductibles at time

of service. "When I go into practices when they're having problems, it's most of the time still, because they aren't doing the basics," says Mary Witt, senior vice president of healthcare management and consulting services company The Camden Group. "They've taken their eye off the ball."

3. Assess agreements. Review your payer contracts and look for errors or necessary updates, says Witt. "Many practices, especially small practices, end up with contracts that are sort of evergreen contracts so they never really expire, which means that you can have fee schedules that you've agreed to from years ago and you've never updated them," she says. "It's [about] making sure that you look at your agreements with payers, and understand what fee schedules they're using to pay you."

4. Prepare for high deductibles. Many of the plans offered through the health insurance exchanges (unveiled in October 2013) include high deductibles, says Piper. If many of your patients have purchased these plans, you'll need to step up your patient payment collection efforts to ensure you are paid all of what you are owed. For tips, visit bit.ly/Collect-More.

Editor's note: The results of our annual Fee Schedule Survey are in. See where your practice stacks up when it comes to payment for top codes.

In Summary

Value-based reimbursement opportunities can help practices combat traditional fee-for-service declines. Here are some small ways your practice can begin exploring value:

• Ask payers about value-based models and incentives.

• Identify the metrics payers are using to assess quality.

• Implement patient satisfaction surveys and take steps to improve.

• Implement an EHR.

• Add value-based incentives to physician compensation.

• Implement a practice-wide strategy to address value.

Aubrey Westgate is senior editor for Physicians Practice. She can be reached at aubrey.westgate@ubm.com.