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Value-based reimbursement and a few other trends that will have a major impact on physician practices in the coming year.
As we approach 2017, physician practices are being challenged on all fronts. Payers are changing the way that physicians are paid, patient expectations are at an all-time high, hospitals are seeking new ways to align, and competition is mounting from new types of providers. To some physician groups, this unprecedented level of change will threaten their financial viability. To others, it will represent an opportunity to transform their group for future success. Here we take a look at the top 2017 trends for physician practices that will have the biggest impact.
Payers are Driving Value Based Reimbursement at a Faster Pace
Physician practices are facing rising pressure from payers to assume more risk for the delivery of high quality and lower cost care. In 2017, this is best represented by the launch of CMS' Medicare Access and CHIP Reauthorization Act ("MACRA"). In January 2015, the government announced a formal goal of shifting Medicare reimbursement from volume to value, including a goal of tying 30 percent of all Medicare payments to alternative payment models by the end of 2016. They accomplished this goal ten months early in March 2016.
The full impact the November election results will have on healthcare policy remains to be seen, but regardless, the move to value-based payments is likely to continue. The government simply cannot afford to continue paying physicians primarily on volume.
MACRA continues the trend toward value and gives practices the choice of two paths: the Merit-based Incentive Payment System (MIPS) or an Alternative Payment Model (APM). An overwhelming majority of groups will start 2017 under MIPS, where they will be measured on IT use, advanced clinical practices, and quality. Cost becomes an additional measure in 2018. Group performance will be graded on a curve, and better performing groups will earn a bonus while underperforming groups will face reductions in reimbursement. The APM path offers a 5 percent bonus to groups participating in risk-based contracts. Most groups should spend 2017 focused on improving MIPS performance and evaluating opportunities to move into APM.
Commercial payers are also shifting risk to physician practices. Today, most "value-based contracts" are really just fee-for-service arrangements with incentives for value. While the pace of change will vary by market, expect health plans to tie more reimbursement to value and risk in 2017.
To succeed under new payment models, medical groups will need to transform their practices and add new capabilities for population health and care management. The use of care teams will be necessary to support primary care physicians. New analytic capabilities will be necessary. The investments will be significant but the alternative may be dire.
Patients Will Expect More
For decades, physician groups have enjoyed the enviable position of providing a service that consumers wanted so much that they would tolerate long waits, confusing bills, and inconvenient delivery times in order to see a physician. In other industries, a company that provided this level of service would likely be out of business. However, physician practices have been spared this level of consumerism. All practices operated essentially the same way and patients lacked alternatives. This has changed. Patients are increasingly demanding immediate access, convenient hours, and multiple ways to communicate with their physician. The service received in a physician's office is no longer compared just to the office across the street. Patients now compare service across industries. The level of service they receive at a Nordstrom's or the Four Seasons influences their expectations for service from their physician's office.
In 2017, physician practices should reassess their patient experience from the patients' perspective. Expanding office hours, simplifying appointment scheduling rules, and deploying new technology can all increase patient access. Evaluate and redesign work flows in your offices to reduce patient cycle times. And groups should make patient experience a high priority for providers, staff, and management.
Hospitals and Physicians Will Continue to Align
The last five years have seen the volume of hospital acquisitions of medical groups reach a level last seen in the mid-1990s. Hospitals continue to employ physicians to support various strategies, including defensive responses to competitors' actions. Meanwhile, many physicians in private practice will look to sell to hospitals in 2017 as they approach retirement or as the transition to value based reimbursement, including MACRA, threatens the financial viability of their practices. However, not all physicians want to sell to hospitals. Many physicians will remain independent. However, significant number of those will struggle to develop the capabilities and resources necessary for success under new reimbursement models such as MACRA. Many hospitals have created clinically integrated networks ("CINs") that help independent physicians participate in value-based contracts. In 2017, expect to see more hospitals expand the capabilities of these CINs to provide private physician groups with the information technology and care management capabilities necessary for survival and success under value-based arrangements. Private, equity-backed population health enablement companies offering similar services will grow in number and scale in 2017.
In 2017, physician practices should evaluate opportunities to partner with hospitals or other organizations that can help them access patient populations and the tools and capabilities to care for them.
New Providers will Disrupt the Physician Practice Market
Innovative new providers are offering to care for patients and to potentially compete with physician practices. Expect to see more high-tech and high-service medical groups open in 2017. Many of these are for-profit venture-backed companies that are taking advantage of more traditional physician practices' lack of patient access and service. Telehealth and virtual visits will gain popularity in 2017- both as components of enhanced practices as well as stand-alone services. Home visit providers have started in major markets and will be looking to expand. Physicians should recognize that these new providers threaten to compete for primary- care patients. These new delivery models will gain traction where physician practices fail to meet patients' expectations for access and convenience.
Physician practices must commit to improving patient experience in 2017 and should look for opportunities to add new ways for patients to access their care. In doing so, groups should consider whether they should partner, adopt, or compete with these new providers.
The coming year promises to be a year of change, threats, and opportunities for physician practices. The actions (or inaction) of groups during 2017 will likely have a lasting impact on their performance for years to come.
Marc Mertz is vice president at GE Healthcare Camden Group. He can be reached at 310.320.3990 and Marc.Mertz@ge.com.