Population health payment models: This changes everything

The traditional fee-for-service model is rapidly disappearing. In its place government and private payers are emphasizing accountability and value-based purchasing. The Department of Health and Human Services (HHS) has a goal of having 50 percent of Medicare contracts governed by alternative payment models by the end of 20181. Moreover, private payers are rapidly following this trend, as evidenced by the multi-stakeholder Health Care Transformation Task Force committing to a goal of negotiating value-based contracts for 75 percent of their operations by January 20202. The task force is also calling on the rest of the health system to follow suit.

What does this mean for acute and post-acute providers? It means that delivering services will no longer guarantee payment. It means that patient outcomes must be tracked by every provider for payer-specific population cohorts. And it means that healthcare providers face new financial risks, including the financial risk for services before and after the delivery of their own services.

Navigating the new outcome-driven landscape and its shifting risk can be challenging. To thrive and compete, however, healthcare organizations of all types—from hospitals to home healthcare and everything in between—have no choice. The key is to proactively assess and modify internal processes and choose potential partners carefully.

Goals of a long-term, risk mitigation strategy

Because acute and post-acute facilities will depend even more on network and referral partners than they do now, the first goal of a strategic plan should include managing and strengthening existing relationships with other providers, and building relationships with new providers.

In the past, strong partnerships were often based on compatible corporate philosophies. Now, the key components of referral relationships include how well partners can track and analyze patient outcomes and provide a seamless transition for the patient from one provider to another. The goals are to reduce the need for additional hospital stays and to manage patient care for a high-quality and cost-effective outcome.

Prepare for reimbursement changes

As the fee-for-service model becomes more outcome-driven, providers need to take critical steps:

  • Be proactive, not reactive. Every department—including IT, clinical, and finance—needs to work closely with other providers, in every area from data collection to clinical pathways.
  • Upgrade cost efficiency. Increasingly, reimbursements will be based on cost-efficient delivery of care, management of outcomes, and patient/member satisfaction. Contracts will specify improvements in overall outcomes and cost efficiency, with incentives for achieving certain goals and financial penalties for falling short.
  • Understand local, regional, and national trends. With shifting Medicare reimbursement models on a national level, Medicaid changes at the state level, and new programs implemented by national and regional private payers, providers will likely encounter significant variation among geographic areas—and across their payer mix. Some areas have advanced far along the spectrum, while others are lagging behind. Providers should know the current situation and near-future trends in their service areas.

What acute-care providers need to know now

In many cases, acute-care providers are start to choose and manage the relationships with post-acute/downstream providers. Critical to those relationships are contract negotiations based on in-depth impact analysis of how those partnerships affect the bottom line. Especially in cases where the acute provider is part of a Total Cost of Care (TCOC) financial performance measurement program, the acute provider must fully understand the impact of how payers will develop reimbursement parameters that encompass episodes of care.

For acute providers, the relationships run two ways: upstream to Medicare, other payers, conveners, and Accountable Care Organizations (ACOs) and downstream to community healthcare providers, such as post-acute facilities, home healthcare agencies, and primary care physicians (PCPs) and specialty care physicians (SCPs).

Acute-care providers shoulder the majority of the risk, and they need to ensure that contracts include rewards to compensate for that risk. Most importantly, they need to perform an impact analysis to fully understand the risks of participating (or not) in any given contract. An outside firm, such as Baker Tilly, can assist in performing that impact analysis, as well as aid in negotiating contracts that manage that risk.

Choosing the right downstream partners and managing those relationships is also critical. Acute providers should ask themselves:

  • Who has a track record of delivering quality care?
  • Who can service the patient population that the acute care provider will provide?
  • Can these partners track quality and financial metrics?

Because many of the treatment costs are incurred after discharge, the acute facility may face most of the financial risk, even though the majority of the care takes place downstream. For many organizations, the key is to design and implement a bundled-care strategy that operates according to a focused, coordinated plan, not simply reacting.

What post-acute providers need to know now

Post-acute and home health providers need to start talking to acute-care providers about partnerships and creating full continuums of care. These organizations may not understand the risks associated with managed care and, specifically, bundled payments. The days of being reimbursed for home visits, therapy sessions, and additional inpatient days, regardless of outcomes or quality of care, are rapidly disappearing.

Analyzing and understanding the impact and risks of managed-care and bundled contracts are critical for downstream providers. Implementing or enhancing systems to enable patient tracking and outcome measurement will be an integral part of operations going forward, and post-acute facilities should begin moving in that direction now.

In short, post-acute providers will have to be seen as a valued partner by upstream providers, or face being bypassed for referrals, putting revenue at risk.

Baker Tilly can help post-acute providers understand where they fit in their local continuum of care and help them develop short- and long-term strategies to build and manage relationships with existing and potential partners, or position them as acquisition targets.

Where clinical programs are heading

Outcomes depend on clinical practices, and many contracts include “scorecards” that measure many aspects of care, including:

  • Utilization targets
  • Steerage measures
  • Quality measures and gaps in care closure
  • Total cost of care efficiency, including services by outside providers
  • Quality/value stage gates that must be exceeded before payments kick in
  • Tiered reimbursement that changes as performance thresholds are exceeded
  • Risk-sharing deals in which failure to meet performance targets triggers refunds of prior payments

If they haven’t done so already, clinical managers in the post-acute setting should begin coordinating with payer partners on proactive case management. In addition, they need to raise awareness among their clinical staff of bundled-payment program expectations and to implement systems that track and measure results.

How Baker Tilly can help

Baker Tilly has performed numerous audits and assessments of operations, management, and technology, based on nationwide best practices. These analyses give organizations the tools and information to transform operations and technology proactively, placing them in a stronger position to understand and manage risks now and in the foreseeable future.

For many organizations, the first step in implementing a risk-management strategy is performing an assessment to understand their “current state.” Baker Tilly can assess the related functions within a provider’s operations, including financial reporting, clinical programs and measures, existing and proposed risk-based contracts, IT capabilities, and organizational culture.

Based on the assessment, Baker Tilly will identify opportunities for improvements and make recommendations to help the organization move forward in the risk-based world. Baker Tilly can also assist with preparing the provider for the new risk environment. An acute facility, for example, may not currently be able to track all the costs to care for a joint-replacement patient across multiple providers following discharge. Baker Tilly can help acute and post-acute partners analyze and implement systems to provide that important data.  We are also experienced at assisting providers in expanding their networks and partnerships to include broader components of the care continuum to increase control over a wider set of services.

As reimbursement models evolve, providers must evolve to anticipate and manage new levels and types of risk in order to preserve or enhance revenue. The time to embrace and prepare for those new models is now.         

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