The term "value-based reimbursement" has been thrown around enough in healthcare to reach buzzword status, but no matter how sick everyone is of hearing it, it is becoming reality.
The hospital and health system C-suite is tasked with facing the overhaul of payment models head on and positioning their organizations for success. Jonathan Niloff, MD, vice president and CMO of McKesson Technology Solutions, offers his insight into how the healthcare C-suite can prepare for and succeed under these payment models.
Please note responses have been lightly edited for clarity and concision.
Question: Do you think the majority of hospital and health C-suite executives are prepared for value-based reimbursement models?
Dr. Jonathan Niloff: Success in value-based models requires a different care model and different management competencies than fee-for-service. Strategies are needed to safely navigate the transition to a value-based reimbursement environment. Optimization for a very different paradigm is required. The level of preparedness varies among hospital and health system C-suite executives. Those in geographic regions with a legacy of risk contracting typically are better prepared. Examples include senior leaders in Massachusetts and California.
Data suggests that there remain hospitals that have yet to engage in value-based contracts. A survey conducted by KPMG of executives attending the American Hospital Association Leadership Summit in the summer of 2015 revealed 36 percent were not participating in CMS Shared Savings Accountable Care Organization or CMS Bundled Payment for Care Improvement programs. Only one-half were participating in similar commercial programs. This suggests that there is, indeed, heterogeneity in preparedness for value-based care reimbursement models among hospital and health system C-suite executives.
Q: For those that feel unprepared, what can they do now to acquire the necessary skills?
JN: Executives need to assess where they are on the path to transitioning to value-based care in the context of evolving government reimbursement models and the dynamics of their local markets. Success in value-based care requires significant domain knowledge and new competencies. However, design and implementation of new programs that support those competencies must be customized to the local environment and include a physician engagement strategy.
To meet these needs it is usually necessary to recruit new talent that has significant experience in managing value-based contracts. Individuals with this expertise are scarce in the provider space, especially in the regions that don't have a legacy of this type of contracting. Some organizations have had success in filling this gap with experienced executives that have worked for payers. To ensure that the new programs are implemented in a manner consistent with the organization's culture and environment and to ensure physician buy-in, it is important to team new leaders with seasoned local leaders that know the market and have the respect of the medical staff.
It would be prudent to start with a limited number of "lives" in value-based contracts to provide the opportunity for program development and on-the-job training before the organization assumes too much risk. However, this will be a missed opportunity if insufficient resources are devoted to the effort despite the low immediate return. It needs to be viewed as an investment for the future.
Q: What are the necessary skills to handle the shift away from fee-for-service at the C-suite level?
JN: The single most valuable skill at the C-suite level to guide an organization through the transition to value-based reimbursement is leadership. With such fundamental change in clinical and economic models, this is a difficult transition. It is compounded by the challenge of overcoming skepticism from those with unfavorable memories of "managed care" from the 80s and 90s. The C-suite needs to be aligned and speak with one voice. United, they need to make the case to all constituents in the organization and align all those constituents' incentives around the new model. This is challenging when initially only a small proportion of the business will be in a value-based reimbursement model.
The C-suite needs the ability to truly take a step back and think through what the transition to value-based care will mean to their organization when the market matures around that model. They need to be able to think strategically about what they need to accomplish over time to be successful operating in the new paradigm and be strong enough to potentially suffer some short term pain to get there. There are specific skills that will be new for each member of the executive team.
Q: How will these skills differ from position to position? Will a healthcare CEO need different skills than a CFO or CIO?
JN: Beyond strong leadership skills, CEOs will need a deep understanding of the economic dynamics of value-based care and the new care model, including the complex interplay between value-based contracts and traditional operating accounting. For example, if the organization owns a skilled nursing facility and the SNF has an operating loss, what should be done? The answer may be different in a fee-for-service world versus a value-based environment. If the SNF is contributing to the success of value-based contracts with short lengths of stay, low readmission rates and low emergency room visits and all that is being accomplished through a collaborative care model with shared personnel between the SNF and hospital, overall economic benefit may exceed the SNF's operating loss.
The CEO will need skills to build a care network and develop business relationships greater in scope than most hospitals and health systems have done in the past. The need for scale and to provide coordinated cost-effective care across the entire continuum will necessitate this as will the emergence of new types of providers, like retail clinics.
The CFO will need to understand the dynamics of value-based care contracts and the key drivers of successfully managing the total cost of care of a population. They will need fundamental actuarial skills and to learn about reinsurance. Knowledge of new incentive models will be required. The CFO will be in the center of managing and mitigating the conflicting economic incentives of simultaneously living in a fee-for-service and value-based world. Strong leadership skills will be needed to accomplish (survive) this.
The CIO will deal with a different universe. No longer is the focus on just what happens in the four walls of the hospital. What's needed now is the ability to manage clinical care and economic health across a broad network of ambulatory and inpatient sites, each with disparate systems. This may include multiple EHRs and accounting systems, among others. Thus, new skills will be needed for data acquisition, aggregation and normalization. IT knowledge is required in order to successfully manage value-based contracts to help the team select and implement appropriate solutions. These may include registries, care management and risk management tools. The CIO will also need to become proficient with analyses of paid claims, as will the CFO. This new data source and related analytics — focused on per member per month and days/1000, for example — are fundamental to effectively managing in a value-based environment.
In many environments the CIO will need skills that extend beyond data and analytics. The success of new IT solutions will include optimizing the end user experience. This may include workflow integration and strategies for prioritizing clinician alerts to avoid the challenge of information overload. Skills obtained implementing EHRs may be leveraged, but the scope of this activity will be greater.