According to David Gray, vice president, innovation and growth consulting at Truven Health Analytics, the move from fee-for-service to value-based care is not a linear one. It is not as simple as moving from our current model to a new model.
"Initially, managing our businesses involved trying to grow volume and maintaining a profitable business, but this is no longer the case. What we need to focus on is becoming more and more complex," he said at the Becker's Hospital Review 6th Annual Meeting in Chicago, May 7 to 9.
There is a strong shift to treatment to the outpatient setting. It is estimated that inpatient volume will be more flat than outpatient, said Mr. Gray. A number of factors are pushing down that volume including payment reform and population growth, but outpatient volume will grow by 15 percent in the next 10 years.
Additionally, all acute care providers are being held accountable for episode-based care. "We are already being penalized or rewarded based on how well we manage patients across the continuum of care," said Mr. Gray.
The approach to funding uncompensated care is also changing. There is an annual aggregate reduction in federal disproportionate share hospital funding. Additionally, there are states that are not expanding Medicaid. All of these factors affect payments, noted Mr. Gray.
"We will be working in a multimodal payment world," he said. "And we need to start looking at what the impact will be."
But what will these changes look like on the state level?
Truven Health delved into the impact certain payment changes may have on hospitals in North Carolina. According to Tricia Eminger, senior consulting manager at Truven Health, the following threats took a toll on North Carolina hospitals:
1. Site-neutral facility payments. MedPAC and RAND are recommending neutral rates for services equivalently performed in multiple settings. However, Truven Health estimates this would impact16 percent of hospitals with 10 percent or more of their outpatient revenue impacted, noted Ms. Eminger. These estimates take into account a shift to ambulatory surgery center fee schedules, and don't include changes that result from a shift to the physician fee schedule.
2. Phase-out of disproportionate share payments. The Patient Protection and Affordable Care Act includes a reduction in disproportionate share hospitals funding to states in phases. Also, reductions in Medicaid DSH payments will start in 2017. Truven Health's estimations found that the joint impact of sit-neutral pricing and reduced Medicaid DSH payments would result in 19 North Carolina hospitals moving from positive to negative margins, according to Ms. Eminger.
3. Increase of episode-based payments. Episode-based payments, including bundled payments, provide savings for Medicare from a budgetary standpoint, said Ms. Eminger. Commercial payers are also more aggressively contracting in bundled rates than in the past. "Understanding and managing your utilization is key for managing your efficiency and spend," she said.
The average N.C. hospital operating margin was 4.2 percent in 2013, and the average simulated impact of all three of the aforementioned threats was -4.2 percent.
"It is an undeniable fact that multiple changes are coming all a once," said Ms. Eminger. "We are all in the population health business right now and whether we like it or not, this is where payment is going. Gather the data and see how your hospital will perform under current and potential changes."
* Truven Health would like to thank Bob Kelley, vice president, healthcare analytics, at Truven Health for conducting the research behind this presentation.