As value-based models occupy a larger share of healthcare reimbursement, hospitals face the two-pronged challenge of reining in costs while achieving better patient outcomes. The industry is shifting toward business models that emphasize population health management, requiring hospitals to use a variety of tools and resources to effectively meet the health and wellness needs of patients in their markets.
Below is an overview of key points that emerged from recent surveys and studies on how healthcare treatment and payment incentives are being realigned, how hospital leaders rank population health in relation to other strategic priorities, and what leaders view as barriers to implementing successful population health initiatives.
The healthcare industry is shifting — albeit slowly — toward value-based reimbursement.
1. The portion of reimbursement tied to value-based payment models that stress population health strategies has increased in recent years. In 2017, 34 percent of healthcare payments were tied to alternative payment models — that is, shared risk, shared savings, bundled payments and population-based payments, according to a report from the Health Care Payment Learning and Action Network, a public-private partnership launched by HHS. Although that represents a steady increase from 2015, when 23 percent of payments were linked to alternative payment models, healthcare reimbursement is still anchored in the fee-for-service system that links reimbursement to the quantity of services provided.
2. CMS has helped drive the move to value-based payments over the years. The agency has committed to tie 50 percent of Medicare payments to alternative reimbursement models by 2018. Private payers are following CMS' lead and increasingly linking a larger share of reimbursements to value-based models.
3. By tying reimbursement to quality of care and rewarding providers for efficiency and effectiveness, value-based payment models are designed to improve patient outcomes and reduce healthcare costs. There's a clear need for this type of payment model in the U.S., where healthcare spending is projected to reach nearly 20 percent of GDP within a decade and more than 100 million residents are projected to be 65 or older by 2050.
Optimism about value-based care is increasing.
4. Healthcare executives are becoming more optimistic about how value-based care will affect their organizations' bottom lines. The percentage of healthcare organizations that say value-based contracts improve profitability jumped from 23 percent in 2016 to 46 percent in 2018, according to a poll of managers and executives by KPMG.
5. Despite the increased optimism, nearly half of the healthcare providers surveyed said value-based contracts, such as bundled payments and shared savings, represented less than 10 percent of their contracts.
Population health management brings financial concerns for hospitals.
6. With value-based reimbursement, a larger portion of provider revenue is driven by performance elements outside of a traditional revenue cycle management system's capabilities. This creates the possibility of financial losses, and is a top challenge to adopting alternative payment models with risk-based revenue, according to a survey by Numerof & Associates.
7. The shift to value-based care presents challenges, but most healthcare executives see population health management as a strategic imperative. Ninety-five percent of executives surveyed rated population health as important to their organization's future success. Financial risk also isn't preventing providers from shifting toward alternative payment models, with nearly all executives surveyed predicting their organizations will have some revenue in alternative payment models within the next two years.
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