Now or Never: Making the Commitment to Value-Based Reimbursement

Abstract

THE MARKET HAS spoken. Healthcare is too fragmented, inconsistent, redundant, and expensive. With a slew of value-based reimbursement reforms marching across the healthcare landscape, a fundamental shift is beginning to take hold. In their feature article, Henkel and Maryland point out that Ascension Health in St. Louis, Missouri, realized that a payment inflection point was bearing down faster than anticipated, stimulating them to make a bold commitment to building a value-based system. Similarly, Kuhn and Lehn relate how Banner Health Network (BHN), in Phoenix, Arizona, seized the initiative by volunteering for the Pioneer accountable care organization (ACO) program. Understanding the magnitude of the undertaking, both organizations realized that a significant investment was needed to transform the management of patient communities. Taking action ahead of competitors is risky, as any early adopter can attest, and it is not without setbacks and lessons learned. However, the accelerating pace of change is demanding action as payment innovations, which are beginning to yield cost and quality results, redefine the revenue model. Although the levels of these payments are currently marginal, the rise of consumerism brought about by exchanges and narrow networks is spurring a redesign of the care model. A tipping point will come when the bulk of revenue shifts from volume to value, as we discovered at Carroll Hospital Center in Westminster, Maryland, when we volunteered to participate in an experimental payment program.Many executives are struggling with the question of how legacy healthcare organizations should reinvent themselves to thrive under value-based reimbursement. Without question, underlying quality incentives-avoidable readmissions, process-of-care improvements, and disease management outcomes-are objectives that hospitals and healthcare systems should already be pursuing. Strategists and planners are grappling with the future business model even as current volume-based revenue continues to be the driver in most markets. Under diagnosis-related group case rates, hospitals have been fairly successful in driving down unit costs. Yet, the major gains will come from utilization management. This is the tricky strategic question: how and when to embrace a shrinking inpatient enterprise?The feature articles in this issue describe two organizations that anticipated the future and created it, often at great peril to existing business models. Unlike volumebased payment systems that fail to reward high-quality, low-cost providers, value-based reimbursement fosters real competition. Kuhn and Lehn describe how BHN stepped forward as a Pioneer ACO and garnered success in a program that has not proven to be a panacea for all, in light of the fact that about one-third of original members have dropped out. Sensing the impending impact of valuebased reimbursement, Henkel and Maryland describe how Ascension redirected resources to building MissionPoint Health Partners, a provider-sponsored organization that identifies high utilizers and develops focused care management for patients with chronic disease. Both organizations understood that the forces driving change were not only inevitable but welcome, because change would encourage and reward improvements in health and enhancement of patient experience at a reasonable cost.Inherent in these case studies are key success principles in value-based reimbursement: making the infrastructure commitment, transforming the cost structure, and collaborating across the healthcare delivery spectrum.MAKING THE VALUE COMMITMENTFor Carroll Hospital Center, the opportunity to make the value commitment came early, even before passage of the Affordable Care Act. In 2009, the state of Maryland rolled out a value-based reimbursement system that focused on potentially preventable conditions, core measures, and patient experience of care. Owing to its unique payment system, Maryland has become a hotbed of innovation. …