Hospitals mull multiple models for value-based payments

Chief financial officers must determine the best value-based care model for their healthcare organization, experts say.

Jim Landman, director of healthcare finance policy, perspectives and analysis at the Healthcare Financial Management Association in Westchester, Ill., predicts that we will indeed see a time when fee-for-service  is significantly reduced.

“In finance, most people are jazzed up about the potential for value-based payment to make a better healthcare system,” he said.

According to recent research by Chicago-based Valance Health, “The only questions most of today’s providers will face in the not-too-distant future --if not already -- are not if they’ll be joining the value-based healthcare movement, but when and, beyond that, which particular care and risk model to join.” The FFS model rewards volume and intensity of service and is widely seen as a driver for the skyrocketing cost of healthcare over the past three decades.

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“For a long time, it’s been evident that FFS was unfettered, and we pay for more things,” said Stuart Guterman, vice president for Medicare and cost control at The Commonwealth Fund in Washington, D.C. “That’s the nature of FFS. We don’t pay for quality or appropriate care. Value-based payment identifies services that stress quality, patient satisfaction and cost indicators that reward providers for service to patients.”

According to the Valence research, payment models fall on a continuum of care, ranging from FFS and Patient-Centered Medical Homes to full capitation and provider-sponsored plans. Chief financial officers “navigating significant changes in how they conduct business and deliver care,” must determine the best value-based care model for their healthcare organization.

“All payment models have fans and critics,” Guterman said. “All have upsides and downsides. Many say the best may be a combination of payment methods, depending on the provider and population.”

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According to Landman, a specialty provider might find bundled payments for episodic care something at which they would excel, while a regional health system that has gained experience with high-spend patients might think about capitation.

“If you look at Medicare Shared Savings, or BPs, they are built on a FFS chassis,” he said. “Even though the physician or hospital is paid FFS, at the end of the year there’s a reconciliation against historical benchmarks. If spending is less, the savings is split between CMS [the Centers for Medicare and Medicaid Services] and the provider. It works the same way on the commercial side.”

Guterman said staff-model HMOs, such as Kaiser-Permanente, are better equipped to take risks because they’re in charge. “Kaiser owns their hospitals. Their patients are part of their system. If you’re a solo physician in a fragmented health system, you don’t have control where your patients go and that could generate costs you have no control over.”

Landman predicts a growing number of smaller community hospitals will form collaboratives to share patient data, best practices and compete as a network.

“They gain scale and access to participate in a capitated or BP system,” he noted, and said he tells small hospital CFOs there’s no reason you can’t be successful under alternate payment systems.

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“Start experimenting with care coordination and population health,” he said. “It’s a win for the hospital and employees because you’re spending less and gaining expertise in techniques to roll out to a broader population.”

Regardless what payment model you choose, Guterman said the CFO and medical staff should be in agreement about the approach.

“What’s best for patients is what results in better financial outcomes for organizations,” he said. “Do well by doing good.”

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