Experts: Nonprofit healthcare must adapt to changing value models

Education session at the HFMA 2015 ANI. (credit: Henry Powderly)

ORLANDO -- Nonprofit healthcare providers have no choice but to adapt, experts say.

“Your business model is changing right from under you,” said Patrick Pilch, managing director at consulting firm BDO, speaking at a course on rethinking capital models for nonprofit health at the Healthcare Financial Management Association’s 2015 Annual Institute in Orlando, Florida on Monday.

The answer, though, isn’t so simple.

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For starters, fee-for-service is on the way out, replaced by a ballooning section of reimbursement tied to value. That’s got healthcare providers having to embrace models like capitation, accountable care and bundled payments.

“By 2019, fee for service will only make up 10 percent of payments,” Pilch said. “Hospitals will have to push out low-acuity volume and actually become a high-acuity provider as a result of that.”

Pilch pointed case studies that showed many hospitals offering too many services that had low acuity, presenting an opportunity to shift those treatments to other outpatient or ambulatory businesses. As a result, hospitals can be far more targeted with their specialities and increase patient volume there.

The Centers for Medicare and Medicaid Services, by far the largest payer for healthcare providers, is pushing value-based payment models. But their recently released ratings system that could also have a big effect on hospitals.

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“The five-star ratings are going to be important from the point of what your reimbursement is going to be and how you brand your network,” said Pilch. “The CMS is going to give a greater proportion to those facilities that have a five-star rating.”

Commercial payers are also switching to value, he said. For example, United plans to increase its value-based payments to providers by 20 percent in 2015 to $43 billion. It also expects that number to hit $65 billion in 2018.

In the end, Pilch said nonprofit health systems need to disrupt their current capital structures to survive. In addition to value-based payment models, that means taking a serious look at costs and finding ways to cut them. It also means enacting a “right care setting” model to shift care to places like ambulatory centers and physician’s offices. That’s even more important as the CMS readies to apply site-neutral payments, the idea that a procedure should be reimbursed at the same level, no matter where it is performed.

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Adapting also means making capital investments to shore up the business. That includes mergers between hospital, physician groups and even payers.

It all comes back to quality, the “value” in the value-based payment shift. Even capital planning should have some positive effect on the quality of care a health system provides.

“Clinical measures will drive financial results,” Pilch said.

Twitter: @HenryPowderly