Becker's Hospital Review

Register Today! Becker's Hospital Review CIO and CEO Strategy Roundtables - Nov. 4 and 5, 2014 - Chicago 12 How to make the switch without sinking At this point, many providers exist in a state of limbo between the two payment models, trying to figure out how to proceed successfully. "Many systems are describing this as a foot on the dock, foot on the boat moment," says Mr. Landman of HFMA. "A lot of them are caught between fee- for-service and value-based contracting, looking at when they will reach the tipping point." As they continue to navigate that transition, hos- pital and health system leaders can take numerous steps to prevent or at least mitigate the potential loss of income that value-based payment mod- els could bring. Mr. Landman recommends cost restructuring as one major strategy to consider. "Your revenue will drop, but if you bring your cost structure down at the same time, you'll main- tain your margin," he says. He advises providers to get a sense first of whether and where they're ca- pable of cost restructuring, which often involves clinical practice redesign. Similarly, KPMG Partner Cynthia Ambres, MD, says providers should understand their core busi- ness well and consider financial restructuring to ensure they're operating seamlessly: "Get your fi- nancial house in order, and move simultaneously toward financing a new payment structure. Total revenue may drop but your margin may increase with better coordinated care delivery models." Advocate has taken exactly that approach to its cost structure as it focuses on value-based care. "We are laser-focused on our care model trying to drive out any waste or inefficiencies," Mr. Engle- hart says. "It's got to be really taking a step back and strategically look how can provide the care differently and more efficiently." Mr. Landman also advises providers to start by experimenting with their self-funded employee population: "That gives them a real sort of feel for what the impacts are. It allows them to project to broader populations. That's a really great spot to start is getting your feet wet." Hospitals that want to "dip their toe in" the value- based payment pool can start with bundled pay- ment programs, according to Dr. Bithoney. How- ever, he warns against being too timid and only implementing bundled payments for one diagno- sis, such as hip replacements. The old-fashioned methods still in place everywhere else in the sys- tem can undermine the experiment. "They haven't really changed the system," he says. "They've tried to change just one thing and try to leave everything else the way it's always been." He says it's better to "jump in" and apply bundled payments to 20 or 25 different diagnoses, albeit not without careful thought and analysis first. Another piece of advice for transitioning to value- based contracts: Adopt new technology. "That's going to be essential to being successful," says Dr. Nace. "All the technologies…for example, revenue cycle systems that hospitals and health systems use today…they are built for a fee-for-service en- vironment, and they are completely inadequate to address value-based methods of reimbursement." Technology can also play a part in clinician engage- ment and education about new care delivery meth- ods — another key aspect of a smooth switch to outcomes-based reimbursement, according to Dr. Bithoney. For instance, electronic health records can contain "blue buttons," which are links to the latest clinical literature and practice guidelines. "If the clinician has a question, he can look at it," he says. "That kind of thing can be quite helpful." Conclusion There's no one-size fits all approach to taking on value-based contracts. Providers need to consider a number of factors — from cost structure to or- ganizational culture to physician relations — be- fore taking on the new payment model, according to Mr. Englehart of Advocate Physician Partners. "You can't be a me-too," he says. "You get in trou- ble when you try to catch up to someone else in your market, and you don't have an honest as- sessment of your strengths, weaknesses and rate of change your organization is willing to take on As for APP and Advocate, the system is prepared to focus more and more on population health, main- taining its focus on providing value while simul- taneously seeking to keep a healthy balance sheet. "We think that shared savings and ACOs are bridg- es toward a higher level of responsibility for the total cost of care," he says. "We're committed, we're in. This is where we believe we need to go." n SUBSCRIBE TODAY! Becker's Hospital Review CEO Report E-Weekly Guidance, analysis and best practice information on hospital leadership, operations and management issues for top hospital and health system executives Each E-Weekly, sent every Tuesday, contains the most popular feature articles covering business and legal issues, CEO profiles and benchmarking and statistical data to immediately inform your decision-making To subscribe to the FREE E-Weekly, visit www.BeckersHospitalReview.com and click on the "E-Weekly" tab or call (800) 417-2035 MORE ONLINE: Want more reading about value- based contracts? See the following stories available at www.BeckersHospitalReview.com: n "What Wayne Gretzky Can Teach Healthcare About Transitioning to Pay-for-Performance" (July 2014) n "New Reimbursement Models to Eclipse Fee-for-Service by 2020" (June 2014) n "Financial, Clinical Consider- ations When Bundling Payments" (May 2014) "They're saying, 'I don't know that this will be successful for us; it may hurt us financially.' But what you're not hearing as much is, 'But not as much as if we didn't do anything.' What you're missing is, 'We're going to do it anyway, because we're dead if we don't.'" — David Nace, MD, CMO of McKesson Health Solutions.

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