Becker's Hospital Review

How to Successfully Operate with Fee-For-Service and Fee-For-Value Reimbursement Models H ospitals and health systems today are balancing the demands of two very different payment models: the traditional fee-for-service model and emerg- ing fee-for-value arrangements, which tie a portion of payment to providers' performance on cost-efficiency and quality performance measures. Both commercial and government payers are clear about their plans to shift toward value-based models, but the shift will take several years. In that time, healthcare providers must strike a delicate balance today, maximiz- ing their fee-for-service reimbursement while strategically planning and preparing their organizations to take on more risk. Hospital and health systems CFOs often feel like they are living in two different economic worlds. How do they pace this transition? How do they involve clinicians and physicians? What are the most pressing chal- lenges of operating under dual reimbursement models? We asked healthcare industry execu- tives — Michael Moody, senior vice president of partnership integration and development of Walnut Creek, Calif.-based John Muir Health System, Victor Jordan, CFO of Detroit Medical Center and Robin Kilfeather-Mackey, CFO of Lebanon, N.H.-based Dartmouth-Hitchcock Medical Center — for their insights and answers to these questions and more. Question: As the healthcare industry moves to FFV reimbursement, which el- ements of fee-for-service are important to preserve, if any? Michael Moody: Certain tertiary and quater- nary services may always have fee-for-service elements, and you need to be thoughtful about moving away from fee-for-service in these areas. The decision is market-specific and influenced by the size of the population you will be taking risk for. Examples of this are transplant, trauma and burn units — essentially things that are more difficult to manage from a population standpoint. Victor Jordan: In the fee-for-service model, we're always going to need to be paid for the services we actually provide in hospitals. The challenge is moving away from getting paid for each encounter and moving toward some kind of risk-based methodology. Hospitals would get paid for services we provide, but there has to be some kind of incentive to ensure they're provided at the right level of care. This would be in the form of a shared savings pool that would be distributed to providers based on quality and outcome measures as well total cost of care for the patient population in the risk program. From a hospital perspective, we want to be sure we are part of the solution. In other words, as we take costs out of the hospital, we want to be a partner as far as sharing in cost savings for payers. These savings will result in lower overall cost of care for the popula- tions whose health we manage. As providers meet certain quality and outcome metrics, as population health is improved and as there are fewer readmissions, the incentives are aligned for all the players — hospitals, physicians, post- acute care providers and payers. If you look at the hospital providers in the Southeast Michigan or the Detroit areas, a minority percentage of the business is reimbursed based on fee-for-value. We still need to focus on the majority of our enterprise, which consists of fee-for-service. The basic el- ements of service line development, physician alignment, and quality and safety will never go away. To a great extent, penetration of risk payment models will be dictated by local mar- kets and states. One area that providers should move quickly on, if not already, is risk models for Medicaid payers. Fee-for-service schemes for this payer are not financially sustainable. Robin Kilfeather-Mackey: My organization is in quite a few different payment models that all have the underpinnings of fee-for-service. Fee-for-service is the principle way providers currently show the payer how their money is being spent and what services are actually pro- vided. If fee-for-service goes away, the industry will still need to have some type of record- keeping mechanism to track how — in theory — that money was spent. Today, many people also use claims information to track, manage and measure care. We will still need this type of tool in a fee-for-value world. There are also health interventions that ad- vance the health of populations that we don't get paid for today, such as preventive care. The industry will need to also begin to track health services we don't get paid for and marry it with outcomes and patient data flow. Q: What are the challenges of operating in dual reimbursement models? MM: There are inherently conflicts in some of the operating models. From a clinical delivery standpoint and workflow, you can't ask physi- cians and other providers to behave differently based on fee for service versus fee for value. If you're going to preserve value, you're going to cannibalize your fee for service value. We created a Medicare ACO and reduced our Medicare revenue. We thought it was important to pursue and it was important to preserve costs. We were successful, but we aren't sure in the long-term if that's the best way to go. We've decided not to move forward with it this year. The bottom line is that you can't ask your physicians and providers to do two different things. It creates additional risk in customer service, patient safety and outcomes. Providing the right care, at the right time and in the right setting is what we should all strive for. VJ: One of the challenges is for hospitals to accept the mindset that they're not going to be paid for every patient encounter, and they probably shouldn't be. If patients are being readmitted after 30 days at an excessive or pre-agreed upon rate, providers should realize financial penalties. We have to move toward the mindset that patients need a defined con- tinuum of care when they leave the hospital, and we're financially responsible if the health outcomes don't materialize. Another challenge is moving from the mindset that we're only responsible for what happens inside our hospital toward being responsible for managing the health of a population. It's hard for physicians to move to a fee-for-service model and focus on the health of a population because they are consumed with their day-to-day challenges of managing their patients. They will, more and more, be affiliated with physician organizations that will help them move to fee-for-value and popula- tion health management. An example of this model we have used in Detroit to ready us for the next level of pop- ulation health management is Detroit Medical Center's Pioneer ACO. On a per-member, per-month basis, we had the most success of any Pioneer ACO in 2014 for our 18,000 mem- bers. The amount of savings realized by CMS through our efforts was significant, and our physician partners as well as DMC shared in the savings, thus defraying our costs of running such an ambitious population health program. RKM: We are currently running a lot of pay- ment models in our organization. Although it is very expensive to keep a fee-for-service engine going, it still is the underpinning of most of our payment models. What we've layered onto it is the topside recordkeeping required to settle performance for the various different pay- ment models. We've participated in a Pioneer ACO in New Hampshire and a shared savings program in Vermont. Each of those payment models required dedicated infrastructure, so I've been paying for multiple models. There's a lot of costly infrastructure duplication that drives me crazy; each [agreement] comes with its own administrative bell and whistle. For me, that's the biggest challenge: The economic burden of having duplicate infrastructure that is a non-value add from a patient perspective. The dual environment also tends to be confusing to our providers. We want the pro- vider to drive the patient care path and not be influenced by the payment model. Sometimes the payment model gets in the way or creates an unnecessary burden for providers. Sponsored by: Executive Roundtable 31

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