As the market responds to continued pressure to reduce healthcare costs – and with costs expected to consume 20% of the US economy by 2020 – the march to value-based care will pick up speed in 2017. Healthcare pundits have been focusing on how the ACA will be repealed or replaced—but don’t let that noise distract you. In reality, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) is the legislation that mandates the transition to value-based care – and no one in Washington is considering repealing it. MACRA was passed with overwhelming bipartisan support; both parties feel a sense of urgency when it comes to containing healthcare costs. As Gov. Mike Leavitt, the former Secretary of Health and Human Services under George W. Bush, observed, “There’s not a place on the economic leaderboard for a country that spends 20-25% of its GDP on healthcare.”
MACRA is the product of that shared sense of urgency. It lays down the gauntlet, mandating the migration from fee-for-service to true population-based reimbursement, all in a relatively short period of time. This will force healthcare providers and the organizations that support them to reimagine how they deliver care, so they can successfully manage these new payment models….and that is a very big deal.
It’s also already happening
A 2016 survey by the HCP-LAN of government and private payers representing 50% of covered lives reveals that 28% of payments are already being made through Alternative Payment Models (APM’s). Given that MACRA will not impact reimbursement until 2019, these survey results appear to confirm that the market—rather than legislation—is driving the transition to value-based care. And even though the early adopters of APMs are impacting an increasingly bigger share of the market, there is still time to get in on the leading edge. And that is good news—no, great news—for physicians.
Physicians are being offered an unparalleled opportunity to truly lead their markets under these new payment models. Payers want to partner with physician-led organizations and incentivize them to manage the total cost and quality of healthcare delivered to their patients. Why? Because payers can create episode-based reimbursement models for hospitals and post-acute facilities that take into account cost and quality—but they can only impact actual utilization by incentivizing physicians to manage total medical expenditures for their populations.
As an example
Under the Comprehensive Care Joint Replacement (CCJR) Bundled Payment Initiative (BPI), the total cost of care is essentially predetermined – and to avoid financial penalties, providers must also demonstrate quality of care. Although Medicare is rapidly adopting BPIs (otherwise referred to as Episode-Based Reimbursement) because it is a “quick win” to reduce the cost of care, these models do not seek to address actual utilization. We know that up to 20% of surgical procedures performed in the US are considered medically unnecessary—but denying payment after the fact is not an effective strategy to prevent those surgeries from occurring in the first place. There’s no way to effectively incentivize a hospital or skilled nursing facility not to admit patients, or a home health agency not to accept referrals—because they rely on the physicians' judgment to determine the medical necessity of those services. Only by engaging the physician can payers target the reduction of unnecessary and ineffective utilization across an entire population. This is why the majority of APMs, with the exception of Bundled Payments, are designed to be delivered by physician-led organizations and not hospitals—it’s physicians who truly impact utilization.
Healthcare Prediction for 2017
So my prediction for 2017 is that we will see the next wave of physicians and physician-led organizations evaluating their options and aggressively adopting new payment models. The market will continue to move away from fee-for-service—and providers who recognize this and take a leading role in optimizing for APMs will have far greater opportunities in the future.