Experts in performance-based payment approaches are anticipating a number of future trends:
Although many health systems have been in pay-for- performance contracts for several years, the number-and variety-of those contracts is burgeoning as health system performance becomes more transparent. Centura Health, Colorado's largest health system, for example, has insurance contracts that tie payment to its performance on everything from readmissions and quality improvement goals to patient satisfaction scores and timely notification of a member's hospitalization (see the exhibit below).
The percentage of pay at risk in these arrangements varies widely, says Bradley Olson, former director of payer relations and contracting for the 13-hospital system.
In general, 1 percent to 2 percent of Centura's net revenue is tied to its performance-and that is enough to get Olson's attention. "One to 2 percent is an important number for Centura," he says. "It does mean a lot."
Major employers, however, are pushing for much more. Catalyst for Payment Reform, a not-for-profit organization that represents 22 of the nation's largest employers and other healthcare purchasers, wants 20 percent of aggregate net payments to providers to be value-oriented by 2020. "When you look at the breadth and depth of programs available today that are value-oriented, they are very superficial," says Suzanne Delbanco, executive director, Catalyst for Payment Reform. "They touch very few providers, they touch very few of the healthcare dollars in the system, and they touch very few patients."
Catalyst for Payment Reform's definition of "value- oriented" payments extends beyond traditional pay-for-performance contracts to include new payment strategies that reduce waste, such as paying the same price for Cesarean and vaginal deliveries, thereby discouraging unnecessary C-sections. "If we can settle on which of those strategies seems to be effective and implement them more broadly, I don't think it's unrealistic to get to the 20 percent," says Delbanco. "If you don't push for something bold, you will never make any progress."
The boldest employers are contracting directly with health systems to deliver certain procedures at set prices through so-called "travel surgery" programs. That strategy hinges entirely on the use of quality and cost data to identify providers that can deliver the value the employers want.
The home improvement retailer Lowe's pioneered this concept in 2010 when it signed a bundled payment contract with Cleveland Clinic to provide heart surgeries for its employees. The company said it would be pleased if 10 employees used the travel surgery option in the first year of the program; indeed, 30 workers chose the option, says Michael McMillan, Cleveland Clinic's director of market and network services, in a February 2011 HFMA Forums article.
Most recently, PepsiCo contracted with Johns Hopkins Medicine to provide cardiac and joint replacement surgeries for its U.S. employees and their dependents, regardless of where they live. Although traveling to Baltimore for those procedures is optional, the 250,000 individuals in PepsiCo's self-insured health plan will see their deductibles and coinsurance waived if they choose that option. The company will also pay the travel and lodging expenses for the patient and a companion.
The consulting firm that arranged the contract on behalf of PepsiCo started the process by reviewing Johns Hopkins' quality data. "We did go through a significant vetting process with PepsiCo's consultant about our program," says Patricia M.C. Brown, president of Johns Hopkins HealthCare LLC. "They reviewed all of our data to ascertain our quality before they even introduced the employer to us."
The health system then proposed prices for 27 bundles of services-22 cardiovascular procedures and five joint replacement procedures-which include all hospital and physician charges and certain preoperative tests. "PepsiCo's consultants had the ability to assess our rates because they have a lot of data," she says. "We negotiated, obviously, but the consultants were able to ascertain from their own data whether we were offering a competitive price, and whether that price would offer savings to the purchaser-in this case, the employer."
Arnold Milstein, MD, is an expert on the travel surgery phenomenon, having initiated the contract that allows Lowe's employees and dependents to travel to Cleveland Clinic for cardiac procedures. He expects to see complex cardiac and spine surgeries, major joint replacements, and possibly brain surgeries slowly migrate out of community hospitals in the years ahead. However, he thinks direct contracting between employers and providers will be limited to only the very largest employers because of the extensive administrative work involved.
Those employers that do pursue direct contracting will demand data that proves high-quality care before they consider a provider for a travel surgery contract. However, employers' decisions will be based on cost; they want to control costs through a bundled payment approach that holds the provider financially responsible for any complications of care associated with the procedure.
That said, community hospitals may be at a disadvantage when it comes to direct contracting with employers-even if they can document top quality and lower cost of care. "When employers are starting down this road, they want their employees to embrace the idea of traveling for surgery rather than using the local team," says Milstein, director of the Clinical Excellence Research Center at Stanford University School of Medicine. "They don't want ambiguity in people's minds as to whether the quality is worth the trip."
In the immediate future, he expects employers will only pursue travel surgery programs with big-big-name centers like Mayo Clinic, Stanford, and University of California-Los Angeles Medical Center.
Delbanco agrees that few employers will want to contract directly with providers. But she says the motivation for direct contracting is the same one that is driving employers to demand other changes in healthcare purchasing. "Employers are increasingly aware of the fact that there is wide payment variation for the same service, and it does not necessarily have anything to do with differences in quality," she says.
Of course, that fact benefits health systems that are able to deliver high-value care. Olson, at Centura Health, says the system has focused on quality improvement since it was organized in 1996. Over time, the concept of value-quality divided by cost-has become increasingly important, and it is a central theme in the system's strategic plan for 2020. "Centura knows patients, employers, and payers are very focused on cost and quality," he says. "We have well-laid plans to manage this."
Nearly a decade ago, the system entered into its first pay-for-performance contracts with managed Medicare plans. In the past five years, pay-for-performance measures have also been used in its contracts with managed care preferred provider organizations (PPOs) and health maintenance organizations (HMOs).
Olson worked with Centura's clinical quality directors when he negotiated with payers about the metrics to use in performance-based contracts. In addition, he shared the results with those directors each quarter so they could see how clinical performance affected Centura's revenues.
The data that is used to assess Centura's performance comes from a variety of sources. For example, one payer uses a third-party vendor to gather data that is manually submitted once each year by Centura's quality directors or case managers. Another payer tracks performance measures by analyzing Centura's claims data, which includes information on the services provided to patients.
This claims data analysis sometimes reveals facts about Centura's performance that the health system may not be able to see internally. At quarterly meetings with Centura, the insurer reviews length of stay and discharge data for its members who have been admitted to Centura hospitals and identifies opportunities for improvement. For example, when a payer pointed out that a certain physician had a longer-than-expected length of stay for newborn deliveries, Centura responded by coaching that physician about the system's policy regarding mother-and-baby discharges.
At these quarterly meetings, the insurer also reviews the percentage of admissions for which Centura notified the payer within 24 hours, 48 hours, or 72 hours. Olson says the health system's goal is to notify insurers within 24 hours for 100 percent of admissions, but its track record is closer to 95 percent. Tracking the payer's notification data helps Centura reduce claims denials, he says.
See related sidebar: Succeeding in a Value-Based Payment World
This kind of information sharing between payers and providers would have been remarkable just a few years ago. But providers and payers alike are realizing that data can drive improvement. In many cases, adversarial relationships between health systems and insurers are giving way to mutually beneficial collaborations based on data.
Both parties are responding to pressure from employers that are tired of ever-increasing healthcare costs and nagging questions about the quality and safety of care. That is what prompted GE, 3M, Xerox Corp., Walmart, and other major employers to come together in 2009 to form Catalyst for Payment Reform.
The not-for-profit's strategy is one of shared strength. Although no single employer or purchaser has enough buying power to change the way health care is paid for, large healthcare purchasers banded together do have that power, says Delbanco. The organization's reach is spreading. Earlier this year, Ohio Medicaid became the first state Medicaid program to work with Catalyst for Payment Reform.
Catalyst for Payment Reform's strategy is to influence insurers in ways that drive payment reform. All employers or other purchasers that participate in the organization's efforts agree to use its health plan Request for Information (RFI) to query insurers about how they currently pay hospitals and physicians and their plans for the future. The goal is to help healthcare purchasers examine and compare the amount of physician and hospital compensation that is tied to performance through pay-for-performance and other value-based purchasing programs-and to put pressure on them to do more.
First introduced last summer, the RFI will be used by Catalyst for Payment Reform purchasers to vet health plans during their next contracting cycles. In the interim, employers are encouraged to use the RFI questions as a discussion guide during their periodic meetings with their current health plans. "We suggest to our purchasers that these are the questions they should be posing to health plans so they can find out what the plans are up to and push them into these value-based contracts," says Delbanco.
The RFI includes sections asking health plans to assess their performance-based payments, give evidence that the performance-based payment is effective in adding value, identify how performance is measured for payment purposes, and reveal their future plans for payment strategies.
Through an arrangement with the National Business Coalition on Health, the RFI will have a much broader reach than the 22 purchasers that work with Catalyst for Payment Reform. The National Business Coalition annually surveys more than 60 national and regional health plans using its eValue8 assessment tool. Most of the RFI questions have been incorporated into this year's eValue8 survey, and all of them will be included next year, says Delbanco.
The data collected through the RFI will identify the health plans that are most aggressively moving to value-based payment strategies, which will help employers decide which plans they wish to contract with. The very process of asking for the information, in and of itself, puts pressure on health plans to move beyond the current standard, in which providers are at risk for only 1 percent to 2 percent of total payment.
Beyond that, the information will illuminate which value-based strategies are most effective in controlling costs and which payment models are gaining traction. "Health plans are very open to working with us because, right now, they have every customer asking them for something different," says Delbanco. "To the degree that we can organize a health plan's customer base and have them all on the same page about what they want from the health plan regarding payment reform, we may make the health plan's work easier."
Accepting more financial risk-either through accountable care organization contracts, bundled payments, or more aggressive pay-for-performance arrangements-will be easiest for those health systems that are already using performance data for payments and for management.
At Centura, Olson liked contracts in which payments reflect the well-recognized performance measures, such as the core measures for heart care and pneumonia. "Those are where Centura is focused," he says. "The outcomes are generally easier to meet because our health system is engaged-from the top to the bottom-in meeting those goals."
Interviewed for this article (in order of appearance): Bradley Olson is former director of payer relations and contracting, Centura Health, Englewood, Colo. Suzanne F. Delbanco, PhD, is executive director, Catalyst for Payment Reform, San Francisco (email@example.com). Patricia M.C. Brown, JD, is president of Johns Hopkins HealthCare LLC, Baltimore (firstname.lastname@example.org). Arnold Milstein, MD, is director of the Clinical Excellence Research Center, Stanford University School of Medicine, Stanford, Calif. (email@example.com).
The Claro Group: Partnering for Performance Improvement
In this Business Profile, Larry Volkmar, a managing director in the performance improvement
practice at The Claro Group, discusses key strategies for improving
clinical and financial performance.
Deloitte: Taking Data Analytics to the Next Level
In this Business Profile, Christine Santos, chief of strategic business analytics for
Providence Health Services and Chris DeBeer, principal at Deloitte
Consulting LLP explain the value of enterprise data analytics.
PatientMatters: A Patient-Centered Financial Experience
In this Business Profile, Sheila Schweitzer, founder and CEO of PatientMatters, offers insights
on ways hospitals and healthcare systems can address rising patient
Cerner RevWorks: Helping Providers Boost their Bottom Line
In this business profile, Jason Rawlings, vice president ambulatory
and revenue cycle for Cerner talks about leveraging third-party
management services to improve revenue cycle health.
The Claro Group: Transforming Clinical Documentation Improvement
In this business profile, Tim Marshall, managing director at The
Claro Group, discusses the value of rethinking and retooling clinical
Ontario Systems: Maximizing Self Pay Collections
6 Patient Revenue Cycle Metrics You Should Be Tracking (and How to Improve Your Results)
Patient financial engagement is more challenging than ever – and more critical. With patient responsibility as a percentage of revenue on the rise, providers have seen their billing-related costs and accounts receivable levels increase. If increasing collection yield and reducing costs are a priority for your organization, the metrics outlined in this presentation will provide the framework you need to understand what’s working and what’s not, in order to guide your overall patient financial engagement initiatives and optimize results.
10 Ways to Reduce Patient Statement Volume (and Reduce Costs)
No two patients are the same. Each has a very personal healthcare experience, and each has distinct financial needs and preferences that have an impact on how, when and if they chose to pay their healthcare bill. It’s no longer effective to apply static billing techniques to solve the complex challenge of collecting balances from patients. The need to tailor financial conversations and payment options to individual needs and preferences is critical. This presentation provides 10 recommendations that will not only help you improve payment performance through a more tailored approach, but take control of rising collection costs.
Reduce Patient Balances Sent to Collection Agencies: Approaching New Problems with New Approaches
This white paper, written by Apex Vice President of Solutions and Services, Carrie Romandine, discusses the importance of patient segmentation and messaging specifically related to the patient revenue cycle. Applying strategic messaging that is tailored to each patient type will not only better educate consumers on payment options specific to their billing needs, but it will maximize the amount collected before sending to collections. Further, targeted messaging should be applied across all points of patient interaction (i.e. point of service, customer service, patient statements) and analyzed regularly for maximized results.
The Future of Online Patient Billing Portals
This white paper, written by Apex President Patrick Maurer, discusses methods to increase patient adoption of online payments. Providers are now seeking ways to incrementally collect more payments due from patients as well as speeding up the rate of collections. This white paper shows why patient-centric approaches to online payment portals are important complements to traditional provider-centric approaches.
Payment Portals Can Improve Self-Pay Collections and Support Meaningful Use
Increased electronic engagement between healthcare providers and patients provides significant opportunities for improving revenue cycle metrics and encouraging patients to access EHRs. This article, written by Apex Founder and CEO Brian Kueppers, explores a number of strategies to create synergy between patient billing, online payment portals and electronic health record (EHR) software to realize a high ROI in speed to payment, patient satisfaction and portal adoption for meaningful use.
Large Health System Drives 10% UP (Patient Payments) and 10% DOWN (Billing-related Costs)
Faced with a rising tide of bad debt, a large Southeastern healthcare system was seeing a sharp decline in net patient revenues. The need to improve collections was dire. By integrating critical tools and processes, the health system was able to increase online payments and improve its financial position. Taking a holistic approach increased overall collection yield by 10% while costs came down because the number of statements sent to patients fell by 10%, which equated to a $1.3M annualized improvement in patient cash over a six-month period. This case study explains how.
ICD-10: Managing Performance
With the ICD10 deadline quickly approaching and daily responsibilities not slowing down, final preparations for October 1 require strategic prioritization and laser focus.
Clarity Drives Collections
Read how Gwinnett Medical Center provides clear connections to financial information, offers multiple payment options for patients, and gives onsite staff the ability to collect payments at multiple points throughout the care process.
Orlando Health Gains Insight into Denials, Reduces A/R Days with RelayAnalytics Acuity
Read how Orlando Health was able to perform deeper dives into claims data to help the health system see claim rejections more quickly–even on the front end–and reduce A/R days.
Revenue Cycle Payment Clarity
To maintain fiscal fitness and boost patient satisfaction and loyalty, healthcare providers need visibility into when and how much they will be paid–by whom–and the ability to better navigate obstacles to payment. They need payment clarity. This whitepaper illuminates this concept that is winning fans at forward-thinking hospitals.
Streamlining the Patient Billing Process
Financial services staff are always looking for ways to improve the verification, billing and collections processes, and Munson Healthcare is no different. Read about how they streamlined the billing process to produce cleaner bills on the front end and helped financial services staff collect more than $1 million in additional upfront annual revenue in one year.
Wallace Thomson Hospital Automates to Maximize Limited Resources
Effective revenue cycle management can be a challenge for any hospital, but for smaller providers it is even tougher. Read how Wallace Thomson identified unreimbursed procedures, streamlined claims management, and improved its ability to determine charity eligibility.
7 Steps for Building and Funding Sustainability Projects
Before launching an energy-efficiency initiative, it’s important to build a solid business case and understand the funding options and potential incentives that are available. Healthcare leaders should consider taking the steps outlined in the whitepaper to ease the process of gaining approval, piloting, implementing, and supporting sustainability projects. You will find that investing in sustainability and energy efficiency helps hospitals add cash to their bottom line. Discover how hospitals and health systems have various options for funding energy-efficient and renewable-energy initiatives, depending on their current financial structure and strategy.
Key Capital Considerations for Mergers and Acquisitions
Health care is a dynamic mergers and acquisitions market with numerous hospitals and health systems contemplating or pursuing formal arrangements with other entities. These relationships often pose a strategic benefit, such as enhancing competencies across the continuum, facilitating economies of scale, or giving the participants a competitive advantage in a crowded market. Underpinning any profitable acquisition is a robust capital planning strategy that ensures an organization reserves sufficient funds and efficiently onboards partners that advance the enterprise mission and values.
Key Capital Considerations for Mergers and Acquisitions
The success of healthcare mergers, acquisitions, and other affiliations is predicated in part on available capital, and the need for and sources of funding are considerations present throughout the partnering process, from choosing a partner to evaluating an arrangement’s capital needs to selecting an integration model to finding the right money source to finance the deal. This whitepaper offers several strategies that health system leaders have used to assess and manage capital needs for their growing networks.
Trend Watch: Providers adapt as value-based care moves from hype to reality
Announcements from several commercial payers and the Centers for Medicare and Medicaid Services (CMS) early in 2015 around increased efforts to form value-based contracts with providers seemed to point to an impending rise in risk-based contracting. Rather than wait for disruption from the outside in, health care providers are now making inroads on collaborating with payers on various risk-based contracting models to increase the value of health care from within.
Yuma Regional Medical Center case study
Yuma Regional Medical Center (YRMC) is a not-for-profit hospital serving a population of roughly 200,000 in Yuma and the surrounding communities.
Before becoming a ZirMed client, Yuma was attempting to manually monitor hundreds of thousands of charges which led to significant charge capture leakage. Learn how Yuma & ZirMed worked together to address underlying collections issues at the front end, thus increasing Yuma’s overall bottom line.
Reforming with a New 50-Bed Acute Care Facility
Kindred Hospital Rehabilitation Services works with partners to audit the market and the facility’s role in that market to identify opportunities for improvement. This approach leads to successes; Kindred’s clinical rehab and management expertise complements our partners’ strengths. Every facility and challenge is unique, and requires a full objective analysis.
5-Minute Briefing on Revenue Integrity Through HIM WhitePaper Hospitals FS
As the critical link between patient care and reimbursement, health information enables more complete and accurate revenue capture. This 5-Minute White Paper Briefing shares how to achieve cost-effective revenue integrity by your optimizing HIM systems.
5-Minute Briefing on Accelerating Cash Flow Through HIM WhitePaper Hospitals FS
Speedier cash flow starts with better CDI and coding. This 5-Minute White Paper Briefing explains how providers can improve vital measures of technical and business performance to accelerate cash flow.
5-Minute Briefing on Reducing the Cost of RCM WhitePaper Hospitals FS
Qualified coders are getting harder to come by, and even the most seasoned professional can struggle with the complexity of ICD-10. This 5-Minute White Paper Briefing explains how partnerships can help improve coding and other key RCM operations potentially at a cost savings.
Providers Focus Too Much On Revenue Cycle Management
The point of managing your revenue cycle isn’t just to improve revenue and cash flow. It’s to do those things effectively by consistently following best practices— while spending as little time, money, and energy on them as possible.
Lucille Packard Children’s Hospital Stanford Case Study
How Lucile Packard Children’s Hospital Stanford increased payments received within 45 days by 20% and reduced paper submission claims by 70% by using ZirMed solutions.
Using Predictive Modeling To Detect Meaningful Correlations Across Claims Denials Data
The reasons claims are denied are so varied that managing denials can feel like chasing a thousand different tails. This situation is not surprising given that a hypothetical denial rate of just 5 percent translates to tens of thousands of denied claims per year for large hospitals—where real‐world denial rates often range from 12 to 22 percent. Read about how predictive modeling can detect meaningful correlations across claims denials data.
ZOLL and Emergency Mobile Health Care Case Study
Emergency Mobile Health Care (EMHC) was founded to be and remains an exclusively locally owned and operated emergency medical service organization; today EMHC serves a population of more than a million people in and around Memphis, answering 75,000 calls each year.
Maximizing Medicare Reimbursements White Paper
Since the Physician Quality Reporting Initiative (PQRI) introduction, CMS has paid more than $100 million in bonus payments to participants. However, these bonuses ended in 2015; providers who successfully meet the reporting requirements in 2016 will avoid the 2% negative payment adjustment in 2018, so now is the time to act! Included in this whitepaper are implications of increasing patient responsibility, collections best practices, and collections and internal control solutions.
Denials Deconstructed: Getting Your Claims Paid
Getting paid what your physician deserves—that’s the goal of every biller. Yet even for the best billers, achieving that success can be elusive when denials stand in the way of success, presenting challenges at every turn. Denials aren’t going away, but you can learn techniques to manage and even prevent them.Join practice management expert Elizabeth W. Woodcock, MBA, FACMPE, CPC, to: Discover methods to translate denial data into business intelligence to improve your bottom line, determine staff productivity benchmarks for billers, and recognize common mistakes in denial management.
Automation and Operational Improvement Drive Sustainable Results
Physician practices must improve organizational efficiency to compete in this era of reduced reimbursement and escalating administrative costs.
Revenue Cycle Management Resolves Migration Implementation Issues
Many healthcare organizations are pursuing next-generation health information systems solutions. Learn more about Navigant's work with University of Michigan Health System.
Partnering For Success – Provider Achieves Strength in Stability
The proper implementation of healthcare information technology systems is crucial to an organization’s financial health.
Building a Clinically-Integrated Network
As value-based payment models evolve, providers are challenged to maintain superior clinical outcomes while controlling costs.
Winning in the Post-Acute Marketplace
Read more about factors contributing to the changes in the post-acute marketplace and what it means for manufacturers, physicians, clinicians, patients, and post-acute facilities as they anticipate the transition to the second curve.
Building A Common Vision with Employed Physicians
HSG helped the physicians and executives of St. Claire Regional in Morehead, Kentucky, define their shared vision for how the group would evolve over the next decade. As well as, develop the strategic and operational priorities which refocused and accelerated the group’s evolution.
Practice Performance Improvement
The client was a nine-hospital health system with 14 clinics serving communities in a multi-state market with very limited access to care, poor economic conditions, high unemployment, and a heavy Medicare/Medicaid/uninsured payer mix. In most of these communities, the system was the sole source of care.
Though the clinics were of substantial size (they employed 98 physicians) and comprised of multiple specialists, the physicians functioned as individuals and the practices lacked any real group culture.
Clinical Integration Without Spending a Fortune
Clinical integration can be expensive, but it doesn’t have to be, as this four-step road map for developing a CIN proves. Does it have to cost millions to initiate a clinical integration strategy?
Contrary to popular belief, we have clients who have generated substantial shared savings and a significant ROI over time, without massive investments. Yes, some financial capital is required for resources the CIN providers can’t bring to the table themselves. But the size of that investment can be miniscule relative to the value it produces: improved outcomes and documentation for payers.
Adding Value to Physician Compensation
Today’s concerns about physician compensation are the result of the changing healthcare environment. The transition to value is slow, but finally becoming a reality. Proactive hospitals want to ensure that provider incentives are properly aligned with ever-increasing value-based demands.
This report focuses on the three big questions HSG receives about adding value to physician compensation; Why are organizations redesigning their provider compensation plans? What elements and parameters must be part of successful compensation plans? How are organizations implementing compensation changes?
Effective Revenue Cycle Management in Your Network
Revenue Cycle Management has become an even more complex issue with declining reimbursements, implementation of Electronic Health Records, evolving local carrier determinations (LCD), and payer credentialing [The emphasis on healthcare fraud, abuse and compliance has increased the importance of accuracy of data reporting and claims filing).
The efficiency of a medical practice’s billing operations has critical impact on the financial performance. In many cases, patient billings are the primary revenue source that pays staff salaries, provider compensation and overhead operating cost. Inefficiencies or inaccurate billing will contribute to operating losses.
Succeeding in Value-Based Care
This publication identifies and outlines the necessary characteristics of a fully-functioning clinically integrated network (CIN). What it doesn’t do is detail how hospitals and providers can participate in the value-based care environment during the development process.
One common misconception is that the CIN can’t do anything significant until it has obtained the FTC’s “clinically integrated” stamp of approval. While the network must satisfy the FTC’s definition of clinical integration before single signature contracting for FFS rates and contracts can legally start, hospitals and providers can enjoy three key benefits during the development process.
Therapy: Benefits at All Levels of Care
Nearly half of all Medicare beneficiaries treated in the hospital will need post-acute care services after discharge. For these patients, a stay in an inpatient rehabilitation facility, skilled nursing facility or other post-acute care setting comes between hospital and home.
Does Your Budgeting Process Lack Accountability?
With the proper process, tools, and feedback mechanisms in place, budgeting can be a valuable exercise for organizations while helping hold organizational leaders accountable. Having a proper monthly variance review process is one of the most critical factors in creating a more efficient and accurate budget. Monthly variance reporting puts parameters around what is to be expected during the upcoming budget entry process.