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Hospitals, health systems, and physician practices must find
ways to adapt to the quickly changing market forces around them. Sources of
change include value-based contracting, provider competition, consumerism, changes
in government and commercial payment models, health system regionalization,
government regulation, and technological innovation.
(pictured at right: author William K. Faber, MD)
Health systems and physicians increasingly are finding it in
their best interests to affiliate with one another in new ways, but how they
collaborate depends on specific forces in their market. Some markets have larger
populations and more significant provider competition than others. Some are
more likely to have health plans that want to implement value-based payment models.
For a given market, the x-axis of the exhibit below (click to enlarge) indicates the level
of competition for patients and physicians. The y-axis reflects the level of
interest by health plans in products that reward cost-effectiveness or value. We
will examine affiliation strategies that pertain best to each market scenario.
The quadrant on the lower left of the grid represents
markets with limited nearby competition and health plans and self-insured
employers that have not shifted their expectations to value. The risk of losing
patients and physicians to local competitors is low. Commercial insurers tend
to rely on PPO fee-for-service contracts, but Medicare and Medicaid still
provide incentives for waste reduction.
(pictured at right: author John Malone)
This environment may not be right for establishing a
clinically integrated network (CIN) because relatively small patient populations
make bearing actuarial risk more difficult and geographic dispersion makes care
Low competition favors the status quo delivery model,
although physicians and hospitals are still incentivized to develop mutually
beneficial partnerships and work together to satisfy the needs of the community.
The biggest incentives to deliver value-based care in this scenario come from
government programs: Medicare Access and CHIP Reauthorization Act of 2015 (MACRA)
physician payment reforms and, in many states, managed Medicaid.
Hospitals and physicians in this quadrant benefit from patient
loyalty. There may be a need to compete at the edges of catchment areas and to protect
referral patterns, but the primary challenge here is to respond to payment reforms
from Medicare (primarily MACRA for physicians and the value-based purchasing, readmissions
reduction, and hospital-acquired conditions reduction programs for hospitals). Hospitals
and health systems are required to respond to these federal programs.
Hospitals can help physicians do well in MACRA by providing
quality measurement, health IT platforms, and patient-centric programs (e.g.,
chronic disease management) to improve success in MACRA quality metrics.
Physicians can help hospitals by coordinating care to prevent
unnecessary admissions and readmissions. Even putting aside the penalties that
apply for unnecessary 30-day readmissions for designated conditions, each
avoidable Medicare or Medicaid admission may amount to a loss to the hospital
because the Medicare DRG payment or Medicaid payment does not even cover the
variable cost of care. Stabilizing these patients in the outpatient setting is
not only good for the patient but also fiscally beneficial to the hospital.
Third parties can help physicians in these markets through
the development of management services organizations or other services that can
provide billing, staffing, technology support, imaging, or credentialing services
in aggregate more efficiently than practices can provide for themselves. This
type of market also can benefit from messenger-model contracting support or the
establishment of a health information exchange. Hub hospitals can serve their communities
and help secure their referral bases by developing telehealth programs.
This position is where Advocate Health found itself in the
early 2000s. The Chicago-area has population density, a diversified economy,
many provider organizations, and many health plans. The insurers were interested
in creating value-based products in response to pressure from employers.
Competition between physicians was high—patients could find
an alternate primary care physician (PCP) or specialist within several square
miles. PCPs were concerned about having enough patients to support their
practices. Specialists had a great interest in protecting their referral base.
Likewise, health systems were concerned about public perception and market
Advocate was a leader in recognizing that it would need a
better value proposition than its competition to maintain market share. Development
of a CIN made perfect sense under these circumstances. (More recently, the Federal
Trade Commission in November 2018 made statements supporting the closer
integration of hospitals and physicians if the combination results in controlled
costs and improved care.)
An integrated network requires that providers willingly submit
their quality and utilization data and that they respond to organized efforts
to improve both. A network should use care management to improve patient
outcomes and decrease the total cost of care, and partner with facilities that
provide care in the most cost-effective settings.
Both physicians and hospitals in a competitive environment
benefit from legally sanctioned steerage of patients to in-network providers. Providers
are rewarded directly (with a portion of shared savings, as established in the health
plan contract) and indirectly (through in-network steerage). Providers may even
choose to accept a lower payment rate in exchange for the increased volume that
comes from being a part of the network. Patients benefit from higher-quality,
more cost-effective care, based on the standards that providers must agree to
as part of the CIN.
The upper-left quadrant in the grid represents hospitals in
markets with limited nearby competition but with health plans and self-insured
employers that increasingly demand value from providers. Low competition
creates a challenge for the development of integrated networks in this market because
there may be a shortage of specialists and because providers may not see a threat
of losing their patient base to a narrow network. This type of market dynamic puts
the emphasis on cost containment.
Hospitals and health systems in this quadrant can improve
their positions via both traditional and new approaches to cost reduction and quality
improvement. Traditional methods include basic operational “blocking and
tackling”—examining labor and non-labor cost management and searching out revenue
cycle and supply chain efficiencies. Newer approaches include physician
engagement and clinical variation reduction.
In this type of market, health plans are less interested in
promoting value-based products, but there is much competition between providers.
This dynamic is driven in large part by the socioeconomic environment.
Locales such as Silicon Valley and New York City are
populated with prosperous businesses that use generous benefits to attract top
talent from around the world. Hospitals have negotiated excellent
fee-for-service rates with the health plans in this market because they are
“must-have” network providers for the local businesses. These businesses have
not been interested in restricting their employees to narrow networks. They
want their top talent to be able to access any provider they wish, particularly
those that practice in convenient and well-regarded facilities.
This is a wonderful type of market for providers.
Fee-for-service PPO payment prevails. At the same time, other providers want to
crowd into the area to get a piece of the action, meaning competition is high. Providers
and facilities fiercely protect their patient base and referral sources.
The primary strategy in this market is to be perceived as
the best. Patients demand high-quality care and top-notch service. Price is not
the primary driver of business. Providers must compete by being convenient and
providing the best possible consumer experience, including by using telehealth
technology. Providers benefit from developing mechanisms to hand patients off
to each other seamlessly.
Despite key differences, several things are common to all
markets. MACRA will require improvements in quality and cost control for
Medicare beneficiaries, and the number of people who are 65 and older will
continue to grow as a share of the population during the next 20 years.
According to a census of U.S. hospitals, the payer mix at most
facilities is more than 50 percent Medicare. Likewise, for many physicians,
more than half of their patients are enrolled in Medicare, meaning MACRA can significantly
affect their payment.
Hospitals can help physicians who are engaged in MACRA—and
thereby gain their allegiance—by participating in advanced alternative payment models.
Physicians can help hospitals control length of stay, readmissions, and other
variable costs of care that affect Medicare DRG payments and Medicaid payments.
In all communities there is at least some incentive for hospitals and physicians
to find ways to affiliate.
Conditions are always changing, so the best strategy for
today may not be ideal for tomorrow. The employer base may undergo significant
changes. A new hospital may be built across town. An integrated delivery system
may create a narrow network in coordination with a health plan, and suddenly
thousands of patients have incentive to change providers seemingly overnight. Health
plans may continue to shift to products that reward some element of
cost-effectiveness. A new insurance product may appear at any time.
In other words, providers should constantly reassess their
situations and decide whether a change of strategy is in order.
William K. Faber, MD, MHCM, is managing principal
and chief medical officer for Lumina Health
Partners. John Malone is principal
for Lumina Health Partners.
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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.
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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
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Clarity Drives Collections
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Revenue Cycle Payment Clarity
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Key Capital Considerations for Mergers and Acquisitions
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Yuma Regional Medical Center case study
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Providers Focus Too Much On Revenue Cycle Management
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Denials Deconstructed: Getting Your Claims Paid
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Automation and Operational Improvement Drive Sustainable Results
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Revenue Cycle Management Resolves Migration Implementation Issues
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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.
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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
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