HFMA Research Highlight

The shift from a fee-for-service payment model to one based on value is creating radical changes in how hospitals and health systems do business. As healthcare organizations increasingly are incented for delivering high-quality care at low cost, they are seeing greater financial importance around their abilities to costeffectively manage patient health at the population level.

How well organizations can apply evidence-based best practices, improve seamlessness of care transitions, and provide wellness support to those living with chronic conditions is becoming integral to their success in this new era of health care. With such changes in mind, the Healthcare Financial Management Association recently set out to examine current perspectives on hospital and health system value-based payment readiness and anticipated needs over the next three years.

In spring of 2015, HFMA researchers surveyed 146 senior financial executives, comprising CFOs, vice presidents of finance, and finance directors, about where their organizations’ readiness efforts are today and anticipated level of progress. In addition, respondents assessed ROI of efforts and rated a list of factors based on likelihood of enabling organizational readiness for value-based payment.

The following HFMA Research Highlight, sponsored by Humana, discusses the importance of these findings and key takeaways for today’s healthcare finance leaders.

Readying for Value

HFMA’s Executive Survey: Value-Based Payment Readiness, sponsored by Humana, provides insight into ways in which shifts in payment are affecting organizational priorities. For many providers, few contracts to date have included value-based mechanisms. In terms of median (middle level) experience, only 12 percent of respondents’ commercial payments currently incorporate value-based mechanisms. However, this number is anticipated to jump to 50 percent in three years.

Healthcare providers are heavily focused on meeting the Centers for Medicare & Medicaid Services’ (CMS) Value-ased Purchasing requirements, and their arrangements with private payers increasingly are targeting improvements in safety indicators, patient outcomes, and costs of care as well.

“I think any doubts about whether we are transitioning to more value-based payment and care delivery models have been dispelled,” says Jim Landman, HFMA’s director,healthcare finance policy, perspectives & analysis. “With CMS detailing specific targets for transitioning to valuebased payment and private payers clearly expressing their intent to accelerate the transition, now is the time for providers to focus on their capabilities to manage the transition, if they haven’t done so already.” 

Key among these capabilities are the following:

  • Eligibility verification: The ability to effectively identify patients covered under a value-based payment arrangement
  • Interoperability: The ability to aggregate clinical information across networks and between hospitals and physician practices
  • Business intelligence: The ability to collect, analyze, and model data
  • Real-time data access: The ability to provide meaningful data to care providers at the point of service
  • Care standardization: The ability to provide infrastructure that supports use of data to standardize care processes
  • Assessment of return: The ability to monitor valuebased contracting revenue opportunities versus costs of implementation
  • Chronic care management: The ability to provide systems and processes that support wellness and management of patients with high-volume, high-cost chronic diseases
  • Post-discharge follow-up: The ability to support patients post discharge with systematized follow-up (e.g., home health services, structured patient follow-up protocols)
  • Physician compensation: The ability to compensate physicians in a way that flexes to accommodate both fee-for-service and value-based models

The survey responses suggest finance executives generally do not view their organizations as being highly capable when it comes to most of these areas. Only on verifying eligibility does a majority rate themselves as highly or extremely capable more than 50 percent of the time. (See exhibit below.)

Current State
Current State

Data Challenges and Opportunities

Most healthcare finance leaders see significant challenges—and opportunities—ahead when it comes to accessing the data that will be necessary to improve performance under value-based models.

As one respondent noted: “Aligning services along the care continuum for a coordinated patient experience isn’t just challenging for organizations clinically. You also need to align all of your data with financials to allow costing throughout the system if you’re going to enable ideal decision support.”

As organizations look to the next three years, gaps in readiness are most pronounced in data sharing and application. Nearly 40 percent of respondents don’t believe that their organizations currently possess capabilities rated as extremely important to succeed in risk-based value arrangements in the areas of interoperability, business intelligence, and real-time data access. (See exhibit below.)

Projected Needs
Projected Needs

Views on interoperability are of particular significance, as that is not only where organizations currently rank weakest but also where nearly 70 percent of financial executives anticipate their organizations will need to be extremely capable in the near future. 

Sharing clinical and financial information across the care continuum is necessary to support coordinated care, track patient adherence to care regimens, understand costs of care, and leverage patient engagement across settings.

Although many organizations have invested in electronic health record adoption to achieve CMS Meaningful Use, data largely remain in silos. “To a significant extent, challenges arise from the fact that many of the systems that have been put into place within hospitals and other healthcare settings are not very good at talking with other systems,” says HFMA’s Landman.

Although the Office of the National Coordinator for Health Information Technology has defined a “10-year vision” to achieve a fully interoperable system by 2024, Landman notes that organizations remain challenged to navigate the current and near-term environment as demands for better information sharing across the care continuum grow.

“The scope of this issue has drawn the attention of organizations that are working to develop solutions to bridge gaps in interoperability that exist today,” he says. "These solutions will probably require additional investments by providers, so an additional challenge will be managing IT spending to ensure that investments are being made where they can best further an organization’s ability to compete in a value-based environment.”

To some extent, making the business case for further IT investment is eased with widespread recognition of resulting opportunities. Competencies around data use ranked highest among respondents when it came to factors that would best enable success under value-based payment. In particular, analytical support (business intelligence and actuarial), use of consistent care quality measures, and ability to monitor adherence to medically recommended regimens at the patient level are seen as most likely to support organizations’ abilities to take on risk.

Organizational leaders also may take some comfort in the successful financial start many healthcare providers are experiencing under arrangements with value-based mechanisms. Although times of transition aren’t easy and current efforts indicate a long way to go, hospitals and health systems already are seeing performance gains from initial program participation. More than half of the respondents have seen a positive ROI from their value-based payment programs, while only one-fourth are seeing a negative ROI.

Positioning for Readiness

The next three years of change clearly present significant strategic and operational challenges for CFOs and other finance executives. As one respondent notes, "Changing our culture and mind-set from health care being a volume-based industry isn’t easy. We’re still trying to understand all the nuances in how a provider ill be profitable under a value-based payment system.”

As healthcare finance leaders prepare their organizations for a payment environment that’s increasingly focused on managing quality and cost, the following recommendations can best position organizations for success.

Recognize that not all providers will succeed with the same approach to managing for value given differences in risk capacity and demographic and market variation. Value readiness is not one size fits all. Even the pace of change along certain competencies can be influenced by an organization’s particular demographic characteristics. For example, HFMA researchers noted significant variances in readiness by size of organization. Hospitals with 300 or more beds rated their capabilities much higher than smaller-sized peers did when it came to chronic care management, assessment of ROI, and interoperability.

Notes Landman: “As part of HFMA’s Value Project work, we have defined four key capability areas that we believe all organizations should be focused on: people and culture, business intelligence, performance improvement, and risk and contract management. Our reports detail where these capabilities need to be if an organization is to succeed at different levels of risk, and they also describe some of the unique challenges and opportunities that different types of organizations, such as rural hospitals or academic medical centers, might face in the transition to value.” 

Collaborate with payers on consistent measures for care quality. Healthcare providers are best-served when they seek opportunities to work with payers on streamlining or complementing existing value-tracking efforts. “The patient’s quality of care is an important focus for all stakeholders: hospitals, physicians, and payers,” notes Susan Horras, HFMA’s director, healthcare finance policy, health plan and population health initiatives. Successful providers not only perform to quality metrics but also collaborate with payers to reduce the administrative burden around reporting wherever possible.

Strengthen data-sharing relationships with payers. “Perhaps most important for driving positive ROI is willingness to exchange data between entities in the most timely way possible,” Landman says. “As providers experiment with new care delivery and care management models, they need to know what is working and that is not, both clinically and financially, and the sooner they can learn that, the better.”

Contain initial exposure to financial risk. Providers should be cautious about the degree of risk they are willing to assume, especially if they are relatively new to value-based payment models. “Starting out with ‘upside only’ payment models or models that cap potential losses at a certain amount can help limit risk as an organization develops its capabilities,” Landman says.

A more detailed review of survey results


Our Sponsor Speaks

9 Best Practices for Accountable Care Success
Caraline Coats, vice president, provider development center of excellence, Humana, discusses nine tips when transitioning to value-based payment arrangements.

Health systems and physicians are increasingly moving toward value-based payment models. Although the goal of alignment toward the “triple aim” of improved patient outcomes, better experience and lower cost of care resonates with most, it is clear that this transition requires expertise that many hospitals and physicians groups need. Having developed management tools and resources that support value-based payment, health coverage payers are developing capabilities and tools to support partnerships to help in navigating this new terrain, enhancing the levels of success and providers’ bottom line.

The following are nine tips for success when transitioning to an accountable care or value-based payment arrangement:

  1. Cultivate a “patient centric” focus and team approach to patient care at all levels, and routinely assess the satisfaction of patients, referring physicians, and business associates.
  2. Develop and/or refine processes for chart alert reminders regarding preventative care and patient messaging for office visits, disease management, medication adherence/recalls, and more.
  3. Track and routinely audit clinical performance (e.g., referrals, prescriptions, testing, emergency room, admissions, discharges).
  4. Ensure electronic medical record connectivity to all stakeholders in the care continuum (e.g., hospitals, specialists, payers).
  5. Enhance the alignment of compensation and incentives for all associates, including physicians, with patient clinical outcomes and satisfaction.
  6. Engage associates by focusing on the organization’s team approach to ensuring a patient care focus. Incorporate training to support a patient care focus with existing staff and in orientation activities with new employees.
  7. Communicate a clear definition of roles, responsibilities, accountabilities, and performance goals to staff throughout the organization.
  8. Engage physicians through data sharing. Create a monthly report to share with physicians that quantifies clinical and financial performance.
  9. Continuously review performance and discuss key metrics with the leadership team on a regular basis.

Source: Humana


About HFMA’s Executive Survey: Value-Based Payment Readiness

Findings are based on 146 responses received in February and March 2015. Survey participants were selected randomly from among HFMA members ho are senior finance executives in hospitals and health systems. Respondents came from organizations with one to two hospitals (53 percent) or more than two hospitals (47 percent). The survey was sent to 952 members, with a response rate of 15 percent.

Publication Date: Wednesday, June 03, 2015