Value-Based Care News

Is Fee-for-Value Payment Reform Transition Merely a Trend?

By Jacqueline DiChiara

- As the pendulum swings away from the realm of fee-for-service and into the sphere of fee-for-value, the healthcare industry enters a transitional state where the status quo is becoming merely old news. Those hospitals and physician groups that fail to seamlessly transition may end up closing their doors.

fee-for-service

Jay Sultan, Principal Strategy Advisor at Edifecs, chatted with RevCycleIntelligence.com about the importance of considering the fee-for-value push as much more than a mere trend and as a means of revenue cycle survival and prosperity.

“In the government space, and true for most of the commercial space, fee-for-service has been predominant for so long,” Sultan says. “As an industry, we developed complex capability, infrastructure, systems capability, workflows, and business strategies that are all based upon the precepts of fee-for-service,” he states, relating revenue cycle as a finance proposition fundamentally based on fee-for-service.

“Our systems, workflows, business models, and processes are so inherently dependent upon the way fee-for-service works today and how it has worked in the past, many of the changes related to payment reform will break stuff,” Sultan states. “The way we do things just doesn't work.”

The healthcare industry is transitioning from the realm of the automated claim to a world where the totality of variously defined services delivered across a population is expected to reduce expenses. As the pendulum swings from fee-for-service to fee-for-value, broadly scoped financial questions arise, for healthcare providers, and beyond, says Sultan.

“How do I get paid based on methods that don't involve fee-for-service anymore?” Sultan asks. “Am I willing to take on risk, and what happens when the risk isn't managed well or if I have a whole series of very expensive patients that cause me to lose money?”

The basic things that currently drive revenue cycle’s expected value and reimbursement are changing, says Sultan. Healthcare providers need to keep up with payers’ changing methods to continue to make sure payments received are accurate.

“Payers and providers have to develop new technology, workflows, standards, and new data exchange formats so they can communicate and establish new business processes around the new forms of payment,” he maintains. “The new programs operate in a world where we're trying to establish partnerships – trust, visibility and aligned intentions and outcomes,” Sultan states.  

“I hope in such an environment where true partnership needs meet, it'll be easier to get to that shared approach, that commonality of interest, which allows the stakeholders at either end of the transaction to work together towards coming up with these new capabilities,” he explains.

Sultan, who confirms support for the alignment objectives manifested within dual-eligible programs, says government-based payment reform initiatives “feel more like a reaction to some of the misalignments that exist within the fee-for-service world.”

“It's impossible to overstate the importance of Medicare policy on the way providers operate and think about their administration, and their care delivery. For most facilities, Medicare is at least 50 percent of their total revenue intake,” Sultan says. “That predominant role in the revenue pie means that it's hard to expect providers to make wholesale changes in the way they organize themselves, the way they deliver care, the decisions they make, if Medicare is not a part of it,” he explains.

Sultan sees definite best practices developing in other areas as part of the recent proposed rule for Medicaid. “I see CMS saying to states, ‘We're not abolishing state-level control, but we are about to start setting more standards, and we've got to ratchet up. Some of you are doing MLRs, some of you are not, going forward we're all going to do MLR. Some of you have certain provisions on the way you enroll a Medicaid beneficiary and some of you don't. We're all going to go to a minimal set of standards,’” Sultan says. But the recent proposed rule was silent on payment reform.  

“Medicaid doesn't pay that well, and the patients can be very acute and expensive,” Sultan says. “There's also the perception that the Medicaid population is less compliant,” he says. “As long as Medicaid is entirely in a fee-for-service world, they're going to further disadvantage the beneficiaries. The new programs designed to deliver value-based care to commercial and to Medicare populations will be not available, or will be available to no financial benefit to the provider when applied to the Medicaid population,” he maintains.  

Hospitals want Medicaid, Medicare, and their largest commercial payers to have similar accountable care organizations (ACOs), and one set of quality measures to track, he says. This will make things easier on the providers both administratively and organizationally.

“But, making major payment changes in Medicare and Medicaid will be hard, because of the lack of administrative capability to administer most types of payment reform.  On the one hand, There's no appetite at the government level to start paying out more for administrative processing,” Sultan says. “On the other hand, we completely want to change the requirements for that administrative processing, by making it much more complex and expensive. I don't know how those two things are going to reconcile,” he states.

Almost all MAC and FI or MMS systems limit the healthcare industry’s capabilities to pay Medicaid and Medicare in the same manner as commercial plans under payment reform, says Sultan. “What doesn't exist is a realization on the part of the government sponsors that there are administrative costs to making changes that are aligned with each other,” he says.

“Eventually, CMS is going to want those Medicaid and Medicare programs to take advantage of some of the more efficient ways of delivering healthcare that's been happening in the commercial space for many years,” he predicts.

In terms of advice for the healthcare industry at large, Sultan recommends embracing this industry change and investing in payment innovation to be successful. “Those providers who can demonstrate value are going to be more profitable and they're going to survive and thrive as an organization,” he claims. “Those providers who cannot demonstrate value and quality are either going to get acquired or going to be less profitable or they're just simply going to go out of business.”

Sultan says he fully predicts hospitals and physician groups will close their doors if they fail to smoothly execute the payment reform transition. Healthcare can sometimes be characterized as an ongoing series of fads, he says. “This year it's HMOs, next year it's high deductibles, and then a few years later it goes away. There may be people who mistakenly feel payment reform is such a fad. ‘I'll just hang on, ten years from now we'll be back to fee-for-service and everything's going to be fine.’ That's not going to happen,” he says.  

“There have to be people at every organization who are going to get fired if their organization doesn't do a good job of converting over to pay-for-value – from care delivery to revenue cycle management, to contracting, to billing, to the people who think about what primary care practices they are going to buy next,” Sultan confirms. Going forward, it is about volume and value.

“Different activities need to be aligned around how your revenue is contracted and risk managed. I'm seeing way too many hospitals say, ‘No, it's still just a volume thing. I want every ACO contract I can find. Sign them all. I'm not going to worry about managing risk. I'm not going to worry about changing the way I deliver care.’ That's just a mistake, and they're going to fail,” he predicts.  

There will be more rapid progress, especially at the state level, says Sultan, who praises the efforts of Ohio, Tennessee and Arkansas for effectively communicating with commercial payers to maintain commonality and alignment to create meaningful and impactful change.

“We're going to see – as we always do in Medicaid – 58 different ways to doing things,” he maintains. “Organizations that are multi-state need to be ready to handle ACOs, plus episodes, plus medical homes, plus capitation, plus partial capitation, plus global risk, plus direct contract.

“There are going to be a lot of people asking CMS, as they think about these new proposed Medicaid rules, to change the way waivers are handled and take the brakes off of the ability of the states to meaningfully participate in the innovation that Medicare and commercial plans are doing today,” Sultan maintains.

Financial incentive and success is achievable if what’s next on the revenue cycle horizon can be embraced, acted, and reacted upon accordingly.