Reimbursement News

Value-Based Payment Preparation Requires Cost Measurement

By Jacqueline DiChiara

- Value-based payments present numerous challenges to healthcare providers. Healthcare finance departments may have a bit of catching up to do. Following an announcement from the Centers for Medicare & Medicaid Services regarding an actively targeted push to link 90 percent of reimbursements to value-based or quality-based care by 2018, the realistic need for healthcare providers to amend their actions and objectives with innovative payment models is arguably more imperative than ever for revenue cycle survival.

alternative payment arrangements

“It has never been more crucial for providers to prepare their finance departments to address the demands that new care delivery models, such as Accountable Care Organizations and alternative payment arrangements, will present as the industry moves away from fee-for-service reimbursement mechanisms,” states Joe Kuehn, Advisory Partner at KPMG’s Healthcare & Life Sciences Practice.

“Medicare, Medicaid, and commercial health plans are all pushing toward paying hospitals and physicians for value, effectively pushing financial risk upon the providers. Finance departments will need to prepare to manage these challenges and have better systems to measure performance against established targets including the cost and quality of care for example, so they can manage in this new environment,” he adds.

According to a survey of 165 healthcare providers from KPMG LLP, 85 percent of finance departments confirm they lack the “very sophisticated” capabilities needed to support larger pieces of the collective revenue puzzle, such as capitation, bundled payments, and quality-based payments. Over 60 percent of survey respondents confirm their financial departments are working to gather needed tools and conduct effective analysis about meeting upcoming financial goals. 13 percent state their finance function is simply “undeveloped” for risk management and accounting for innovate payment mechanisms.

  • 4 Value-Based Care Models Demanding New Long-Term Focus
  • CMS Releases First Set of Open Payments Data
  • Outsourcing on the Mind as Hospitals Pursue Value-Based Care
  • Senior management is rarely completely uninvolved in addressing the impending issue of alternative payment arrangements, KPMG confirms. Only 4 percent of provider organizations categorize their senior management in this way.

    Best addressing the reimbursement transformation 

    Twenty percent of healthcare providers confirm they are measuring risk and accounting for doing so within their fees. Additionally, 23 percent claim they utilize data and analytics to quantify and advance quality and efficiency to best tackle reimbursement changes brought upon by payers.

    “Data & analytic tools are an important component for improving the finance function’s effectiveness, especially since there are so many variables that need to be addressed in the delivery of care,” states Mark Jamilkowski, Managing Director. “The tools available now can take that unstructured information from patient records, billing, and sources outside the provider organization that can help provide meaningful context around measuring healthcare quality and overall costs,” he adds.

    In light of the announcement to reward value regardless of the quality of care delivered from the Department of Health and Human Services (HHS), it is hopeful the healthcare industry will not only best collectively assess what needs to be done now to meet and exceed upcoming reimbursement objectives, but also how to do so intelligently.