More Execs Expect Value-Based Reimbursement to Up Profitability

July 09, 2018 - Approximately 46 percent of healthcare executives and managers expect value-based reimbursement contracts to improve their organization’s profitability, according to a recent KPMG survey.

Healthcare leaders are more optimistic about the impact value-based reimbursement will have on their organization’s bottom line, the survey of 221 executives and managers found. Nearly half of healthcare leaders expect improved profits from value-based reimbursement contacts compared to just 23 percent two years ago.

In the 2016 survey, slightly over one-half of healthcare executives and managers (52 percent) saw value-based reimbursement contracts detracting from their organization’s profitability. About one-third (35 percent) also said the alternative payment models would decrease profits in 2014.

The most recent survey showed that perceptions of value-based reimbursement are shifting. About one-third of respondents to the June 2018 survey see value-based reimbursement contracts having a neutral impact on their organization’s profitability, and only 20 percent said the contracts would lower their profitability. “

We are beginning to see performance-based payment models replacing traditional fee-for-service models,” stated Matt Snyder, KPMG's Advisory Principal who focuses on internal audit and enterprise risk at healthcare organizations. “The need to shift from volume to value is shared by payers, providers, and ultimately patients.”

With healthcare leaders are now seeing value-based reimbursement contracts in a new and better light, their organizations may be more willing to take on more contracts with alternative payment models. But for now, adoption of the alternative payment model remains low.

The survey found that only 10 percent of executives and managers reported having a majority of their contracts tied to value-based reimbursement arrangements, such as shared savings, bundled payments, and population-based capitation payments. The majority of respondents (49 percent) said value-based reimbursement represented less than ten percent of their contracts.

The KPMG survey’s results echo the findings from other recent polls. For example, a February 2018 report from Numerof & Associates found that most delivery organizations received ten percent or less of their revenues through value-based reimbursement contracts, and that percentage did not meaningfully increase compared to the previous year’s survey.

Provider organizations may be slow to add more value-based reimbursement contracts to their portfolios because of political uncertainty, Michael Abrams, Co-Founder and Managing Partner at Numerof & Associates, explained to RevCycleIntelligence.com.

“Over the course of 2017, the policy uncertainty issuing from Washington left many healthcare administrators paralyzed about what to do next,” he said. “In particular, the cancellation of several mandatory bundled pricing programs in favor of voluntary versions raised questions about the future of value-based care, just as many administrators were beginning to accept value-based care as inevitable.”

Abrams and other industry experts remain confident that value-based reimbursement is here to stay despite political uncertainty with the Affordable Care Act and recent efforts to modify existing alternative payment models.

And healthcare executives may be more willing to accept additional value-based contracts as they find the reimbursement structures boost profitability.

But healthcare executives will have to focus on high quality, transparent, and secure data reporting capabilities to actually see their profits increase under value-based reimbursement contracts, KPMG’s Snyder said.

“It is key to generate, assemble, and share data in a reportable manner to help reap the benefits of value-based reimbursement,” he explained. “In addition to other reporting requirements, payers are increasingly playing the role of ‘data service platform’ to healthcare providers in order to help them manage patient care.”

Healthcare organizations finding value under alternative payment models are also establishing standardized processes and internal controls, he added.