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Small Hospitals, Systems Grapple with Value-Based Reimbursement

A survey showed that over half of small hospitals and health systems do not plan on engaging with value-based reimbursement initiatives in 2017.

Small hospitals and health systems less likely to engage in value-based reimbursement initiatives in 2017, survey shows

Source: Thinkstock

By Jacqueline Belliveau

- Approximately 67 percent of small hospitals and health systems do not plan on undertaking value-based reimbursement initiatives in 2017, a recent Ernst & Young LLP Advisory Health survey revealed.

The survey of 700 healthcare professionals from organizations with annual revenues of at least $100 million also found that 61 percent of hospitals and health systems with annual revenues between $500 million and $999 million do not anticipate engaging in additional value-based reimbursement models in 2017.

In contrast, only a small portion of large hospitals and health systems with annual revenues exceeding $1 billion do not expect to add value-based reimbursement initiatives to their plate this year. About 23 percent of organizations with at least $1 billion in annual revenue, 14 percent of organizations with at least $2.5 billion in annual revenue, and 8 percent of organizations with over $5 billion in annual revenue selected this option.

Instead, at least one-half of large hospitals and health systems plan to implement additional alternative payment models (62 percent of organizations with at least $2.5 billion in annual revenue, 52 percent or organizations with at least $1 billion in annual revenue).

The larger organizations also anticipate participating in bundled payment models in 2017, with 47 percent of organizations with at least $5 billion in annual revenue, 38 percent of organizations with at least $2.5 billion in annual revenue, and 32 percent of organizations with at least $1 billion in annual revenue.

READ MORE: Understanding the Value-Based Reimbursement Model Landscape

Only about 27 percent of small hospitals and health systems expect to participate in alternative payment models in 2017. Even fewer expect to engage in bundled payment models, with 12 percent of organizations earning between $500 million and $999 million annually and 7 percent of those with annual revenue below $499 million.

The survey findings indicated that small hospitals and health systems are facing more challenges than their larger peers with implementing value-based reimbursement models.

“It is insightful that among hospitals and health systems with revenues of less than $1 billion, few have embraced strategies or made progress toward value-driven care,” stated Yele Aluko, MD, an Advisory Health executive director at EY and a co-author of the report.  “This creates a competitive disadvantage for smaller hospitals, and quite frankly, puts their financial futures, sustainability and corporate existence in jeopardy.”

Small and large organizations agreed that four industry challenges prevent hospitals and health systems from successfully implementing value-based reimbursement.

First, hospitals and health systems struggled with inefficiency in terms of healthcare cost reductions. The organizations reported that fee-for-service payment models and limited integration across care settings led to an increase in the number of repetitive tests performed and overtreatment.

READ MORE: Best Practices for Value-Based Purchasing Implementation

As a result, the organizations experienced wasteful spending while costs continued to increase because of expensive chronic disease management, greater levels of administrative support, and investments in new health IT systems.

To better control healthcare costs in 2017, hospitals and health systems plan to make incremental improvements versus transformative gains. The top initiative for realizing this goal is to engage in peer and competitive benchmarking, with 40 percent of respondents planning to do this and 13 percent undertaking the task.

Other top healthcare cost initiatives in 2017 included:

• Decreasing hospital and emergency department use by high-cost patient with 28 percent planning to implement and 20 percent undertaking

• Reducing unnecessary variation and utilization with 24 percent anticipating launching an initiative and 41 percent already engaging in a plan

READ MORE: How a Small Hospital Increased Patient Collections by 300%

• Dropping medical error rates and increasing reliability with 18 percent expecting to prioritize this and 58 percent with a program in place

• Boosting patient access to primary and specialist care with 17 percent planning to start an initiative and 34 percent already participating in one

Second, respondents identified inconsistent care quality as a major value-based reimbursement challenge.

“Clinical outcomes and health care quality are often measured inconsistently by health care providers — if they are measured at all,” the report stated. “At the same time, a high prevalence of medical errors is stoking the anxieties of the public through alarming headlines and creating concern among health care executives over potential litigation.”

Third, hospitals and health systems faced workforce issues with value-based reimbursement implementation. Respondents reported that staff are not engaged with the organizational shift in care delivery.

Only 12 percent of participants stated that their clinical ancillary staff was “highly engaged” and just 8 percent said the same about their administrative staff.

“This is especially concerning because the administrative and frontline staff are often the first point of contact for patients, and may help provide long-term patient support,” the report stated.

In addition, physicians and nurses ranked as the most engaged staff members. However, the providers reported elevated levels of burnout because of a constant challenge with balancing patient care and administrative burdens.

Finally, the survey showed that a lack of trust, transparency, and coordination plagued hospitals and health systems.

“Historically, the relationship between providers and payers has been ruled by a FFS [fee-for-service] reimbursement arrangement centered on health care visits and procedures,” wrote researchers. “However, unsustainable costs and a demand for improved clinical outcomes are making it increasingly difficult for payers and providers to develop a contracting structure that works for both entities now and in the future.”

To implement value-based reimbursement models, about 78 percent of healthcare professionals agreed that organizations need to pivot their strategies to succeed in the new care delivery and claims reimbursement environment.

Respondents stated that hospitals and health systems should focus on the following areas to succeed in value-based reimbursement models:

Patient experience: 93 percent of organizations plan to undertake a patient experience initiative in 2017

Culture alignment with value-based care and reimbursement: 51 percent of respondents stated that employee satisfaction in healthcare drives patient satisfaction

Data analytics capabilities: 23 percent of professionals ranked new health IT implementation as one of their top three 2017 priorities, with predictive, proactive, and preventative analytics topping their lists

In addition, healthcare professionals said that hospitals and health systems should increase productivity to succeed in alternative payment models. Organizations should balance monitoring costs and productivity as well as measuring and reporting accurately.

Survey respondents also found that embracing the new claims reimbursement and care delivery model is key to value-based reimbursement success.

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