Risks and Opportunities in the Changing Reimbursement Landscape

The passage of the Affordable Care Act empowered CMS to encourage new payment models by changing reimbursement structures driving an evolution from pay for volume to pay for outcome.

Pay per volume and pay for outcome are often at odds with each other especially in the hospital market as volume (admissions) still drive the bulk of their revenue while new incentives and penalties related to quality often incent lower volumes and activity levels - potentially eating away at already thin profit margins on the volume-driven revenue model. Sticks are more prevalent in these new programs than are carrots.

Here is a summary of some of the programs in place today:

  • Hospital Acquired Conditions (HAC) and Readmission Reduction Programs are mandatory programs that penalize lower performing hospitals.
    • HAC’s focus on patient safety and infection measures will force hospitals to evaluate their operating room workflow and their ability to ensure proper sterilization.
    • With the Readmission Reduction Program, readmissions higher than the national average will result in penalties. In the context of the current pay-for-volume reimbursement model where hospitals receive additional reimbursement for readmissions; hospitals may weigh the loss of revenue through readmission reduction efforts against the potential penalty. At what point does the penalty outweigh the investment to reduce readmissions plus the incremental revenue that it provides?
  • In the case of bundled payments which is a voluntary program, a participating provider selects a specific condition or procedure and accepts a capitated payment. This arrangement with CMS gives the provider an opportunity to bear the risk and reward for the cost of delivering care for a particular condition or procedure. Providers can capture the financial rewards by finding and correcting current inefficiencies in the delivery of care and redesigning the care coordination efforts across multiple parties for that particular condition or procedure.
  • Value-Based Purchasing also creates an opportunity for providers to participate in both risk and reward based on three key areas: clinical process, patient experience and mortality. Depending on a hospital’s score against the industry average and its individual performance over time, a hospital will receive either an increase or decrease in reimbursement. Value-Based Purchasing attempts to ensure that hospital efforts to decrease the cost of care do not sacrifice efforts to provide quality care.

Providers continue to invest time and money to meet ever-changing regulatory focus and requirements, and many are consumed with the ambitious goals of the Meaningful Use provisions in the HITECH Act. Ultimately, providers will need to be able to address CMS’s ultimate goals of increased patient safety, improved care coordination and better overall outcomes.

Source: Triple Tree


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