Finding the path toward fee-for-value

June 25, 2015
Jay Sultan, Principal Strategy Advisor, Edifecs

The path toward fee-for-value drives a new connection between the clinical and financial world. Going forward, the financial value of a service will be based more discreetly on the clinical value of the service, and the decision about the delivery of services will be made based on the new metric of volume plus value, instead of just volume. This may seem self-evident, but many organizations have not yet come to terms with the impact of this simple idea.

The problem is organizational in nature. Both payer and provider organizations have people who focus on specialized areas (departments) as driven by business needs. However, business needs are undergoing a radical shift.

Consider the provider world

Today, a chief of staff at a hospital knows the head of managed care, but they do not talk each time a new care pathway is approved. There is no data flow that adequately addresses and drives information about incentives, risk, and quality into the care delivery driven by an EMR, CPOE, or by the chief of staff at a hospital.

But the problem is worse. Almost all value-based contracts require providers to work with other providers outside their organization. These affiliated provider relationships are often the most critical when creating the correct coordination and alignment to deliver care effectively in the new world.

Providers need to balance value into everything they do. EMR systems could help with this, but few providers have implemented their EMRs in a manner to meet these needs. While driving toward Meaningful Use, they failed to make the use of their software meaningful.

Bottom line: Financial and clinical departments in a provider network need to talk, share data, and make better decisions based on what each knows and does. Then, they can solve that problem across multiple independent providers, and solve it multiple times for different value-based contracts with different terms.

Imagine a doctor employed by a hospital. Of the 20 patients they will see today that need imaging, one patient is in an ACO with a commercial payer. In this ACO, the hospital will earn 50 percent of all savings. The patient needs an MRI and can either be sent to the doctor’s hospital or an independent imaging center across the street.

Using the hospital’s MRI, the hospital will be paid $2,000 for the procedure, but the cost of doing the MRI is $1,500 – a $500 profit. At the independent imaging center, the cost is $800. This creates $1,200 of savings, which translates to $600 of profit. But what system anywhere in the U.S. is able to place that choice (decision driver) into the hands of a provider in an informed manner? I imagine 100 percent of hospitals today focus on volume in this example and keep the business internal.

The problem is just as bad for a payer

The head of network contracting just signed a great deal with an orthopedic surgeon to do episodes of care. He knows the surgeon has a great plan to reduce costs and improve outcomes by increasing the use of outpatient physical therapy.

But the medical director has just finished working with claim operations to change the clinical edits in their core system, ensuring no member gets more than a few physical therapy visits, as he knows how much these are abused.

After a bunch of denied claims and patients being turned away by the physician therapist, the head of network contracting figures out what happened with a frustrated surgeon. Even if he can convince the medical director that care under this contract is different, how can the core system be told to make this edit conditional? I am only aware of a single vendor offering technology that can do this, and it is very limited in its market adoption.

Bottom line: The decisions made in contracting and claims operations have to be driven by what the clinical side of the organization understands and vice versa. The financial and clinical data within a plan has to flow much better and in far better context.

Bring in the business intelligence team

Since the clinical side of payer operations is focused on different tasks, a surrogate is often used: the business intelligence team. The head of provider contracting has to rely on SAS programmers to write custom reports that attempt to explain what clinical performance is happening in the value portion of the contract they want to write.

But there is an ever-larger need, driven by the nature of the new fee-for-value partnerships in healthcare: Payers and providers must have data, workflows, and efficiencies flow between each other.

In a larger context, the provider is the clinical element, and the payer has financial ownership in ways the provider cannot match. Sharing the data between payer and provider is needed in order to establish trust. Each payer and provider has data the other needs to be successful in the relationship. This data, once shared, can also be used to hurt each other. But I cannot envision how new value-based partnerships can work without sharing this kind of data – even before contracting.

There is also the need for shared workflows between payers and providers. Streamlined ways of processing authorizations are the type of activity that adds value in a partnership, reducing pain and cost for both payer and provider.

It was recognized years ago that the trend toward value would cause payers to start acting more like providers and providers to start acting more like payers. The combination of payer and provider functionality through partnership, or through actual integration in the case of health systems owning health plans, is not only necessary, but organizations doing it well will have a significant competitive advantage over those who do not.

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