Blog Post

Four Steps to Value

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With Congress’s passage of MACRA in 2015 and CMS’s stated desire to move 50% of Medicare payments to alternative payment models (APMs) by 2018, healthcare providers have had plenty of notice about the shift away from pure fee-for-service reimbursement. And when CMS released the final rule for MACRA last month, it became clear that remaining on the sidelines of payment reform was no longer an option. If your organization bills for Medicare Part B, you’re now in the value-based care business – like it or not.

The migration toward ever-greater accountability for cost and quality is likely to continue, not only with Medicare but with commercial payers as well. That means that organizations must develop strategies for determining how to participate in Medicare Part B and other payers’ programs. The right path forward will vary from one organization to the next, but the following four activities can help any organization initiate a thoughtful, fact-based approach to these complex decisions.

Assess Your Value-Based Readiness

Starting down the path to value begins with an honest and objective assessment of your organization’s core competencies and overall readiness to make the transition. Organizations that succeed under value-based reimbursement are almost always fundamentally sound across six key domains:

  • Payment Models – Connecting with payers to build value-based reimbursement into contracts
  • Organizational Foundation – Embracing a value-based culture within clinical and nonclinical teams
  • Provider Networks – Ensuring the right care is available to your patients
  • Care Model Transformation – Supporting patients with the infrastructure to manage their care
  • Provider Incentive Design – Rewarding providers for guiding patients to the best choices
  • Business and Clinical Informatics – Getting the right information to the right people

Identify Viable Payment Options

Just as important as understanding your organization’s readiness to take on value-based payments is understanding the models themselves. Medicare has introduced a dizzying array of payment models, and not every model will be applicable to every organization.

  • Narrow the options to those that are most relevant to your organization (e.g., performance incentives, bundles, care management, total cost of care).
  • Determine the intersection between your organization’s capabilities and the needs placed on it by the models.

Different reimbursement models will stress organizations’ value-based readiness capabilities to varying degrees. Understanding the fit of a particular model is essential.

Evaluate Financial Implications

Once the range of options has been narrowed, start taking a close look at the financial implications of each model. Financial considerations should not necessarily be the chief determinant of an organization’s value-based strategy, but they’re certainly relevant (for planning purposes, at the very least). Key elements of the assessment include:

  • Range of outcomes for Part B reimbursement
  • Congruence with existing commercial payment arrangements
  • Impact on both physician and hospital revenues
  • Investment required
  • Scenario planning/sensitivity analysis

Finalize the Strategy

Having evaluated your organization’s readiness for value-based reimbursement, identified viable models and metrics, and weighed their potential impact, you should have the full complement of information necessary to start making decisions. These decisions will be complex, and some may be based as much on intuition and judgment as on objective data.

Key questions to consider as you design your strategy:

  • What will serve our patients best?
  • What is our level of risk tolerance?
  • How likely is it that we can achieve high levels of performance? And what happens if we don’t?
  • How difficult will it be to fill gaps in our capabilities?
  • How will participation in a given model now help us prepare for future models?

Addressing these questions in a thoughtful manner, with input from stakeholders, is a challenging process but necessary to balance competing interests and achieve buy-in.

For an in-depth look at preparing your organization to thrive under value-based reimbursement, check out Forging a Path to Value by ECG Associate Principals Dave Wofford and Jason Lee.