Measuring (and Incenting) Quality:
The Move from Fee-for-Service to Prevention-Based Medicine
By Alex Strauss
Changes are coming so fast as medicine moves into its uncertain future that standing at the helm of a healthcare organization these days can feel a little like chasing a ball downhill. As we talked with five area CEOs for our ongoing series on The Future of Healthcare, we discovered one impending change that seems to underlie all of the others: The move from the traditional American “fee-for-service” payment system, where providers get paid to treat illness, to one that is based on prevention, wellness, and so-called “accountable care”. It is what Bon Secours Hampton Roads CEO Michael Kerner calls a “sea change”.
“The transition from fee-for-service medicine is a big challenge because we providers have been focused on growing volume,” says Kerner. “In our world, our budgets are still based on volume, so we haven’t made the full transition. But the future is likely to be more focused on prevention and wellness than what we have seen in the past.”
“For now, we don’t get paid on keeping people healthy.”
– Peter Bastone, CEO, Chesapeake Regional Medical Center
While all of the CEOs we talked to agreed that this change is coming, not everyone believes that fee-for-service is doomed – at least not right away. “Over the rest of this decade, quality is going to become an increasingly important determinant of reimbursement and fee-for-service is going to decrease,” says Jim Lind, CEO of EVMS Medical Group. “I do believe that quality will become more important, but I don’t think fee-for-service is ever going to go away.”
Chesapeake Regional Medical Center CEO Peter Bastone agrees that it will be some time before a true value-based system is implemented in the US. “We are still riding the fee-for-service structure for a long time,” says Bastone, whose small hospital has remained independent through strategic alignments with other organizations. “For now, we don’t get paid on keeping people healthy. We get paid on episodic illness.”
Sentara Healthcare President and CEO David Bernd also calls this transition “the biggest issue in healthcare” in the next three to five years. At a recent White House meeting including CEOs from six different US hospitals and health systems, Bernd says he was asked to name the number one thing that the administration could do to reform American healthcare.
“In our world, our budgets are still based on volume…”
– Michael Kerner, CEO, Bon Secours Hampton Roads
“I told them to change from fee-for-serve to value based medicine,” says Bernd. “I told them that I believe that is the single biggest thing that can happen to improve healthcare.” Though he is passionate about the value of value-based medicine, Bernd also acknowledges that the fee-for-service structure is too deeply entrenched for changes to happen quickly.
Defining Shared Savings
Regardless of how soon the fee-for-service system is phased out, some of the basic terminology will need to be defined before the biggest changes can happen. Exactly what this new “value-based” system will look like, and how it will bring providers on board while keeping them in business, has yet to be determined.
“There is still a lot of work to be done to even identify what a prevention-based system means,” says Bill Downey, President and CEO of Riverside Health System. “From a reimbursement standpoint, the insurance companies and the federal government talk about shared savings but right now in those models, since a lot of it is based on lower utilization, there are not a lot of places where the savings are going to be shared back with providers.”
As healthcare wavers between two reimbursement philosophies, the issue remains a Catch-22. Healthcare leaders agree that, for a shared savings system to be effective and get providers on board, restructured reimbursement programs will have to recognize and reward the contributions that providers make to keep patients out of the system. “Right now, we are incented to provide tests and treatments for customers and patients,” observes Bernd. “Preventive services are largely not covered.”
Some healthcare leaders believe that bundled payments, payment structures that pay more to providers when the insurer ends up spending less than the average on their patient, may offer a solution. Some insurance companies are already doing this. Unfortunately, as several area CEOs pointed out, Virginia may not be a top priority for this type of structure since healthcare here is already considered a “good value.” Insurers are more likely to concentrate their cost-saving efforts in higher-cost regions of the country, at least for the next few years.
“I believe that [value-based medicine] is the single biggest thing that can happen to improve healthcare.”
– David Bernd, President and CEO, Sentara Healthcare
The Risk of Lower Utilization
While payors may have an interest in keeping patients out of the system, providers know that the system exists for a reason. Several healthcare leaders we spoke with say they are worried about the potential negative result of an entirely value-based system – that fewer people will get the care they need in the coming years.
“Deductibles and copayments are higher now, putting more of the burden of payment on the patient,” observes Kerner. “But sometimes that can cause under-utilization and access to care can be lower than it needs to be.”
That may be especially true in Virginia, which failed to approve the expansion of Medicaid. As a result, an estimated 400,000 Virginians are without healthcare coverage, a situation several CEOs say may make it more difficult to care for them when patients finally do come in with more advanced conditions. This presents a dual challenge for providers, who will increasingly be judged (and reimbursed) based on their outcomes.
Gathering Quality Data
All of the CEOs we spoke with agree that the collection of quality data will be a vital part of the move away from a fee-for-service system. The idea is that patients will naturally gravitate toward providers whose outcome data look good and those whose data is not as good will be motivated to improve in order to stay in the game.
“I don’t think fee-for-service is ever going to go away.”
– James Lind, Jr., CEO, EVMS Medical Group
While healthcare leaders say it is a solid theory, there is still uncertainty over exactly what data is most important and against what standards it will be measured. For the transition of the healthcare system to be effective, they say there must be a greater emphasis on the standardization of outcome and quality data in the future.
“Hospitals have really changed,” says Bastone. “If you ask them anything about the bottom line, they know those numbers cold. But when it comes to quality outcomes, they don’t have those performance metrics nearly as readily.”
“Part of the problem is that there are a myriad of quality of indicators,” says Downey. “Medicare has certain ones, Anthem has certain indicators that they want. I think we need to come up with a national benchmark that says here are the top 25 quality indicators that we want everyone to track.”
“There is still a lot of work to be done to even identify what a prevention-based system means.”
– Bill Downey, President and CEO, Riverside Health System
Most area providers are already gathering this data to a greater or lesser degree, based on their size and budgets. Some were early implementers of EHR technology and began using it to standardize best practices as early as a decade ago, while others are still struggling to integrate the system into day-to-day patient care and gather critical data. Ultimately, all are well aware that the investments they are making now in improving and tracking quality will determine their future – provided they can stay in the black until that future arrives.
“We are changing peoples’ behavior. It’s a new paradigm,” says Lind. “We are spending time and infrastructure today trying to demonstrate to our providers where we think we need to be in the future. The problem is that the cost of that infrastructure can outpace your reimbursements.”
When our Future of Healthcare series continues, we will look at what these five healthcare organizations are doing to prepare for the new paradigm, including implementing new technology, addressing quality issues, gathering and reporting outcome data, and driving patient engagement.
