AHA's Richard Umbdenstock on value-based payments, narrow networks

Richard Umbdenstock has served as president and CEO of the American Hospital Association since 2007. His career includes experience in hospital administration; health system governance, management and integration; association governance and management; HMO governance; and healthcare governance consulting. He is vice chairman of the National Quality Forum and serves on the board of Enroll America. Modern Healthcare Editor Merrill Goozner recently spoke with Umbdenstock about the future of value-based payment, narrow networks and antitrust enforcement. This is an edited transcript.

Modern Healthcare: What's your reaction to the recent court decision barring Obamacare premium subsidies in the federal insurance exchange?

Richard Umbdenstock: We continue to be supportive of people receiving subsidies through the federal exchange. We're glad to see that this thing will probably move faster toward some sort of Supreme Court resolution.

MH: What would happen if the Supreme Court struck down subsidies in states using the federal exchange?

Umbdenstock: That would mean a whole lot less coverage and a whole lot more confusion. I think Congress intended for people (in all the states) to get these subsidies.

MH: What do you see as the future of moving to value-based payment and of fee-for-service drawing to a close?

Umbdenstock: The movement to value is here to stay. It's going to take Medicare a while to move off fee-for-service, and that's a bellwether. But there's a whole lot more in Medicaid and Medicare managed care. The nongovernmental payers are all moving in this direction. We all assume fee-for-service will be greatly diminished.

Large national employers can be real influences in their respective marketplaces. And you see states trying to limit their exposure as well. It could be a global budget approach with a targeted rate of increase, as in Maryland and Massachusetts. In Maryland, 10 rural institutions have adopted the value approach of less utilization, more community-based services, and less reliance on inpatient care because they only get a fixed amount of money. They are out in the community collaborating with social service providers. I see them embracing it and it's terrific.

The future will be in reserving acute care for when it's absolutely necessary but trying to reach the community through less intensive, less expensive forms of intervention. But everybody's question is, how do you make it work financially?

MH: Will there be a backlash against narrow networks as in the 1990s?

Umbdenstock: The jury is out as to how well that works on the access and customer satisfaction side. We've been through one cycle of this on the exchange level, and you're starting to see some tinkering with those networks. On the provider side, you're seeing people say, how do I become one of those preferred providers? So there's movement in the market. The good news is we see positive patient response and performance indicators from provider-sponsored plans. We actually have rating systems and measures this time. We didn't have those in the 1990s. There's a level of accountability and transparency that wasn't there back then, and that gives me hope.

MH: With population health, how will the role of physicians change?

Umbdenstock: Physicians will probably play either more of a consultative role within a larger team, or their services will be reserved for issues of clinical ambiguity that no other team member is as qualified to address. They may be seeing fewer patients who are more appropriate to their capabilities and specialties. That would be more rewarding. Would they have as much contact with as many patients? Maybe not. Would they have more time for the truly serious conditions when the patient needs that clinical support and the reassurance that they're getting the highest level of expertise? There will be different practice models, and I think much of it is for the good.

MH: Is having networks compete with each other, such as in Pittsburgh, a long-term positive for the healthcare system?

Umbdenstock: Historically, my member hospitals have competed based on array of services and level of technology, and now they're competing more on cost, patient satisfaction and quality outcomes. In that sense, it's healthy for us. But we're starting to figure out where competition should and shouldn't occur. Patient quality and safety should not be a competitive issue. When we figure out what works, or when we have information in one system that is necessary to treat a patient who is being treated elsewhere, we need to be able to share those successes and move that information. Competing on price and patient satisfaction is fine, have at it. But on quality and safety, if the American Hospital Association could find out what works in one institution, we want to spread it to all others because every institution should be the safest place possible for patients.

MH: Is there a mixed signal from Washington on consolidation and antitrust enforcement?

Umbdenstock: They are not forcing people back to square one, tearing things up, denying opportunities. But it does keep lots of lawyers, consultants, executives and boards busy all the time. Our members are moving within that reality. What I'd like to see is some acknowledgment that the entities in the system have to be connected more closely to get to the type of coordinated care we all want to see. We have to be able to figure out how these entities can work together legally without wasting a lot of time and money looking over their shoulder. I'd like the government to think about a more appropriate setting going forward.

MH: What would you like to see happen on the Medicare rule requiring a three-day inpatient stay before patients qualify for coverage of rehab care?

Umbdenstock: We'd certainly like to see that sort of threshold lessened if not eliminated. But that's going to depend on the type of payment system, incentives and accountability mechanisms in place. The reality at the moment is that if you try to eliminate the three-day rule, it would increase Medicare spending. How are you going to find savings elsewhere? If you want to bundle post-acute care and give the providers a fixed amount of money to take care of their post-inpatient needs, then fine, we'll take that. Now, how do we manage it? Can we move the patient to the most appropriate level without having to worry about these particular hurdles?

MH: What's the outlook for reforming Medicare physician payment?

Umbdenstock:I don't think the political calculus has changed, which is that fixes need to be paid for. We are certainly making our view clear that taking the money from one provider entity to pay for a fix in another area is not real reform and doesn't make sense. We think that the physician payment system should be fixed in and of itself. But we're not happy being the target of cuts on a repeated basis.