CEO Power Panel poll finds broad support for value-based pay

More than three-quarters of a representative sample of the nation's top healthcare leadership back the ongoing shift toward value-based payment systems, which reward providers for what they achieve rather than what they do.

Yet only 20% are willing to do away completely with the industry's still dominant fee-for-service reimbursement model, according to the first quarterly poll of Modern Healthcare's CEO Power Panel.

The 55 members who participated in an online survey in April are nearly unanimous in their belief that Americans will see their healthcare improve as government and private insurers switch to a value-based reimbursement system, which was defined for participants as capped, per-patient reimbursement, bundled payments and pay-for-value rewards or penalty programs. While estimates vary, anywhere from a quarter to half of all hospital and physician pay now involves some form of value-based reimbursement.

“We should be compensated for results, not just for doing something,” said Chris Van Gorder, CEO of Scripps Health in San Diego.

“I'm encouraged by the early pay-for-value work,” said Dr. Gary Kaplan, chairman and CEO of Virginia Mason Health System in Seattle. The switch to value-based reimbursement is “a good thing,” he said, noting that the current and still-dominant fee-for-service payment model contributes to the high cost of care.

Power Panel members selected value-based reimbursement as the topic for the first of what will be a quarterly series of Power Panel surveys by Modern Healthcare. Because of the timeliness of the issue, they were also asked about the possible outcome of the U.S. Supreme Court decision in King v. Burwell and its effects on their organizations. (See sidebar, p. 8.)

The 55 Power Panel members surveyed represent 23 hospital systems and integrated delivery networks, and seven free-standing hospitals with a combined 85,000 beds; 14 medical, professional and trade associations; and four insurers, which, combined with the integrated delivery networks, cover 87 million lives.

The group also has members from three physician organizations, including a clinic, an independent practice association and an ambulatory surgery center; and a small group of venture capital, health information technology, retail and service firms.

While the panel was almost unanimous in supporting the move toward value-based pay, the fact that just a fifth support eliminating fee-for-service entirely worries some. “I'm concerned that we'll dabble around the edges,” Kaplan said.

Of course, integrated delivery networks are among the most willing to do away with fee-for-service, since they already have the skills in-house to manage actuarial risk and use an employed-physician model.

“If this is successful, and I expect that it will be over time,” said Bernard Tyson, CEO of Kaiser Permanente in Oakland, Calif., “it will change the whole economics of the value chain about how we think about healthcare and the financing of healthcare, which is still predominantly on a fee-for-service basis or pay-for-volume.”

When Power Panel CEOs were asked, “Which statement best describes your attitude toward value-based reimbursement models?” more than 3 in 4 (78%) selected this choice: “Value-based reimbursement models should play the dominant role in healthcare reimbursement, with fee-for-service medicine playing a declining and minor role.”

“Everybody feels that the days of fee-for-service are coming to an end,” said Dr. Ram Raju, president of the New York City Health and Hospitals Corp. “It's a great idea” to shift to value-based reimbursement, but “some are quicker to adapt” than others. Those “on the lower part of the value chain” are still struggling to reach the next level, above reporting clinical quality measures, Raju said. “We need to bring everybody together. We need one glide path.”

Even large physician groups are embracing the move to pay-for-value, in part because they believe it will improve patient outcomes. “I don't see our current system leading to better care,” said Dr. Joseph Vasile, CEO of the Greater Rochester (N.Y.) Independent Practice Association. He backs a mix of value-based reimbursement and fee-for-service. “I still see areas of medicine that lend themselves better to fee-for-service reimbursement,” Vasile said. “At some level, you're still going to have to manage providers and there still has to be some measure for payment and productivity based on how hard you work. Fee-for-service is still a good measure of productivity.”

When asked about the impact that value-based reimbursement will have on quality of care, the vast majority surveyed also believe care improves when financial incentives are better aligned with patient outcomes. Over half (53%) said the switch to value-based reimbursement will yield “somewhat” higher quality of care, while 40% said it would improve care quality “a lot.” Only 7% said quality will stay “about the same.”

“We have been doing bundled pricing on hips and knees since 2010,” said Curt Kubiak, CEO of the Orthopedic & Sports Institute of the Fox Valley, Appleton, Wis. Based on his organization's experience running an ambulatory surgery center, he believes value-based reimbursement payments will force providers to improve quality “a lot.”

“In our surgery center, we were able to control variability much better,” Kubiak said. “If someone fixes the payment on you, there isn't room for error. The quality dramatically has to improve to make that care viable.”

The group was nearly evenly split on their perceptions about the pace of change. Slightly more than half (51%) observed that the U.S. “is advancing rapidly” toward value-based reimbursement, while 49% said value-based pay is “just beginning” and “is moving slowly.”

There was a similar split among CEOs in their attitudes toward the pace of change, with 42% bemoaning that payment reform is moving “too slowly” and 49% seeing it as advancing “at the right pace.” Only 9% think government and private insurers are moving too quickly toward value-based pay.

“I have to go with what I see around me,” said Dr. David Bailey, CEO of Nemours Children's Health System in Jacksonville, Fla., where there is very little movement toward value-based reimbursement. Healthcare systems “don't have the infrastructure to evaluate risk yet. We're not there, either.”

As an example, Bailey said most healthcare providers cannot calculate the real cost of seeing a patient with lower back pain and his system can't either. “Until we know full cost, (we) can't go full bore,” he said.

“This is certainly not a slow evolution,” added Vasile of the Greater Rochester IPA. “Right now, I think we're bordering on a revolution. Any faster, and things will fall apart.”

On the financial front, healthcare CEOs are divided over whether the shift to performance-based pay will improve their organizations' top and bottom lines. Using revenue as the measure, a narrow majority (52%) of executives indicated value-based reimbursement will increase revenue either “somewhat” (43%) or “substantially” (9%). But a significant minority (27%) indicated they expect their organization to “lose a little” (19%) or “lose a lot” (8%). Another 21% said they will “not be affected one way or another.”

Raju of New York City's public hospital system is among those who worry value-based pay will affect top-line revenue “a lot,” since many programs tie reimbursement rates to patient-satisfaction scores. “We're trying our best to improve,” he said. “Quality, that's no problem. We're very good at that. Changing the patient-satisfaction scores is a very heavy lift.”

The picture gets a bit darker when assessing the switch's impact on overall profit margins. While 39% of CEOs envision their organizations will benefit somewhat and 6% will profit substantially from value-based pay, fully 31% expect to lose some money because of pay-for-value arrangements, while 2% expect to lose a lot.

“In the short run, value-based reimbursement can remove waste, allowing you to do things more efficiently,” said Bailey of Nemours. “You'll have money left over.”

Scripps Health could see a dip in revenue and a narrowing of its margin because of value-based pay, according to Van Gorder. He recently announced a switch to a new electronic health-record system for Scripps' four hospitals and 37 ambulatory clinics, in part to deal with changing reimbursement mechanisms.

Despite their enthusiasm for value-based pay, the Power Panel CEOs see a number of potential roadblocks ahead. Heading their list is a “poorly designed health IT infrastructure,” which drew concern from 22% of respondents.

“Right now, most healthcare systems have multiple electronic health-record systems in place,” said Matthew Aug, CEO of Cox HealthPlans, Springfield, Mo. “On top of that, they probably have multiple analytic tools.”

The Power Panel CEOs also pointed to groups over which they have little direct influence when asked about the biggest roadblocks to value-based reimbursement. They ranked poor physician engagement (21%) and policy uncertainty (21%) just behind poorly designed health IT systems among their concerns.