Skip to main content
Sister Publication Links
  • ESG: THE IMPLEMENTATION IMPERATIVE
Subscribe
  • Sign Up Free
  • Login
  • Subscribe
  • News
    • Current News
    • Providers
    • Insurance
    • Digital Health
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • Transformation
    • People
    • Regional News
    • Digital Edition (Web Version)
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Midwest
    • Northeast
    • South
    • West
  • Unwell in America
  • Opinion
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
  • Events & Awards
    • Awards
    • Conferences
    • Galas
    • Virtual Briefings
    • Webinars
    • Nominate/Eligibility
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Excellence in Governance
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top 25 Innovators
    • Diversity in Healthcare
      • - Luminaries
      • - Top 25 Diversity Leaders
      • - Leaders to Watch
    • Women in Healthcare
      • - Luminaries
      • - Top 25 Women Leaders
      • - Women to Watch
    • Digital Health Transformation Summit
    • ESG: The Implementation Imperative Summit
    • Leadership Symposium
    • Social Determinants of Health Symposium
    • Women Leaders in Healthcare Conference
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Diversity Leaders Gala
    • Top 25 Women Leaders Gala
    • - Hospital of the Future
    • - Value Based Care
    • - Hospital at Home
    • - Workplace of the Future
    • - Digital Health
    • - Future of Staffing
    • - Hospital of the Future (Fall)
  • Multimedia
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
  • Data Center
    • Data Center Home
    • Hospital Financials
    • Staffing & Compensation
    • Quality & Safety
    • Mergers & Acquisitions
    • Data Archive
    • Resource Guide: By the Numbers
    • Surveys
    • Data Points
  • MORE+
    • Contact Us
    • Advertise
    • Media Kit
    • Newsletters
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Opinion
May 20, 2017 01:00 AM

CEOs weigh the risks and rewards of payment reform

Modern Healthcare CEO Power Panel 2nd Quarter Survey: Taking the pulse of healthcare's most influential leaders.

Alex Kacik
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    Hospitals and health systems have been slowly wading into alternative payment models and many expect to take a deeper plunge in the next few years.

    About half of respondents to Modern Healthcare's most recent CEO Power Panel survey said less than 5% of their revenue is currently tied to alternative payment models. Within two to five years, nearly 40% of the CEOs expect more than 25% of their revenue to be tied to bundled payments, accountable care organizations, population health initiatives, value-based contracts and other payment reforms.

    "This (higher) level of risk accelerates improvements in quality and cost, and that's good for patients." --Dr. Mark Harrison, Intermountain Healthcare

    "We've moved toward taking on more risk, now about a third of our total volume," said Dr. Marc Harrison, CEO of Salt Lake City-based Intermountain Healthcare. "This level of risk accelerates improvements in quality and cost, and that's good for patients."

    Hospitals have traditionally operated in a world that rewarded them for each procedure and test performed. The push toward value-based payment models has caused providers to make larger investments in information technology, improve coordination across the continuum and deliver better outcomes at lower costs. Ideally, successful payment reform translates to reduced variation, the elimination of unnecessary tests and procedures, and managing a patient's total health, rather than doing it episode by episode.

    The challenge in moving from volume to value is doing more with less. "It's not just the providers, physicians and patients have increased financial risk as well." --Dr. Susan Turney, Marshfield Clinic Health System

    "It forces us to look at the care continuum differently," said Julie Taylor, CEO of Alaska Regional Hospital in Anchorage. "If you are going to get the best outcomes from a value-based purchasing perspective, it can't be done in a silo."

    The shift to value isn't easy, though. Nearly two-thirds of the CEOs surveyed said they are still wary of the financial risk involved across all payment reform. Engaging physicians and staff (63%) and revamping clinical processes (57%) were the next biggest obstacles in implementing new models, executives said.

    "The challenge in moving from volume to value is doing more with less," said Dr. Susan Turney, CEO of the Marshfield (Wis.) Clinic Health System. "It's not just the providers; physicians and patients have increased financial risk as well."

    financial risk

    Nonetheless, executives are managing the growing pains.

    "We reorganized, particularly with our population health division, so we can comprehensively look at how we are doing payment reform," said Dr. Rod Hochman, CEO of Renton, Wash.-based Providence St. Joseph Health, a 50-hospital system created by last year's merger of Providence Health & Services and St. Joseph Health. "It is a journey."

    THE TAKEAWAY

    Executives embrace certain payment reforms that are poised to deliver value, but CEOs worry that they are taking on too much financial risk.

    "We reorganized, particularly with our population health division, so we can comprehensively look at how we are doing payment reform." --Dr. Rod Hochman, Providence St. Joseph Health

    The CEO Power Panel surveys executives and leaders of hospitals, insurance companies, physician groups, trade associations and other not-for-profit advocacy groups. Of 123 queries sent, 57 responded to Modern Healthcare's second-quarter survey on payment reform.

    Nearly half of the respondents said they have formed accountable care organizations or are linking with other healthcare providers to coordinate care and share financial responsibility in quality outcomes.

    "New payment mechanisms like ACOs and bundled payments, as long as there are quality indicators and not just cost measures, can be effective vehicles for driving change," said Cathy Jacobson, CEO of Froedtert Health, a Milwaukee-based system.

    ACO proponents argue that they have great potential to ensure care is delivered at the right time while avoiding redundant or unnecessary treatment. Yet, wide variation exists in how ACOs take on financial risk and set benchmarks for costs and patient outcomes.

    obstacles

    "ACOs through the Medicare program have had limited success in producing savings and the savings generated that have been shared with providers are often inadequate to cover the investments providers had to make to be an effective ACO," Jacobson said. "Obtaining timely claims data, whether from a commercial insurer or Medicare, is still an obstacle we have experienced. Without this information, it is very difficult to identify high-cost areas to address or to show you are making progress."

    "Payment reform may hurt some health system providers within the industry that cannot meet the bundled payment obligations in terms of cost, or quality standards." --Curt Kubiak, Orthopedic and Sports Institute of the Fox Valley

    About 43% of survey respondents said their organizations have value-based contracts in place; roughly 40% have implemented bundled-payment initiatives. Nearly 3 out of 4 CEOs said they would continue to support bundled payments as long as they were voluntary.

    The CMS in March delayed expansion of a major bundled-payment pilot, the Comprehensive Care for Joint Replacement, and the implementation of its bundled-payment initiatives for cardiac care from July 1 to Jan. 1, 2018. The agency also delayed the effective date for joint replacement and other bundled-payment programs, from March 21 to May 20.

    Hospital groups have lobbied for making the programs voluntary, arguing that many hospitals don't have the resources to effectively tackle the care-management services and health information technology the models require.

    how much

    "Payment reform may hurt some health system providers within the industry that cannot meet the bundled-payment obligations in terms of cost or quality standards," said Curt Kubiak, CEO of the Orthopedic and Sports Institute of the Fox Valley, based in Appleton, Wis. "High infrastructure costs related to facilities or administrative expenses may make it difficult for certain health system providers to compete in this new payment structure."

    mandate

    Even so, mandated change is coming. The Medicare Access and CHIP Reauthorization Act requires physicians to participate in one of two reimbursement tracks: the Merit-based Incentive Payment System or advanced alternative payment models. About 60% of respondents said they expect most physicians to participate in the former.

    While MACRA could reduce variation and drive quality outcomes over time, it also poses challenges for physicians in small practices, said Dr. Gary Kaplan, CEO of Seattle-based Virginia Mason Health System.

    "It could lead to consolidation of small practices, as they may not have the size needed to drive alignment of quality measures and information systems," he said.

    As healthcare leaders search for payment models that best fit their organizations, they are keeping a close eye on how new policies and regulations could transform the healthcare landscape. Around 83% of the CEOs expect the current administration to bring more uncertainty into the picture.

    "We really don't know what elements of the Affordable Care Act will be sustained or modified," Kaplan said. "We just need to focus on our patients and create value."

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    payment_WEB.jpg
    CMS proposes hospice payment bump
    payments-up_i.png
    CMS 2024 Medicare Advantage rate notice tweaks risk adjustment program
    Most Popular
    1
    More healthcare organizations at risk of credit default, Moody's says
    2
    Centene fills out senior executive team with new president, COO
    3
    SCAN, CareOregon plan to merge into the HealthRight Group
    4
    Blue Cross Blue Shield of Michigan unveils big push that lets physicians take on risk, reap rewards
    5
    Bright Health weighs reverse stock split as delisting looms
    Sponsored Content
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • News
      • Current News
      • Providers
      • Insurance
      • Digital Health
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • Transformation
        • Patients
        • Operations
        • Care Delivery
        • Payment
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition (Web Version)
    • Unwell in America
    • Opinion
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Events & Awards
      • Awards
        • Nominate/Eligibility
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Excellence in Governance
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top 25 Innovators
        • Diversity in Healthcare
          • - Luminaries
          • - Top 25 Diversity Leaders
          • - Leaders to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Conferences
        • Digital Health Transformation Summit
        • ESG: The Implementation Imperative Summit
        • Leadership Symposium
        • Social Determinants of Health Symposium
        • Women Leaders in Healthcare Conference
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Diversity Leaders Gala
        • Top 25 Women Leaders Gala
      • Virtual Briefings
        • - Hospital of the Future
        • - Value Based Care
        • - Hospital at Home
        • - Workplace of the Future
        • - Digital Health
        • - Future of Staffing
        • - Hospital of the Future (Fall)
      • Webinars
    • Multimedia
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • Data Center
      • Data Center Home
      • Hospital Financials
      • Staffing & Compensation
      • Quality & Safety
      • Mergers & Acquisitions
      • Data Archive
      • Resource Guide: By the Numbers
      • Surveys
      • Data Points
    • MORE+
      • Contact Us
      • Advertise
      • Media Kit
      • Newsletters
      • Jobs
      • People on the Move
      • Reprints & Licensing