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January 02, 2019 12:00 AM

Three Payment Trends to Know For Success in 2019

After a landmark year in healthcare, the challenges ahead for health systems await

Shawn Griffin, MD, Vice President, Clinical Performance Improvement and Applied Analytics, Premier, Inc
Premier, Inc
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    Shawn Griffin, MDVice President, Clinical Performance Improvement and Applied AnalyticsPremier, Inc

    Today's competitive environment isn't limited to other local healthcare systems. New market realities have disrupted the industry to change the way care is provided, and the settings where it's delivered to better manage costs, and engage physicians and consumers. In order to succeed, health systems need a clear strategy for transitioning to risk-based payment models, aligning and engaging with physicians, and building the capabilities that position their organizations as the best choice for care.

    What major payment trends will disrupt healthcare in 2019?

    SG: First, alternative payment models (APMs) are saturating the industry among both commercial and public payers. The value-based payment movement is at a tipping point and health systems are increasingly transitioning to take on more risk. In fact, the Healthcare Payment Learning and Action Network (LAN) has a goal to transition 50 percent of U.S. healthcare payments to APMs by 2018. This isn't a farfetched ambition given that 34% of all healthcare payments were through APMs in 2017, according to LAN. Moreover, 12.5% of those payments were for two-sided risk arrangements. With nearly 1,300 entities participating in the Bundled Payments for Care Improvement (BPCI) Advanced model and the uptick in Medicare Advantage participation, these moves will continue.

    Second, risk-based payment models are creating a new competitive landscape at a rapid pace. Because APMs largely give preferential treatment to physician participants, BPCI Advanced has engaged hundreds of new physician entrants in inpatient and outpatient episodes. Further, Medicare accountable care organization (ACO) programs, such as the Medicare Shared Savings Program, will also likely favor physician participants to achieve greater savings and by allowing them more time in upside-only tracks. These programs and others are putting physicians that have woken up to the benefits of value-based payments in the driver's seat.

    Third, employers are becoming a more active and forceful driver of change, putting payers in an uncomfortable spot as they seek to cut out the middleman and contract directly with high-value health systems. With employers paying for care and providers managing it, insurers simply become added cost without value.

    How will these developments affect health systems?

    SG: Competitive forces and new payment realities driven by this administration will continue to push providers to move up the risk continuum. At the same time, health systems are quickly accumulating value-based contracts with commercial and public payers. But many lack a bird's eye view across their APM contracts and a standardized way to evaluate the total amount of risk they face. The implication is that health systems are leaving revenue on the table by not connecting frontline care delivery work streams to the aligned metrics they need to deliver. Winners in this environment must have a paced strategy for building the capabilities needed to succeed in risk-based models.

    All roads lead to the physician. Conveners like hospitalist groups and even insurance companies have new business plans to invest in physician groups and create their own high-value networks. These companies have the potential to pull physicians away from health systems and establish themselves as the owner of the network, such as for an ACO or bundles. The short-term implication of this is that they will profit from the savings and redesigned care delivery processes they oversee, leaving the hospital as a cost center. In the longer term, it will position them to negotiate with insurers and employers in managing APMs.

    Lastly, direct-to-employer contracts are unique and can be seen as a new source of revenue for the health system. In many cases, they are also focused on a differentiated consumer experience. In this new competitive environment, health systems need to be thinking about ways to become the choice provider in their local market.

    Who will be positioned for success?

    SG: Health systems that act now and have an effective strategy for building the capabilities needed to succeed in risk-based models and align with physicians. Premier is helping health systems develop and implement well-paced strategies for success in APMs, based on their unique market conditions. Ultimately, health systems are best positioned to win in this environment, but they must be proactive in selecting the models that make the most sense and sequencing them for maximum value.

    To learn more, visit Premierinc.com/VBC.

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