The three main catalysts in healthcare transformation are technology, science and reimbursement. A leader in healthcare technology, Dr. Eric Topol, has said “medicine is about to go through its biggest shakeup in history.” A leading healthcare scientist, Craig Venter has said “we know 1% of what we’ll ultimately know.” Yet it may be the reimbursement catalyst that will have the most profound impact.
When the Affordable Care Act was passed in 2010, it included $10B to establish the CMS Innovation Center to test new reimbursement and service delivery models. The pilot testing has begun. Once the results roll in, new Medicare reimbursement models will be established. The rest of the healthcare insurance industry will follow Medicare’s lead, as in the past, by leveraging the new reimbursement frameworks to offer similar models. The main thrust of the new models is the establishment of performance programs.
What are performance programs?
Reimbursement to healthcare providers tied to overall outcomes (cost, health and quality) that include factors outside the services directly provided (see 8 Performance Programs that will Change Healthcare).
To be successful, healthcare providers will focus on what happens to patients outside the four walls of hospitals and physician offices. An industry leader in this area, Dr. Andrew Watson from the University of Pittsburgh Medical Center, made this statement this week to over 5,000 attendees at the mHealth conference, “I will predict 85 percent of healthcare will be done in the home in the next 5 or 6 years”.
Here are 5 ways performance programs will transform healthcare:
1. Outcomes will become the mission – Today, physicians and hospitals get paid for providing a discrete service. A patient leaves the hospital when reimbursement runs out rather than when they have recovered. Recovery will be redefined by a holistic patient view, like getting back to work or attending grandchildren sporting events.
2. Team medicine will replace fragmentation – The team is not just doctors working together, it will include hospitals, insurers, post-acute providers, therapists, care givers and community services. It will require sharing data, collaboration and aligning toward a patient desired outcome.
3. Information technology interoperability – Electronic Medical Records, telehealth, remote monitoring and mobile apps have utility in isolation. Once they become interoperable and physicians get compensated for leveraging them, physicians will lead the change of the healthcare delivery system. The healthcare system will become organized around patients rather than around delivering a series of discrete, fragmented services.
4. Volume will shift to “Centers of Excellence” – Medicare, insurers and employers will offer incentives to beneficiaries, members and employees to use the providers delivering the successful overall outcomes (cost, health and quality) with performance programs. One third of hospitals are at risk of closing within 5-7 years from failing to become effective with performance programs.
5. New Insight into recovery outside the four walls – Healthcare data is becoming digital. Patient data from many sources will be combined with patient generated data from mobile health devices like activity monitors and wifi enabled blood pressure cuffs. The patient data will then be married with other massive data bases such as human genome, cancer tumor genomes, microbiome and health outcomes to identify new correlations and insight on how best to care for patients. It will help to personalized medicine in a way that will dramatically improve individual outcomes.
It may be easy to draw the comparison of performance programs in this decade to the promises of managed care in the 1990s. While we have managed care today, it evolved from early backlashes from patients being denied services and physicians asked to become actuarially savy with capitated payments. While performance programs will likely experience similar growing pains, here is why it may be different this time:
Patient Payments are risk adjusted – In the 1990s, managed care focused on getting healthy patients. Now Medicare Advantage insurers and ACOs have learned that the most opportunity for cost savings is with the risk adjusted super-utilizers.
Aligned Incentives – In the 1990’s, once managed care insurers made a payment, patients and providers were at risk. With performance programs, risk is shared by patients, insurers, providers with each incented and aligned to achieving outcomes (cost, health and quality).
Patient Choice – In the 1990’s, managed care plan denied services and choices. Medicare, Employers and Insurers have learned from this. They will roll it out through incentives to use performance programs (patient centered medical homes, bundled payments or ACOs) rather than mandates. Also, with the increase of patient out-of-pocket spending and the pros & cons of all of the options, the healthcare consumer aptitude is expanding.
Transparency – In the 1990’s, the internet was just getting started and there were few ways to research health plans and patient satisfaction. Transparency has only just begun to provide pricing, quality, patient satisfaction and outcomes. Much more is coming.
Many Variations – In the 1990’s, managed care had few models. CMS Innovation Center cites 42 reimbursement models being tested and it will be spending over $2B on the Health Care Innovation Awards to test an additional hundred others.