Outside The Four Walls – It’s Where Medicine Is Going

In 2-3 years, 50% of the reimbursement a hospital receives for most Medicare patient stays may be based on what happens outside the four walls of the hospital.  Yet most hospitals have virtually no capability to care for patients after the sliding glass doors close behind the patient being wheeled to the curb.

How can this be possible?  When the Affordable Care Act was passed in 2010, it included $10B to establish the CMS Innovation Center to test new payment and service delivery models.  The pilot testing has begun.  Once the testing results roll in, new Medicare reimbursement models will be implemented.  The private health insurance plans will quickly follow as in the past.  This will likely dramatically change the healthcare system.  The most transformational models are the Medicare Shared Savings Program (MSSP) and the Bundled Payment for Care Improvement (BPCI) program.


Medicare spends an average of $10K per beneficiary for a hospital stay and also spends $10K on healthcare services in the 90 days immediately following a patient stay.  The BPCI pilot program began last month and is expected to test bundled payments for Medicare hospital stays that represent 75% of the overall volume.  It will take at least 12 month of testing and another 6 months to evaluate the pilot.  It is possible that beginning October 1, 2015, Medicare will change reimbursement to a bundled payment for at least 25% of all beneficiary hospital stays.  It is even more likely that most of the Medicare hospital stays will be in a bundled payment by October 1, 2016. Thus, 50% of the Medicare payment will be tied to what happens outside the four walls of the hospital.


There are over 250 Accountable Care Organizations (ACOs) that have signed up for the three year MSSP.  The ACOs will take on the risk of the overall cost of Medicare Beneficiaries measured over 12 month periods.  The private healthcare insurance industry has followed Medicare’s lead and guidelines by signing up 250 ACOs to similar arrangements for their enrollee’s 12 month costs.  Already 14% of the US population is being served by ACOs.

While it is unlikely that Medicare will require hospitals to join MSSP or an ACO, the financial survivability of a hospital may demand it.  Medicare will roll out a program as early as January, 1, 2015 that would offer Medicare beneficiaries incentives to commit to receiving their care from an ACO.  A proposal called “Medicare Essential” would offer beneficiaries joining ACOs lower Part B premiums, deductibles, copayments and may even eliminate their need for MediGap insurance.  It is likely private insurers will follow with similar incentives to their enrollees.  It may become hard for hospitals to survive without participating in ACOs.  For those that do participate, their revenue would be tied to the more than 50% of costs that are outside the four walls of the hospital.

A shift from promoting the “volume” of patients to overall “outcomes” may bring focus to patient recovery which mostly occurs outside the four walls of hospitals.  According to a Robert Wood Johnson Foundation study on health outcomes by county in the United States, only 20% of the factors are clinical care. The patient recovery science outside the clinical care setting has demonstrated how much we can improve health outcomes and lower costs.  The shift to reimbursement based on “outcomes over time” will begin to cost justify funding the new patient recovery technology.  It would evolve into a recovery platform that would deliver care outside the four walls of hospital, physician offices and other healthcare services.  It may result in helping to create the healthcare we want.


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