3 Considerations for Healthcare Organizations Under Value-based Care

In healthcare, there are (even) more question marks than answers.

Although uncertainty remains around the further reform of healthcare as we head into 2017 and a new political administration takes the helm, we believe the transition toward value-based care will continue.

At the recent BDO Leadership Conference in Nashville, leaders from The BDO Center for Healthcare Excellence & Innovation and Baker Donelson came together to address some of the most pressing questions as they relate to value-based care. Patrick Pilch, national co-leader of BDO Consulting’s Healthcare Advisory practice, moderated the panel, which included:
  • Dr. David Friend, chief transformation officer and managing director in BDO Consulting’s Healthcare Advisory practice;
  • Steven Shill, Assurance partner and national co-leader of BDO Consulting’s Healthcare Advisory practice; and
  • Michaela Poizner, an Attorney in Baker Donelson’s Health Law Group, and Privacy and Information Security Team.
The following is a summary of the panel discussion.

Q: Who will be the ultimate winner in a value-based world?
Answer: The patient

BDO panel insights: First, we should caveat that the shift to value-based care was taking shape long before the Affordable Care Act came to fruition. And reimbursement adjustments like MACRA and the IMPACT Act were largely bipartisan initiatives. So, while we expect a brief slowdown in value-based reimbursement initiatives during the transition to the Trump administration, we anticipate an overall acceleration toward value-based care to take root.

Keeping that in mind, the patient will be the ultimate winner under value-based care, as its purpose is to make care more effective by focusing more on patient outcomes and financially penalizing unnecessary readmissions. Providers across the care continuum bear more responsibility for ensuring the patient is cared for in the right way, the first time.

Data is also a key value add for patients in a value-based model, making care more efficient and effective, and putting more control in the hands of patients.

“You have huge amounts of data that are being gathered and being used to improve the treatment process,” Poizner said. “There are instances where patients now have the ability to go online and see how their hospital is performing with respect to quality, and I think that is going to be a real win for patients going forward.”

Who will be another winner under the value-based model in the future? Behavioral health providers, Poizner said.

“I think you’re going to see a real increase in utilization of behavioral health services as we move toward a more integrated healthcare approach,” she said. “And we see that hospitals are now more actively participating in the behavioral health process. This is going to really grow into a potentially new category of winners.”

Q: Who may struggle in a value-based world?
Answer: Post-acute care providers and hospitals

BDO panel insights: When it comes to how reimbursement is going to work, it’s clear that there’s a new sheriff in town, Poizner said.

Although we are likely to see challenges across the entire provider spectrum as revenue sources are squeezed and business models changed, perhaps no one will feel the pain more than hospitals and post-acute care providers.

“We’ve said 15 to 20 percent of hospitals are not going to look like what they look like today,” Friend said. “Whenever you change reimbursement, you just change everything about the businesses.”

Under mandatory bundled payment programs like CMS’ Comprehensive Care Joint Replacement Model (CJR), hospitals are held responsible for all the costs, processes and outcomes for Medicare patients’ hip and knee replacement surgeries within 90 days of the initial hospitalization. The bundled payment model provides real financial incentive for hospitals, physicians and post-acute care providers to collaborate on best clinical processes and most cost-effective patient resources after hospital discharge—or risk not being fully paid. It also encourages hospitals to work with post-acute care providers with higher quality ratings compared to others, putting pressure on the latter to either cut services to only those that perform well or risk going out of business. This model is expected to expand into other territories too.

Academic Medical Centers (AMCs) will perhaps feel the pain most acutely since they are already under pressure, Pilch said.

“If you think about the composition of the payer mix in hospitals already under the ACA, there’s some obtuseness to the payer mix,” he said. “Managed Medicaid, managed Medicare, looks like their revenues are good. But I’d look at the quality of that payer revenue inside that payer mix. If the pressure is already starting to happen as you shift more toward government-sponsored payer … the capitation is already moving out, but the costs are not going down.

“So how is the AMC, the highest-cost provider, going to survive if tertiary and post-acute care gets pushed out to somebody else? Think about any industry when they change the way they get paid. If you don’t change your infrastructure, you don’t change the way you get paid, you’re going to get hurt.”

The loss of AMCs could have a trickle effect: a shortage of physicians, said Shill.

“Because under these circumstances, there aren’t going to be any places for them to train,” Shill said. “If it becomes as acute as we say it’s going to become with Academic Medical Centers and nothing’s done about it, we’re all going to suffer.

“It’s a big balancing act.”
But while hospitals and post-acute care providers unwilling to change their infrastructure and their business models will do so at their own peril, those who successfully integrate the necessary healthcare components will be part of the new wealth we expect value-based care to create.

“I think there will be a lot of opportunities to capitalize on innovation and try to make up some of those losses for providers across the board,” Poizner said.

Q: What is the most critical area to consider with respect to risk evaluation?
Answer: The misstatement of clinical outcomes

BDO panel insights: Many critical issues need to be evaluated—including the potential going concern of the provider, valuation based on legacy, debt compliance issues, and systemic risk unaddressed by the board or management—but in an industry ripe for fraud, the greatest risk comes from the misstatement of clinical outcomes.

“If [providers are] lying about the clinical outcomes, they’re likely lying about the financials,” Friend said. “When we look at the financial numbers, we also have to look at the clinical data because it relates to the payment, which is related to fraud and abuse regulations.”

One of the biggest challenges for providers, Poizner pointed out, is the competing forces of the existing fraud and regulatory regime, and the nature of value-based pay.

On the one hand, the fraud and regulatory regime punishes financial relationships across the care continuum under Stark law and anti-kickback statutes. But on the other hand, value-based pay incentivizes collaboration and financial relationships across the care continuum to make care more efficient.

The concepts “don’t always play nicely,” she said.

Healthcare organizations with questions specific to their organization or facility are invited to reach out to BDO:

Patrick Pilch
BDO Healthcare Advisory  
Managing Director, National Leader

Steven Shill
BDO Healthcare Advisory
Assurance Partner, National Leader

Dr. David Friend
BDO Healthcare Advisory
Chief Transformation Officer, Managing Director