More than a quarter of healthcare leaders have no faith that the shift to value-based payments is actually coming to their organizations. They're fooling themselves, says the CFO of a New York State healthcare system.
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In the HealthLeaders Media Industry Survey 2014: Forging Healthcare's New Financial Foundation, 72% of respondents said they believe the industry will make the switch from volume to value-based reimbursement models.
That leaves 28% of healthcare leaders—a rather sizable chunk—who have no faith that this fundamental shift in how their organizations will be paid is actually coming.
Could they be right?
Absolutely not, says Daniel Rinaldi, vice president of finance and chief financial officer at Ellis Medicine, a 438-bed community and teaching healthcare system based in Schenectady, NY.
Rinaldi says hospital administrators are fooling themselves if they believe they can continue to operate forever in a fee-for-service world.
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"We are seeing a dramatic sea change in our business, and those of us in an institutional setting better wake up," he says. "This is the most significant time of change that I have seen in my 40 years in healthcare."
In preparation for this move away from the fee-for-service framework, Ellis is developing an accountable care organization as part of a transition toward population health management, Rinaldi says.
Enter the ACO
"The Affordable Care Act has ACOs as part of it, and that is the biggest financial challenge we are facing. That is going to bring a major change to healthcare throughout the country," he says. "Ellis is going to establish an ACO quickly. We are going to create one, and we have to create a separate corporation with a separate board."
Rinaldi recently attended a conference where he listened to hospital administrators whose organizations are already involved in an ACO talk about their experiences.
"I spent three days with people who have already done this, and some of the results are remarkable," he says. "This is where we will see significant changes from fee-for-service to population management. It won't be necessary anymore for primary care doctors to see thirty patients a day. They will be able to see six patients a day."
"Instead of having to see a patient to refill a prescription, they will be able to do that over the phone because they won't have to worry about fee-for-service and billing."
By building an ACO care delivery model, Rinaldi says Ellis will generate revenue through a shared savings payment structure rather than fee-for-service.
"Let's say as an example that our ACO has 30,000 Medicare lives in the region. The government would tell us they spent $300 million last year on those patients, and if we help bring that cost down, we'll share in that savings," he says.
Despite concerns over figuring out how exactly to configure the ACO and the changes it will bring to Ellis' traditional revenue streams, Rinaldi sees the new care delivery model as the best way forward.
Population Health Strategy
"Ellis is a fairly large hospital with $380 million a year in revenue, and we make our living off of fee-for-service and our specialists," he says. "The ACO idea revolves around the primary care docs being able to control the costs and regulate the care. I'm not entirely sure how that is going to work, but as an organization, we really feel that population management is the only way to go in the future."
Rinaldi says that with its population health strategy, Ellis is zeroing in on the 20% of patients that utilize the vast majority of healthcare resources.
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"Normally, those are the chronically ill patients, and those are who we are focusing on. We have a medical home, and we have a chronic care team out there in the community," he says.
The chronic care team includes a pharmacist, social workers, and housekeepers, all of whom visit patients in their homes to assist with any ongoing issues that could potentially land them in the emergency department or hospital.
"For example, the pharmacist is knocking on people's doors to make sure they have their medications and are taking them correctly," Rinaldi says.
Social workers are a key component to the chronic care team because often the problems that keep people from regaining their health are not clinical, Rinaldi notes. "If we've learned anything, it is that the social issues are the big barrier. It is housing, jobs, education, food and dietary challenges, and a lot of drugs."
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Rinaldi says that by giving more home-based care to its at-risk patients, Ellis is making strides in providing cost-effective disease management to its community but adds that this success comes at a price to the hospital.
"We see population management as an investment we have to make in our community, but from a revenue standpoint, it has hurt us financially," he says. "For example, our ED revenue is going down because we are keeping people out of the ED. As a CFO, it gives me nightmares, but in healthcare it is the right thing to do."
While Rinaldi can't help being concerned about guiding his organization through such an important shift in care delivery and payment models, he believes that in the long-run, healthcare reform will create positive change.
"I think ObamaCare ten or 15 years from now could be viewed as a remarkable piece of legislation," he says. "It's not going to be the disaster that a lot of people wanted it to be… I personally think that more Americans having access to healthcare is a good thing, and I hope it helps to reduce costs."
No matter how the legislation is regarded in the future, there is no doubt that it is creating many changes and challenges now for the healthcare industry, and Rinaldi says hospital and health system leaders should not underestimate its financial implications.
"There are a lot of CFOs and hospital administrators that don't believe the reimbursement change is coming, but the cost of healthcare is too high, fee-for-service has to change, and the industry has to move more into population health management… It's a changing industry, there is no question about that," he says.