The Massachusetts Medical Society released a study last week that may have escaped notice by many financial leaders, but it should be noted as it speaks to the willingness of physicians to get onboard with the new payment methods.
If Massachusetts is the national proving ground for healthcare reform, finance leaders should be paying close attention to how doctors' react to changes to payment models. What's happening in the Bay State could be an indicator of how resistant—or amenable—physicians are to changes in how they are paid.
According to a Massachusetts Medical Society survey of 1,095 practicing physicians in the state, half (49%) say they are likely to participate in a voluntary global payment system.
That's a 14% increase over 2011. Doctors working at community health centers are most open to the idea of global payments, while self-employed physicians were least likely to want to participate. It stands to reason that employed physicians (61.6%) are more likely to participate than self-employed doctors (43.4%).
The growing acceptance of this payment model is a positive one. But there is another pathway to payment reform that is attracting the interest of physicians in even greater numbers.
The MMS study notes that 60% of respondents surveyed are likely to participate in voluntary accountable care organizations—71% of primary care doctors versus 61% of specialists are identified as most likely to participate.
ACOs involve a network of providers coordinating care and agreeing to some level of financial risk in insurance contracts. The MMS study says single-specialty practices are least likely to embrace ACOs over multi-specialty groups or teaching hospitals.
"Yet we also see some positives, with more physicians willing to participate in accountable care organizations and global payments, and that bodes well as health reform continues to evolve," said the society's president, Richard Aghababian, M.D., in a statement.
"The payment reform bill signed in August has many provisions pertaining to physicians and the practice of medicine. While we are heartened by the law's provisions for medical liability reforms and preventive care, just how the law will affect our physician workforce and to what degree is unknown at this time. It is something we will be watching carefully."
Risk-based contracts were a subject of discussion at last month's HealthLeaders Media second annual CFO Exchange, an invitation-only event that pulled 30 of the nation's top healthcare CFOs together to focus thought leadership on today's most challenging healthcare issues.
Participation in risk-based contracting by physicians, hospitals, and health systems continues to be slow The contracts can be challenging for financial leaders to accept on behalf of their organizations and convincing physicians to agree can also pose a challenge.
Building a case for risk-based contracts requires gaining access to metrics which some organizations are still working toward acquiring, and access to payer patient data, which isn't necessarily forthcoming...
Bundled payment schemes lump patient populations and then push the risk to providers to make an agreed-upon percentage healthier or lose money. It's easy to see how risk-based contracts might not be all that appealing when the financial risk—regardless of the patient's level of participation in care—falls squarely onto the providers.
Hospitals and health systems can absorb some small margin declines, but smaller physician practices may not be financially capable of doing. Moreover, these contracts require that providers get their costs under control, which means providers much have a true understanding of what their costs actually are—no small undertaking.
"We're finding there's usually up-side, not down-side risk [to these contracts], but we're in the infancy," says Elizabeth Ward, CFO at University Hospitals UT Southwestern in Dallas, TX. Ward's response reflects the MMS' survey finding that University Hospitals are more open to these ventures.
"The insurers are putting a little bit of their skin in the game, and the insurance companies have an expertise to bring to the table that we, as hospitals, don't have; that's the actuarial analysis and the data. We're trying to see how we can use that to our advantage, particularly in these risk-based contracts to become partners," she says.
Ward explains, however, that working with payers and getting them to agree to a fair margin still adds to the complexity of the contracting negotiations.
"We need to get them to understand what margin it takes to support the organizations and provide care to the patient. Our negotiated payments aren't cost plus a fair margin like most other businesses."
"Everybody understands capitalizing your business, but what I don't think healthcare has done a good job of is projecting what our true costs are and what it takes to actually take care of a patient. Quite frankly, as an industry, we've done that to ourselves. Annd now we have to figure out how to fix it," says Ward.
Chris McLean, executive vice president and CFO at Methodist LeBonheur Healthcare in Memphis, says his organization has done a few risk-based contracts, and it has already tried to expand into the employer market, but without much success.
"We're going back to our insurance companies and the [larger] employers," McLean explains. "Our CEO went out and talked to the other CEOs of the large companies [in the area], but we found that some didn't want to do a direct contract with us. They wanted to go with Cigna and ‘cover the world.' Whether we like it or not, that's what the insurance companies bring to the table that we can't in our individual markets."
But McLean adds what healthcare organizations can reduce utilization to benefit the developing ACOs. "True cost comes back to our level of utilization; it's all over the board. It's what we've done because we're paid per click," he notes.
Patrick McGuire, MBA, CPA, and CFO, at St. John Providence Health System, Warren, MI has seen employers in his market take an interest in the total cost of care and thinks it will influence what happens with payer contracts.
"Employers in our markets are starting to look at the total cost of care, and over time, if we can actually influence the healthiness of the population, or the compliance of the population, and the overutilization we can reduce the cost."
"But it wasn't that long ago that [our organization] had a conversation with a company [about working with employees] and basically their philosophy was, 'if it's not going to show up in my P&L in the next quarter, I don't want to talk about it,'" says McGuire.
"But now we're starting to get some employers understanding the concept of it taking longer for a price to change. That it may take two years before they see any benefit from this work, but we know that in the long run, that's what's going to sustainably reduce our costs."
At most organizations, nationwide financial leaders still need to lay some groundwork in terms of understanding their own true costs before their organizations embark on global payment contracts or any other risk-based ventures.
So, too, must physicians before they agree to participate in a risk-based contract with your organization. The pursuit of this payment model across the country, not unlike in Massachusetts, must and will be a slow one.
But in the long-run, the legwork done now will go a long way toward keeping a practice, hospital or health system financially stable while improving the care of a patient population.
Karen Minich-Pourshadi is a Senior Editor with HealthLeaders Media.
