Where Value-Based Purchasing is Still Nascent

A recent conversation with a hospital president in Nebraska shows that it's not always payers who are forcing the value-based conversation.

Hospital and health system leaders have been abuzz about the dramatic shifts their organizations face in moving away from fee-for-service reimbursement. That means, in most cases, that the Centers for Medicare & Medicaid Services and commercial payers are forcing hospitals, physicians and health systems to begin to take risk based on quality, cost, and outcomes.

But it's largely a regional story. One health system in Texas or California might be neck deep in negotiations with commercial payers while another in Nebraska feels like its dominant health plan hasn't yet heard the news.

CMS value-based payment initiatives are, of course, available nationwide, but this is a transformation that seems to need commercial backing to reach the tipping point. As a result, if the commercial payers aren't pushing it in a certain region, this 180-degree shift in the hospital and health system business model is still in its infancy.

That doesn't mean hospital and health system administrators don't know what's coming. In fact, in some areas, hospitals and health systems seem more willing to integrate risk-based reimbursement than are payers.

Such is the case in Kearney, NE. I spoke recently with Michael Schnieders, president of Good Samaritan Hospital there in connection with my cover story in the June issue of HealthLeaders magazine, which explores what's going on with value-based reimbursement in more mature markets.

Our interview ended early and I didn't include any of it in the magazine story because penetration in his area is so light, but his experience is illuminative for organizations where the commercial market seems inactive in the value-based purchasing arena.

But that doesn't mean business as usual is necessarily the smart choice, and you shouldn't think that value-based purchasing won't affect you, Schnieders says.

As for Nebraska, he and the 287-bed regional referral center, along with its corporate parent, are ready to get on with it, even though payers, by and large, aren't cooperating. Here's what Schnieders told me about how he sees the transformation, or lack of it.

HLM: In many parts of the country, payers are shifting risk. Are you seeing that in Nebraska?

Schnieders: Actually, we have not seen much willingness or movement by insurers to move into that model at all. The only payer in our marketplace that is interested in risk sharing is the worst and slowest payer: Medicaid. But we have not seen it with the dominant commercial payer in Nebraska.

Catholic Health Initiatives (Good Samaritan's parent organization) really wants to move from volume to value faster. Right now, we live in two worlds. Do I want beds filled or empty? We know there will be difficult times when we are still getting paid for volume and the volume's gone, so the sooner it happens the better. Other payers are more willing to talk about it. But they represent a pretty small market percentage here.

HLM: What about going direct-to-employer with your offerings?

Schnieders: That's one of the things we're talking about, but you have to have the right legal model—a clinically integrated network. Our new partner, Alegent Creighton Health, which is also part of CHI, already has that designation, so we are moving rapidly toward establishing a chapter of that in Kearney.

We have to prove to regulators and payers that we are clinically integrated. That takes time. But at that point, you can go directly to employers and do exactly what you're suggesting. We don't have large employers, but we have lots with 200–500 employees. That's certainly something we can handle and it would give us an opportunity to pilot, experiment and gather data.

HLM: Is cost shifting (whereby hospitals subsidize money-losing services and payers with higher rates from commercial payers) viable anymore?

Schnieders: It's not entirely dead, but with the volume-based model, the dominant payer is where we would shift. If they're saying they won't do it; they're increasing utilization review, and implementing preauthorization to decrease utilization once they are in the hospital or outpatient, it certainly cuts down on the opportunity.

HLM: Is it realistic to have a payer of your own?

Schnieders: That's a complicated question, and is tied in with developing our clinically integrated network. As we've been talking about establishing that clinically integrated network in Kearney, we'll also have a chapter in Grand Island, Lincoln, and Omaha.

Doctors here were concerned that a CIN would focus only on narrow networks. We did tell them we would be experimenting with narrow networks with our own covered lives only. The narrower network reduces variation, utilization and costs, and thus reduces premium.

They understand, as long as it's just our covered lives. Through that, we'll start tracking quality data. Primary care doctors know who the bad actors are. It'll be their peers deciding who's quality or not. Our new data registry that CHI has will show Dr. Smith and his 2,000 patients, and it can show how many have diabetes or other chronic conditions, and will show the ones, for example, who haven't seen an ophthalmologist in three years.

All the evidence-based data measures is in black and white, and we didn't have this before. Now it's very objective vs. subjective. We purchased a Medicare Advantage product and have bought into an actual commercial insurance company. So we're moving on the path of being an insurance product. In the near future, we could have a sizable presence and a product on the exchanges.