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More Hospitals Embrace Value-Based Payment Models

Medicare payment shift likely driving force behind trend

The number of hospitals that have delved into value-based care is on the rise, and even more say they plan to make the transition soon, according to new research from Kaufman, Hall & Associates LLC.

From August 2014 to February 2015, the share of hospitals reporting that 10% or more of their revenue was tied to value-based contracts nearly doubled –– from 22% to 42%, according to the company’s survey results. During the same 6-month period, the percentage of hospitals that said they expected 50% or more of their revenue will be tied to value-based contracts within 2 years jumped from 7% to 22%.

Two strong motivators for these trends, according to Kaufman Hall, are the Department of Health and Human Services’ announcement in January that it intends to tie 30% of Medicare payments to alternative payment models by 2016 and half of all payments by 2018, as well as the subsequent formation of a provider–payer alliance known as the Health Care Transformation Task Force.

Traditional fee-for-service payments reward health care providers based on the volume of services they deliver. In contrast, value-based payments strive to shift that incentive by putting providers at financial risk or offering financial rewards for achieving cost or quality goals. This shift in incentives brings with it strategic challenges for traditional providers as they are required to re-orient their efforts toward helping patients to avoid the need for treatment in the most expensive settings.

“These findings suggest that more providers are viewing the movement toward value-based payment as inevitable,” Mark E. Grube, managing director of Kaufman Hall, said in an announcement. “As the shift from volume to value gains momentum, hospitals and health systems need to move quickly to understand the likely trajectory in their markets, to identify their desired role, and to make the significant structural and operational changes needed to succeed in the changing business model.”

This may be easier said than done, however, as many providers are wary of jumping head-first into risk-sharing payment models, Paul Keckley, policy expert and managing director of the Navigant Center for Healthcare Research and Policy Analysis, recently said. Thus, the Obama administration’s recent announcement of the Health Care Payment Learning and Action Network, while short on details, is a promising sign that the federal government intends to “bring the market along” with the value-based movement, he said.

In addition to its findings regarding value-based payment models, Kaufman Hall noted that 85% of hospitals that responded to its survey experienced an uptick in outpatient visits during the last 6 months of 2014, compared with 72% that reported an increase during the first 6 months of 2014, which it deemed “another sign of health care’s shifting business model.”

Sources: FierceHealthcare; April 8, 2015; and KauffmanHall; April 7, 2015.

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