Physicians: Reimbursement Reform is Here!

Theo Koury , MD

President of Vituity

Published March 22, 2013

Hospitals across the country are starting to feel the effects of healthcare reform. Beginning in fiscal year 2013 (September 1, 2012), part of hospital reimbursement has been based on a value-based purchasing (VBP) plan that has been created by the Centers for Medicare and Medicaid Services (CMS). This is the first step in a process that will transform the current fee-for-service system into to a fee-for-performance system. This transformation will be taking place gradually, so those who prepare now will improve their strategic position for the future.

CMS established VBP with two goals in mind: to decrease healthcare costs and to improve outcomes for healthcare services. In order to create incentives for hospitals to achieve these goals, they have developed quality criteria which include both clinical process measures and patient experience measures. To start off, CMS will withhold one percent of all hospital payments, and will remit that one percent to hospitals only if they meet the new criteria. The amount withheld will increase annually, finally reaching two percent in 2017.

Initially, VBP will not affect hospital-based physicians who are part of contracted physician groups as they will continue to be reimbursed on the fee-for-service schedule for the time being. However, these changes will affect their hospital clients’ bottom lines. Because hospitals will suffer financially if they fail to meet the new criteria, they are not likely to renew existing contracts with physician groups that do not fulfill these standards. Hospital administrators are going to be increasingly attentive to performance on both clinical and patient-satisfaction measures, and will start looking for other solutions if scores are low.

As if that were not complicated enough, CMS has been piloting other reimbursement models as well: the Acute Care Episode (ACE) Demonstration, and a program to reduce resource utilization. The goal of ACE is to increase collaboration among all the players in the Acute Care Continuum: hospitals, inpatient providers, post-acute care facilities, and outpatient providers. To accomplish this, ACE bundles payments to both hospitals and physicians for a select set of inpatient episodes of care such as orthopedic and cardiovascular procedures. Theoretically, bundled payments will increase care collaboration and lead to increased efficiency and reduced costs. And, in the area of reducing resource utilization, CMS will identify conditions where certain procedures are “unnecessary,” and will motivate doctors to eliminate “unnecessary” procedures. For example, they will develop criteria for determining when they will or will not pay for CT scans.

It is critically important that hospital-based physicians be aware of these new criteria and payment models, and find ways to accommodate them. Where I work, physician leaders already review various performance metrics at each site and develop plans of improvement in areas where those sites perform below the national average. But tracking performance can be difficult, as CMS data is outdated by the time it is published on their website. It will be necessary to work with hospitals and vendors to obtain the most current data possible in order to analyze the impact of any new processes implemented.

It is now clear that these initiatives will impact the entire continuum of care. Physician groups will need the dedication and effort of their physician leaders to meet the needs of their hospital clients under these new rules. As physicians reinforce their culture of commitment to quality care and the hospital’s overall success, they will strengthen the future of all parts of the Acute Care Continuum.

Partnering to improve patient lives

Vituity branding orange wave pattern background