When Hospitals Have One Foot in FFS and the Other in VBP

R. Myles Riner

R. Myles Riner , MD, FACEP

Partner Emeritus

Published March 15, 2016

Most hospitals these days have one foot firmly planted in fee-for-service (FFS) reimbursement and the other foot in value-based payment (VBP), and though this somewhat schizophrenic business model complicates life for the C-suite, it poses an even greater challenge for emergency physicians and other EMTALA-obligated providers.

Almost all hospitals face DRG payments, a form of capitation imposed by Medicare that puts hospitals at risk for reduced profits if their physicians and staff fail to provide cost-effective care. Yet most of these same hospitals also see greater profitability from commercial and some government-insured fee-for-service compensation that is predicated on their staff and physicians ordering more tests and providing more expensive care.

The conundrum faced by hospital CEOs and medical staff leadership is how to provide high-quality care (to avoid getting penalized for failure to meet quality standards) at less cost under VBP, while providing high-quality care (to ensure a good standing in the marketplace) under an FFS system that still rewards liberal use of these more expensive tests and treatments. A cost-effective approach, or protocol, or physician practice pattern might be positive for the bottom line when a hospital goes at risk for the cost of care and negative when the hospital is reimbursed on a cost-plus basis.

Everyone in healthcare talks about alignment and the importance of ensuring that the physicians who staff the hospital and care for the hospital’s patients are in sync with the hospital’s mission and its approach to the business of medicine. Alignment is certainly key to the hospital's ability to meet its revenue goals, especially when the penalties for failure to meet quality metrics are high, and the revenues at risk under capitation or other value-based arrangements with payers is significant.

Alignment is also important, though generally much easier to foster, when the hospital’s business model is to aggressively pursue patients covered under discounted fee-for-service or cost-plus contracts with managed care plans and to eschew at-risk models of compensation.

Alignment is more difficult when the hospital has committed heavily to both models at the same time, especially for hospital-based physicians who have significant exposure to EMTALA. This is because EMTALA regulations basically require physicians to provide a uniform standard of evaluation and care for all patients who present with a similar emergency medical condition to the hospital’s emergency department.

Under EMTALA, according to Dr. Joseph Zibulewsky, “The overriding question becomes: Was the screening exam for similar complaints the same for all patients, regardless of their insurance status or ability to pay?” This likely makes it illegal, or at least unwise, to adopt a cost-effective care strategy for evaluating patients with, say, chest pain, and apply this strategy or protocol only when the hospital is capitated for the patient’s care and not with patients who are covered under an FFS-reimbursing plan.

Does this mean that emergency physicians and other hospital-based specialists can’t align themselves properly with hospitals and medical staff that are capitated or at risk for the cost of care for some patients and covered under FFS plans for other patients?

Prentice Tom, MD, in a recent presentation to his partnership, Vituity, outlined one practice (prompt referral of selected ED patients for palliative care) that resulted in a substantial reduction in the cost of care and therefore significant financial benefits for these patients — and for the hospital when the hospital was at risk for these costs.

Since most of these patients are elderly and on Medicare, this is a strategy that can be applied to all appropriate patients regardless of insurance status, because these patients are predominantly covered under Medicare DRGs. Not surprisingly, prompt referrals to palliative care services also improve quality of care and increase patient satisfaction.

There are undoubtedly a number of cost-effective, quality-improving strategies or protocols that can be applied directly, specifically, and appropriately to all elderly patients in the ED, to all patients referred from SNFs, or to specific emergency medical conditions that are common and costly for elderly patients. Adopting these strategies would enable emergency physician groups to align with the hospital’s cost-effective care strategies when the hospital is at risk under Medicare payment, maintain compliance with EMTALA, and continue to maintain alignment with the hospital’s FFS objectives when the hospital is not at risk for these costs.

Until a hospital fully or predominately transitions from FFS to a value-based payment system and begins to integrate cost-effectiveness into its mission statement and its business plan, emergency physicians may find that they are expected to adopt two disparate practice modes, applying VBP strategies around cost-effective care for a particular subset of patients. This can only be done as long as doing so does not violate EMTALA or their ethical commitment to a universal standard of care for all emergency patients regardless of insurance status or ability to pay.

It may not be so easy to keep one foot in FFS and the other in VBP and keep your balance, but it can be done. Hopefully, cost transparency for the healthcare consumer will eventually make living in this internally conflicted practice environment unnecessary.

Originally published on Sept. 29, 2015, at The Fickle Finger healthcare blog.

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