A tipping point is the moment when a trend or idea crosses a threshold and spreads rapidly throughout a population. It is often when an unstoppable effect or change takes place. When we eventually emerge from the COVID-19 pandemic, our healthcare industry will be at a tipping point regarding payment reform: will we return to the status quo? Or will the industry finally accelerate toward more meaningful value-based care?
Declining utilization brought on by the global pandemic forced health systems and other provider organizations to look more closely at their shrinking profits and identify novel ways to attract new revenue (hint: fee-for-service payment models are not the answer). Provider organizations need to think creatively and offer services that improve patient outcomes and deliver true value to their communities.
We anticipate that the emerging healthcare market will move more rapidly into value-based care. Although COVID-19 may prove to be the tipping point, several other drivers are changing the industry. This blog post will highlight those key market forces and other dynamics that will accelerate this evolution.
Site-Neutral Policies
The past several years have seen a significant shift in the site of care where patient services are furnished. CMS has increasingly removed procedures from the inpatient-only list, with nearly 300 procedures coming off the list at the first of this year alone. Patients have increasingly preferred care outside of the hospital setting, a trend that has only intensified in the wake of the pandemic as patients look to minimize exposure to the virus. Outpatient-based procedures are less invasive, do not require overnight stays, and typically involve a quicker recovery time.
Further, shifting care from inpatient to outpatient—and outpatient to ASC—results in significant savings. Both government and commercial payers have implemented site-neutral payment policies that pay one standard rate regardless of setting. Providers are therefore incentivized to provide care in these lower-cost settings. We have seen site-neutral payment policies implemented across several service lines, including orthopedics and cardiology.
Aging Population
The US population is aging; by 2030, all baby boomers will be older than age 65. This will expand the size of the older population so that one in every five Americans will be retirement age. Further, this means that older people are projected to outnumber children for the first time in US history.
What does this mean for the healthcare industry? Older populations usually consume more healthcare services compared to children and adults. We can expect an increase in prevalence of chronic disease, cancer, and other illnesses. As a result, these patients will require focused care management services and could benefit from high-touch programs.
Value-based care is built on care coordination and close management of patients; specifically, these services can reduce unnecessary ED visits or admissions, which drive up the total cost of caring for elderly patients. Provider organizations will be better able to improve the health of their patient population and overall communities through the implementation of alternative payment models (APMs) that reward value over volume.
National Physician Shortage
Coupled with the aging population, the US is also confronting a national physician shortage. A recent report by the Association of American Medical Colleges (AAMC) projects that our nation will face a shortage of up to 139,000 physicians by 2033. The physician workforce shortage is being felt even more acutely today as we mobilize on the front lines to combat the pandemic.
To counteract this trend, health systems and other provider organizations must get creative in care delivery; that is, they must build multifaceted care teams that include physician assistants, nurse practitioners, and other advanced practice providers (APPs). Fortunately, this strategy is highly conducive for value-based care, as it allows organizations to provide care at a lower cost.
Recently, several states have expanded the scope of practice for APPs. Twenty-two states and the District of Columbia allow NPs to function in a “full practice environment,” which includes evaluating patients, ordering and interpreting diagnostic tests, managing treatments, and prescribing medications. Other states—such as Oregon, California, and Florida—have introduced legislation to remove restrictive supervision requirements for physician assistants.
Digital Health Adoption
Over the past several months, digital health has expanded rapidly and launched into a new era where nearly all provider organizations have adopted some form of telehealth or other technology. Without a doubt, digital health adoption played a large role in maintaining patient access during the height of the pandemic.
Recognizing the value associated with these tools, many health systems are looking to maintain and expand these services permanently. Telehealth allows providers to deliver care at lower costs and with fewer barriers to the patient. Patient monitoring tools allow providers to remotely track patient vitals and intervene when needed. Patient portals and electronic messaging provide open forums of communication throughout the day and after hours. Each of these benefits contributes to a robust value-based care strategy that expands patient access and further supports care management strategies.
Federal Government Initiatives
In the last decade, there has been strong support from the federal government to transition to APMs, both on a voluntary and mandatory basis. We find that commercial payers are likely to follow suit, as they too are focused on cost management. Therefore, we expect that pressures from both government and commercial payers will affect a health system’s entire payer portfolio (not just Medicare or Medicaid patients).
Notably, CMS has prioritized developing and expanding programs that focus on high-cost populations, such as those with chronic illness. These patient populations can be better managed with programs that promote care coordination, frequent touch points, and a highly engaged care team.
- The Primary Care First Model began on January 1, 2021, as a way to support and incentivize providers for delivering enhanced primary care to all patients, including those with complex and chronic illnesses.
- Additionally, CMS has also focused efforts on procedures with high variability in cost. CMS recently announced the Radiation Oncology (RO) model, a mandatory program that will require all radiation therapy providers in specified zip codes to be paid via a case rate, instead of on a fee-for-service basis. By changing the way radiation therapy services are currently paid, CMS hopes providers will deliver higher-value radiation therapy care (e.g., fewer doses, if appropriate, thereby reducing total spend).
We expect that other similar programs built around these high-risk populations will be announced in the coming years; provider organizations will need to be ready to make changes to their processes and procedures to account for these new care models.
Final Thoughts
Admittedly, the transition to value has been slow over the past decade. However, there is no doubt we are on the verge of a tipping point, as significant changes to the market have sparked innovation and ignited a renewed focus on alternative care. Value-based payment models are likely to increase in importance as both existing and new market forces shape the industry today and into the future.
Published January 21, 2021