The transition from fee for service (FFS) to an outcomes-based pay for performance system (PFP) is a key driver for healthcare transformation. Implementing this will require changing the way providers are reimbursed. Performance-based contracts share risk between the customer (payer) and the vendor (provider), as opposed to time and materials billing where the customer bears all the risk for performance e.g., a FFS payment schedule. Coordination of services was done by the payer, leading to potential gaps in information sharing and sub-optimal treatment. The industry is slowly concluding that healthcare services are not effectively administered as time and materials, and in order to deliver optimal outcomes an alternate view of case-based medical services requiring coordination and collaboration across a wide variety of providers and care settings is required.
In time and materials reimbursement, effective utilization of volume discounts to standard rates requires explicit coordination for each provider of each service. Where do these contracting terms impact regular customers? The poster-child example is the anesthesiology claim associated with a surgery. Surgeries and hospitalizations are managed for customers via utilization management processes, separately from anesthesiology services. The patient has little awareness that the anesthesiologist may not have a contract with the payer. As a result, the claim for this service is denied (non-contracted service) and the member receives a bill for the value of these services. The situation could be avoided if providers and payers had aligned incentives. Regulatory and market pressures are slowly ensuring aligning incentives and the result is performance-based contracting: all forms of which include transferring coordination of care from the payer to the provider.
Organizationally, there is now an incentive for payers and providers to move closer to each other. Kaiser Permanente and Geisinger Health System, two integrated payer-provider organizations, already embody that convergence. How are other players in the market trying to achieve this convergence? Some interesting examples that are coming to light are:
- Payers are offering care coordination, management and wellness services to provider organizations and clinically integrated networks, linking payments to achievement of cost and quality targets via ACO contracts. Discounted rates are being offered by providers in recognition of the value of this payer investment, for example Tufts Health Plan with Steward Health Care
- Payers and Providers are creating joint ventures to target specific needs, e.g., Aetna and Innova Health collaboration on disease management
We are likely to see deeper collaboration among payers and providers – beyond coordinated administration of health services:
- End to End Visibility for the Consumer – cost transparency and visibility across the entire care continuum – across care delivery, coordination and wellness.
- A deep understanding of the consumer – The ability to leverage analytics to identify, segment and stratify patients and generate insights based on EMR and claims data.
- Personalized interactions with the customer – leveraging customer insights to design personalized care plans, benefits and products and “next best action” during the sales process.
- A two-way learning system – Learning related to effectiveness interventions across care contexts can help design incentives and contractual relationships.
Supporting these goals in a changing healthcare system requires a flexible and configurable BPM/Rules system which is “built for change” and captures healthcare context and decision-making in a manner easily understandable and configurable by the business and clinical user. Payers and providers would do well to invest into these types of platforms to prepare for the future!