Interview: Shift to Value-Based Reimbursement Offers Challenges for Healthcare Providers
Transcript from a recent interview with Brian Donovan
With recent shifts from Fee-For-Service to Fee-For-Value, among other changes, the new healthcare environment can be a challenging place for independent practices. Brian Donovan discusses some of the challenges that face independent practices and offers advice for how those practices can face the challenges head on and enjoy a high level of success.
SE Healthcare: Healthcare has changed in recent years, and many independent physicians are wrestling with the thought of joining health systems as employees and moving away from independence. What are some of the struggles independent practices face that are causing this trend?
Brian Donovan: The struggles that small, mid-size and even large independent group practices face are very real and continue to grow. In an era where everything has been “super-sized”, the healthcare industry is not immune. Hospital health systems are buying up independent practices at a break-neck pace in their quest to stay solvent, competitive and relevant. Independent practices face many struggles as a result.
The struggles that small, mid-size and even large independent group practices face are very real and continue to grow.
Federal and state regulatory efforts designed to reduce cost, improve quality and expand access to care represent a significant source of complexity for independent practices to navigate. New payment incentives, as well as reimbursement and contract changes all require detailed analysis, which independent practices are not equipped to handle in terms of resources and skillset.
Finally, the growth of new and evolving technology, compliance, privacy and security demands, and new mandates for health information systems and clinical practice underscore the need to manage vast change and multiple competing priorities. Again, these are things independent practices are not well equipped to handle.
SE Healthcare: As you mentioned, small practices are especially feeling the heat. Lack of bargaining power at the reimbursement table is one major hurdle they face. Can you talk more about the challenges smaller independent practices face, specifically in regard to negotiating with insurance companies?
Brian Donovan: With the shift from fee-for-service to fee-for-value reimbursement methodology, a cell size of the population you touch or manage now has significant meaning and relevance in developing new value-based reimbursement programs that are focused on improving efficiency, increasing quality and improving access to care and the overall patient experience. Payers understand that they can manage a significant chunk of the medical and pharmacy spending for their members through new value-based programs that are primary care centric. After all, PCP’s affect or influence about 80 percent of every healthcare dollar spent.
Independent practices have always played second fiddle to larger IPA’s, PHO’s and hospital health systems when it comes to securing best-in-market rates, programs and agreements with a payer.
As a result, payers prioritize partnering with hospital health systems that have a significant concentration of employed or affiliated PCP’s and other key specialties and subspecialties for managing the health of a population, and that would be considered a value provider in a geographic region. Independent practices have always played second fiddle to larger IPA’s, PHO’s and hospital health systems when it comes to securing best-in-market rates, programs and agreements with a payer. The shift to FFV has now increased the intensity of this issue for independents.
SE Healthcare: How do these independent practices gain some sort of footing and put themselves in a better position to more effectively negotiate higher reimbursement and receive their fair share for the work they do with patients?
Brian Donovan: The good news is, there are several steps an independent practice can take to better position themselves at the negotiating table with a payer. The long-term forecast does not have to be all doom and gloom. First, the practice needs to understand their “value” in the market and, more importantly, be able to document and articulate it to all stakeholders in the market, not just to payers. Independent practices should play a vital role in the new world of value reimbursement. Most of the time they offer better access to care and a better experience to patients than the local hospital health system down the street. Furthermore, they are cheaper, often-times by a factor of 50-100% or more, and provide higher quality. Sadly, the health care purchaser (patient and employer group) in the equation is typically unaware of these very important differences.
Independent practices should play a vital role in the new world of value reimbursement.
Next, the practice needs to perform a full accounting of their top payer contracts to understand their current overall payment levels. They need to take steps towards researching publicly available data to show what the market rates are for their particular specialty. With this information, they need to create a balanced fee-for-service (FFS) and fee-for-value (FFV) strategy that begins to balance their payer portfolio over time in terms of price, volume and FFS vs FFV split.
The practice also can’t neglect their operational process and should perform a top down review of the operational process they apply to manage their payer contracts through the contracting life cycle as compared to industry best practices. Opportunities for improvement should be noted, action plans to address those improvements should be developed and implemented, and then on-going maintenance and review of the process should be performed.
Finally, a plan should be developed to execute the new reimbursement strategy using the newly developed value story to support it. This strategy should take into consideration partnerships with health systems for new value programs, a direct line to employer and marketing component and of course, top commercial payers in terms of volume and reimbursement.
SE Healthcare: You work with a lot of independent practices. Without mentioning specifics, can you talk about a case where you’ve seen an independent practice really excel in the face of the challenges they encounter in today’s healthcare environment?
Brian Donovan: When practices stay in the game to “fight the good fight”, don’t succumb to market pressures and follow the recipe for success I outlined in my previous comment, they almost always find a positive outcome. They’re also happier with the results based on my experience working with practices locally, regionally and nationally. Sometimes it just takes a shift in perspective, a sound game plan and the ability and fortitude to execute on the plan to gain control of your future, success and destiny.
SE Healthcare: Thanks for the advice and insight you’ve provided today. Before we wrap things up, what one additional piece of advice would you offer to independent practices that you haven’t mentioned already?
Brian Donovan: In these times of great change within the healthcare environment, the important thing is to stay focused and look for opportunities rather than focusing on roadblocks. When independent practices apply the principles we discussed, and learn to focus on opportunities instead of challenges, great things can happen!