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Purpose: This briefing was composed after I attended a lecture hosted by Senator Rand Paul, a well-respected politician and physician. During our talk, he discussed how payment models in hospitals are severely out-of-date. A part of having an efficient health economy is to have a sustainable system of payment for physicians and other healthcare providers. The problem is that most payment models are very inefficient and can further destabilize the economy and provider supply in the long-run. Therefore, it is crucial that we analyze how providers are paid and how we can incentivize employers (e.g., hospitals, nonprofit organizations, etc.) to utilize mechanisms that encourage efficiency. This brief will prepare me for determining how inefficiencies in our payment models affect market outcomes, specifically the supply-side. This post demonstrates my strength in analyzing hospital payment models, specifically fee-for-service and value-based payments.
According to a study facilitated by Kaufman Hall, only 13% of hospital CFOs (Chief Financial Officers) are prepared to implement value-based reimbursement forms of payment. This is a gradual decline from the meager 15% of CFOs that were ready for its implementation in 2018. What caused this decrease in confidence stems from a myriad of sources; however, it is safe to assume that the expansive, complex, and intricate nature of the health care system has persuaded numerous executives to be hesitant to invoke these programs.
Value-based payment was introduced by the National Commission on Physician Payment Reform in 2013 as a legislative method to advocate for the eventual obliteration of the fee-for-service payment in favor of payment that rewards value as opposed to volume. Ever since its proposal, health systems, organizations, medical practices and hospitals have been encouraged to find ways to implement a system that incorporates a value-based model of payment. Many Accountable Care Organizations (ACOs), created by the Affordable Care Act (ACA), have been instructed to “assume both health and financial responsibility” for patients and the operations necessary to instill greater health outcomes (Bodenheimer and Grumbach, p. 42).
It is argued that hospital CFOs are not equipped with the needed data and analytics tools to evolve with a
value-based payment plan, leading some strategies to faulter due to a lack of information and inadequate medical care. This could potentially affect the hospital’s financial bottom line and, in turn, create financial misfortunes
with patients utilizing services from the hospital. This is a crucial point in which financial executives of these healthcare organizations must evolve withshifting business circumstances. To achieve this properly, hospitals must make inherent alterations to their business strategy. By doing so, these institutions can, according to Kaufman Hall, “more appropriately make course corrections for achievement of strategic objectives.”
Data analytics are key to rectifying this conundrum. They are critical tools to “handling an evolving healthcare
business environment” (LaPointe, p. 2). Surveys suggest that between 50-59% of health operations receive limited clean and trusted data (LaPointe, p. 3). This is problematic, as it is nearly improbable to utilize a value-based system of payment if the technological infrastructure is not reliable for hospital and
physician use. The lack of updated and consistent data analytics technology is “prompting most hospital CFOs to rely on spreadsheets for strategic, financial, and tactical planning decisions” (LaPointe, p. 3.). This form of data upkeep is extensive, time-consuming, and wastes unnecessary operational costs for the health organization. Additionally, it contributes to financial and accounting departments for hospitals, medical practices and the like, to be quite dissatisfied with performance management reporting; thus, also contributing to the inability to implement a value-based model of payment.
It is important to note that value-based forms of payment are not the only method to providing payment to
medical professionals; this essay is merely arguing that it is improbable to consider new ways to reimburse physicians if performance management is not functioning properly. Chief financial officers and their departments must re-strategize their long-term (and short-term) financial goals so theirperformance management departments can operate more efficiently, doctors are reasonably reimbursed, and patients are experiencing greater health outcomes.
