White Paper

2016 Healthcare Trends

October 09, 2015 Loopback HQ

The early idealism that attracted many to the field of healthcare can quickly be overwhelmed by the practical financial considerations when financial incentives are misaligned with patient’s best interests.  For a long time now, fee-for-service reimbursement has rewarded volume rather than value.  Dysfunctional financial incentives have produced a system where patients and families struggle to navigate across fragmented care silos and to survive, providers must work to maximize utilization.

Over the past few years, there have been many pilots and demonstration projects experimenting with new value-based payment models.  Nevertheless, most healthcare spending is still based on a pay-for-volume framework.  Healthcare providers have taken a slow and measured approach to adopting a pay-for-value approach when much of their financial success is still tied to a pay-for-volume system. That is about to change.  

2016 will mark a new inflection point in the pace with which healthcare organizations move to value-based reimbursement models.  CMS, the largest buyer of healthcare services, has now set a goal of tying 30 percent of traditional, or fee-for-service, Medicare payments to quality or value through alternative payment models, such as Accountable Care Organizations (ACOs) or bundled payment arrangements by the end of 2016, and tying 50 percent of payments to these models by the end of 2018. 

Bundled payments require providers across the care settings to coordinate more effectively.  Instead of a payer separately reimbursing for each healthcare service, a bundled payment makes one payment that includes the initial hospitalization and all related services within 90 days following the hospital discharge.  CMS got everyone’s attention when they recently announced, that starting in January 2016, they will require hospitals in 75 Medicare Service Areas (MSA) to accept a single bundled payment for Comprehensive Care for Joint Replacements (CCJR). 

Others are quickly following suit.  Health systems are proactively engaging with payers to design new bundled payment reimbursement models across a broad range of procedures and conditions, including chronic conditions, such as Heart Failure, COPD, and procedures, such as Labor & Delivery.  In 2016, bundled payments will move from pilots to mainstream.

Suddenly, there is a new financial imperative for physicians, hospitals, rehab facilities and home health providers to closely collaborate to ensure that high quality, low cost care is provided every time. In 2016, bundled payment models will require hospitals and health systems to adopt technology that can connect care silos into a coordinated network to enable tracking of patients as they move across care settings and measure clinical and economic outcomes of bundled payment partners. 

Post-Acute Care (PAC) providers, such as Skilled Nursing Facilities and Home Health Agencies will also be profoundly affected by the growth of bundled payment contracts.  PAC providers were left out of federal EHR subsidies enjoyed by physician groups and hospitals.  They will now will be playing catch up and scrambling to show they can be a valued partner to bundled payment conveners – typically health systems, ACOs or MCOs.

In 2016, PAC providers will adopt technology to connect with bundled payment conveners to track patients across care settings and show evidence of high quality, cost-effective care.  New population analytics will be needed to optimize care across bundled payment partners and proactively engage high-risk patients.