New Models of Care What the Future Has in Store for Your Practice

I recently attended a presentation on electronic health records (EHR). It included presentations by various vendors and IT consultants. It was well-presented, and the dinner and cocktails were excellent. What struck me, though, was not what was said, but what was not said. Much of the hype generated by EHR vendors centers around financial incentives, such as the federal stimulus program, more accurate and speedy claims processing, and a faster turnaround of fee-for-service charges. These are short-term financial goals, and if that’s what it takes to get physicians to move ahead on adopting EHR, then so be it.

In the longer term, however, the rationale for buying into EHR and its meaningful use goes beyond these short-term financial incentives to whether or not today’s physicians will be positioned to participate in the future health care delivery system. This article will explain how and why these current incentives will change.

Fee-for-service Decline

The above incentives center around the assumption that fee-for-service (FFS) will continue to be the primary methodology for payment and the volume of procedures will continue to be the driving force to making more money. Recent trends and initiatives at the state and federal levels indicate otherwise. One of the principal causes of rising health care costs is this methodology which pays physicians based on the volume of tests and procedures performed. This does not necessarily improve patient health, and though it may, it is a very expensive means to an end.

Declining Allowable Fees

Most providers realize there is an increasing trend of shrinking revenue per unit of service rendered. The Medicare conversion factor has gone down while practice costs have gone up. As Medicare moves, so do the commercial payers, which means you need to perform more tests and more procedures on more patients just to maintain your compensation level. There are a finite number of hours in the day, and physicians are reaching the point of diminishing returns.

Defensive Medicine

Although malpractice premiums have remained in check for the most part, in the last couple years, there will be another huge increase as insurers’ reserves again become depleted. The failure of Congress to enact meaningful tort reform as part of the health care legislation means continued malpractice litigation reinforcing more defensive medicine being practiced by physicians. More tests and procedures translate to higher health care costs, which bear little or no relation to higher quality of care.

New Paradigm of Payment

There are two objectives, or driving forces, behind future health care reform. One is unsustainable spending increases, and the other is the desire for more accountability in the quality of care.

The new initiatives are aimed at reversing the current trend by tying health care spending (i.e. physician payment) to quality of care delivered. Physicians will be required to report on patient care outcomes. In other words, health care reform will change the way providers will be paid in order to incentivize them to change the way they deliver care, in a manner that improves the effectiveness and efficiency of that care.

Replacing FFS

Accomplishing the above health care reform objectives will require replacing the fee-for-service payment system with a new methodology, referred to as value-based-purchasing. This will reward or penalize providers based on their success in improving patient outcomes at reduced costs. This will be accomplished in two ways.

One is rewarding providers for developing the infrastructure needed to improve health information technology and primary care, thus achieving better value. These will include payments such as meaningful-use bonuses and medical home supplemental payments.

The other is rewarding providers for outcomes of individual patients and reduced costs of serving a given population. This will be done through risk contracting, surpluses, share savings bonuses, and bundled and global payments. ‘Pay-for-performance’ will take on a whole new meaning.

A New Delivery System

The current health care delivery system is fragmented between primary, specialty, inpatient, outpatient, and chronic long-term care. There is a disconnect that leads to redundancy, waste, and excessive spending.

The new payment methodology will drive competition and the development of patient-centered models of health care. It will incentivize providers to integrate, communicate, share data, and provide a more seamless, coordinated continuum of care for a specific population of patients.

This will be done through the development of accountable care organizations, patient-centered medical homes, chronic-disease-management programs, and other innovative efforts.

CMS and several private payers are already piloting these new models and concepts. Individual states, such as Massachusetts, are already legislating mandates for providers to begin the reformation process.

EHR and IT: Means to an End

All of the above brings us back to why physicians and other providers need to adopt EHR and IT systems, to learn and train staff to effectively utilize these, and to stay current on the latest developments in technology in the medical practice. The new accountability and payment models are going to require vast data repositories and an understanding of how to access, analyze, utilize, and report on the information.

These new models are here to stay, and they hold the key to the future of health care — and your participation in the future delivery system.

James B. Calnan, CPA, is partner-in-charge of the Health Care Services Division of Meyers Brothers Kalicka, P.C., in Holyoke; (413) 536-8510; www.mbkhealthcare.com