The Truven Health Blog

The latest healthcare topics from a trusted, proven, and unbiased source.


Planning Strategies to Bridge Fee-For-Service and Value-Based Care

By Truven Staff
Linda MacCracken imageIn today’s market, providers planning for service reconfiguration are focusing on several areas: physician networks, outpatient networks, payer risk initiatives, acute care provider partnerships, and pre-/post-acute care provider partnerships. Driven by healthcare reform, the provider delivery system is rapidly consolidating and contracting in new ways. With the new risk and value-based reimbursement incentives, hospitals and health systems have to develop comprehensive care networks that will provide the right care, at the right price, in the right setting.

So how do providers begin to bridge fee-for-service and value-based care? With strategic planning. In fact, strategic planning has never been so important. Being willing to make new connections and take risks will be hallmarks of a successful planner.

Using the same approach to strategic planning and involving the same planning stakeholders won’t work under healthcare reform. Planning processes need to be more flexible, frequent, and adaptive to ensure that hospital leaders have a strategy for acquiring and delivering care through partnerships.

How can hospital planners get started?
  1. Engage a larger group of internal stakeholders in the strategic planning process, such as physician leadership; fiscally aligned physicians via the physician-hospital organization (PHO) or employed group practices; and senior clinical and operational leaders.
  2. Prepare capacity for the arrival of the newly insured.
  3. Coordinate the outpatient network with the strategic business plans.
  4. Leverage performance best practices.
  5. Establish provider partnerships with pre- and post-care delivery providers.
  6. Assess payer risk initiatives by episode-driven care.

Linda MacCracken
Vice President, Advisory Services

Insurers Limiting Numbers of Providers? That’s How the New Healthcare Model Is Supposed to Work.

By Truven Staff
Mike Taylor imageA published over the past weekend seemed in some ways to imply that consumers who choose smaller-sized provider networks through the new California health insurance exchange could have problems gaining access to their doctors — which would contradict the intent of the Affordable Care Act.

But the fact that insurance plans are limiting network size to give healthcare consumers affordable options is a rational, direct intent of reform — and an example of natural market forces at work. The reason it may feel uncomfortable to some, though, is that it is a different approach to healthcare than the model we’ve seen in the U.S. in the past.

In a fee-for-service environment, it has long been in the best interests of insurers to have networks that were as wide and all-inclusive as possible. The focus of the old model was on more — more providers involved, more services performed.

Now, the focus in a value-based model is to provide the best care at the best price. Therefore, insurers are reaching out to different target audiences with different plan products. And one of the ways an insurer can meet the needs of a consumer who wants high-quality care at the lowest-possible cost is to offer a limited-network plan.

That’s logical — and no different for the newly eligible consumers, really, than the conventional health plan consumers (who are currently insured through their employers) who must make choices based on cost and in- and out-of-network options.

The aim of the health insurance marketplaces is not only to cover more Americans, but to also offer choice and competitive pricing. As the Times article stated, there are 12 different insurers offering plans through the California exchange. Consumers can choose, more than ever before, the price point they are comfortable with for their situations.

Of course, it will be important for both exchanges and insurers to use data and analytics to stay on top of consumer satisfaction and provider capacity, and to evolve offerings as needed.

In the meantime, as the federal exchange information site states, consumers are urged to “compare plans based on what's important to you, and choose the combination of price and coverage that fits your needs and budget.” Those decisions don’t have to be made in the dark, either. With one exchange marketplace application, consumers can compare coverage options side-by-side.

Michael L. Taylor, MD FACP
Chief Medical Officer

The End of Fee for Service – Please!

By Truven Staff
Mike Taylor imageThe Society of General Internal Medicine (SGIM) recently released a report calling for several changes in how healthcare is paid. Most importantly, the payment model, and moving to a reimbursement system more based on the quality of the healthcare delivered. I completely agree. The SGIM is to be congratulated for this important recommendation.  Fee for service drives the wrong behavior for hospitals and physicians.

Physicians are currently paid more money if they provide more services to patients, irrespective of whether the patient actually needs the service. This incents physicians to fit more patients into a crowded day and it leads to more testing. Medical equipment and device vendors understand how payments work—their proposals to physicians to put more testing equipment in the office include details of how many tests per month need to be done to make a profit on the equipment.  This type of analysis is provided to physicians every day for ECG machines, heel ultrasound bone densitometers, and radiology equipment. The tests provide value in certain situations, but the emphasis should be on the clinical need, not the profit motive.  Fee for service medicine drives this behavior, and is part of the reason US healthcare is the most expensive in the world.

Hospitals are not immune to the problem; hospitals make more money by filling the beds and keeping the CT and MRI scanners busy. Marketing efforts are focused on attracting more patients for hospital services, particularly in the more lucrative areas such as cardiovascular surgery and cath labs. Hospitals should focus on improving the health of the communities they serve, not on providing more services.

One of the promises of the accountable care organization is to base medical payments on quality outcomes, not on volume of services. If implemented, the provision of medical services will be based on the medical need and the evidence of medical benefit of the service. This needs to be an important part of the discussion on reforming and improving the healthcare system in the US.

Dr Michael Taylor
Chief Medical Officer