'Payment Reform' Is Here—Are You Ready?

The U.S. Department of Health and Human Services recently announced that it would test the capitation model of payment reform in Massachusetts. The state’s 110,000 Medicare/Medicaid patients under age 65 will be assigned to an integrated care organization (ICO) in exchange for a set fee per patient that covers all medical treatment for a defined period.

The test will demonstrate if capitation works and is scalable, The Massachusetts test heralds the beginning of a new era of payment reform. But as we all know, payment reform is already here. There is a growing consensus by providers that the well-worn fee-for-service model doesn’t work, and that something has to change. But change is already here, and payment reform, whether we like it or not, has arrived. Unless healthcare providers are proactive, these payment reform trends themselves will literally pick our pockets as payors–be they government agencies or insurance companies–pick hospitals’ pockets.

Federal and state governments already engage in payment reform in its crudest form by simply reducing reimbursements. This trend will continue as the Baby Boomer generation becomes the Medicare generation (or possibly the Medicaid generation considering the millions that have saved nothing for retirement).

In the case of Medicare and Medicaid, there is only one place where the buck stops when it comes to the government, and that is with providers. The winners will be those who become the most proficient and efficient when it comes to seeking reimbursements and avoiding denials. As we mentioned last month, that means getting ahead of the ICD-10 curve. Fortunately the U.S. Department of Health and Human Services has given you another year to get ready.

Health insurers are under tremendous pressure from their customers, i.e., employers, to keep costs down, and so far 2012 has not been a banner year for revenues or profits. Insurers will transfer that financial pressure onto providers, and as UnitedHealth Group recently demonstrated, they will leverage consumers to help them. At the recent HFMA leadership conference, UnitedHealth Senior Vice President Simon Stevens showed off a brief demo of his company’s customer engagement tool that enables their customers, your patients, to see the price and relative quality of procedures of healthcare providers in their area. Stevens called it an “Expedia” of healthcare options.

A recent report by Chilmark Research said that adoption of such tools by insurers has been slow, but is growing. UnitedHealth is the 500-pound gorilla in the marketplace, and where they go, the rest of the pack cannot be far behind.

Some healthcare providers have seen the light, and realized that it comes from a computer screen. As Boca Raton Regional Hospitalrecently demonstrated, providing an online infrastructure where you can engage your patients not only means they will be better informed and better prepared about the cost of their healthcare, it also results in increased collections and increased patient satisfaction.