HRI s closer look Healthcare s alternative payment landscape
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1 HRI s closer look Healthcare s alternative payment landscape
2 CMS Payment Changes Medicare s commitment towards quality-based payments grows. 80% 20% 85% 30% 90% 50% All Medicare payments Percentage of payments linked to quality programs Percentage of payments linked to alternative programs Current By 2016 By 2018 Quality based payment programs Alternative payment programs Hospital Value-Based Purchasing Hospital Readmissions Reduction Hospital-Acquired Condition Reduction End-Stage Renal Disease (ESRD) Quality Incentive Value-Based Modifier Pioneer Accountable Care Organization Medicare Shared Savings Program Bundled Payments for Care Improvement Comprehensive Primary Care Initiative Patient Centered Medical Homes Comprehensive End Stage Renal Disease Oncology Care Model Medicare/Medicaid Financial Alignment
3 Accountable Care Organizations and bundled payment initiatives track closely with each other Alternative payment initiatives find common ground. Puerto Rico Alaska Hawaii Bundled Payment Medicare Shared Savings Program ACOs Pioneer ACOs
4 Medicare Advantage enrollees continue to grow across the US Providers see some crossover between MA and fee-for-service alternatives. Medicare Advantage Penetration Range 0-15% 30-45% 60-75% 15-30% 45-60% > 75% Puerto Rico Hawaii Alaska
5 Market archetypes What s happening at the community-level impacts how and when a healthcare organization moves into alternative payment models. Faster Evolution Moderate Evolution Slow Evolution Traditional Healthcare systems have some fragmentation but insurers and employers are beginning to explore innovative payment models. Hospitals and provider groups that do not evolve could be acquisition bait especially if there is a health system that is farther along the alternative payment scale. Lagging The market moves slowly, with sporadic insurer-driven initiatives focused on some quality-based payments. Care continues to be fragmented and hospital-based. Vanguard A fast-moving market with insurers and providers already working together to implement population health. Health systems vie for as many advance contracts as possible to gain a larger share of the patient population. Emerging In emerging markets insurers are moving towards risk-based contracts but payments are still a mix of traditional and new models. Health systems are making the investment in alternative reimbursement models. Fragmented Transitioning Integrated Source: Strategy&, PwC Health Research Institute analysis
6 Health System Readiness Regional factors play a role, but a health system s own goals should guide its decision. Walker Jogger Runner Sprinter A lack of revenue and high operational costs means this health system could stumble out of the starting blocks. Conditioning needed: Improve overall quality and care management. Pilot new value-based care and quality payments. Reach out to post-acute providers to prepare for population health management. Consider partnerships with other provider groups. Thrives under traditional payments such as fee-for-service and wants to delay the move to alternatives for as long as possible. Typically this system is the dominant player in a community. Conditioning needed: A dominant regional footprint can be a good platform for a population health or bundled payment model. Joggers should seek out insurer contracts that reward shared savings and build out ambulatory and retail clinic strategies to bring in more consumers. Committed to value-based care, with several demonstrations underway. Needs to take the lessons from those pilot projects and tailor them according to the health system s size and reach. Conditioning needed: Regional or national expansion plans could position the health system at the front of the pack by improving its ability to perform population health. Expanding the types of medical services it provides could lead to an effective bundled payment program. Looking to increase revenue under a number of alternative payment models. A sprinter wants to differentiate itself from other health systems in the region. Conditioning needed: Revenues are in line with costs. A strong connection with ambulatory, retail and home health. Physicians are aligned with the health system. Source: Strategy&, PwC Health Research Institute analysis
7 Pioneer Accountable Care Organizations: Geographically disperse despite declining numbers Pioneer ACOs Puerto Rico Alaska Hawaii
8 Medicare Shared Savings ACOs across the US Medicare Shared Savings Program ACOs Puerto Rico Alaska Hawaii
9 Bundled payment programs grow as CMS moves to make some participation mandatory Puerto Rico Alaska Hawaii Bundled Payment
10 For more information, please visit: pwc.com/hri/alternativepayment 2015 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see for further details KM/RL
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