$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ HEALTHCARE REVENUE CYCLE MANAGEMENT TRENDS IN ALTERNATIVE PAYMENT MODEL ADOPTION

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1 RESEARCH AND REPORT BY $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ HEALTHCARE REVENUE CYCLE MANAGEMENT TRENDS IN ALTERNATIVE PAYMENT MODEL ADOPTION

2 Contents Executive Summary 3 Vendors Covered in this Report 4 Demographics 5 Most Critical Aspects of RCM 6 Alternative Payment Model Adoption Rates 9 Why not adopting? 11 Revenue Cycle Management Alphabet Soup 12 A Key to Understanding APMs Accountable Care Organization (ACO) Bundled Payments Capitation Comprehensive Primary Care (CPC) and CPC+ MACRA - MIPS and APMs Pay for Performance (P4P) Value-Based Purchasing (VBP) Alternative Payment Models 14 Alternative Payment Vendors Used 15 Recommendation Ratings 17 Deficiencies 18 Alternative Payment Vendors Considered 19 Impact of Value-Based Adoption 21 Outsourcing 25 Conclusion 27 2

3 Executive Summary Revenue cycle management (RCM) runs the show on the financial end of health care. RCM solutions come in all shapes and sizes from tracking patient data to appointment scheduling to insurance verification to coding...and beyond. A good RCM solution reduces time between service and payment-- and getting paid sooner is always a good thing-- while taking the load off of employees who have more important duties to perform. In this updated report from a similar study last year, providers shared their current opinions on what they believe the impact of alternative payment models for value-based care will be on their organizations, which areas of RCM they will most likely need to outsource, and what vendors they are considering (whether for the first time or in replacement of their current solution). Disclaimer: As alternative payment models for value-based care are being adopted at staggeringly slow rates (if at all), there are few providers who felt they could give informed recommendations or opinions on this subject. This Reaction Report is a quick look at what s going on in this realm. The data reflects that-- take it how you will. Research & Analysis: Jeremy Bikman Chris Jensen Junior Analyst: Jordyn Crowley 3

4 VENDORS COVERED IN THIS REPORT Disclaimer: We understand there is an array of payers and vendors who help providers with their varying revenue cycle management needs. In an attempt to simplify the language as we make comparisons, we will be referring to all as vendors throughout the report. 4

5 DEMOGRAPHICS Our participants represent a broad spectrum of opinions and concerns in their varying roles. Each provides a different perspective that vendors need to consider when servicing their solutions. Different sizes of hospitals also have very different opinions, concerns, and needs from their RCM vendors. Participants by Title *Other = Assistant Administrator; Chief Nursing Officer; Comptroller; Deputy Director of Recovery; Manager of Applications & Integration; Physician; Regional Director of Risk, Compliance, Privacy Officer; RN Participants by Bed Size 5

6 MOST CRITICAL ASPECTS OF RCM With varying importance placed on each item of this list, one thing is clear: effective RCM operations are absolutely critical to the overall health of every single provider organization in the country. Most Critical Aspects of RCM 6

7 CRITICAL ASPECTS CONT. Critical Aspects by Bed Count When segmented by organization size and by role, the individual trends generally follow the overall figures in the previous graphs, with most important aspects of RCM displayed on the left and less important on the right. However, we see a few segments breaking rank. Hospitals between beds are more evenly concerned about these items with some exceptions. Where it becomes a little more interesting is in the 501-1,000 bed size organizations; this group appears to have a reverse trend in comparison to the other care facility sizes, with clinical and financial outcomes peaking in this segment. This group appears to be more concerned with the weight of an eventual, but inescapable, shift to true value-based care. In other areas, eligibility and benefits is the hot button for ambulatory facilities as they operate like small businesses rather than hospitals. Where many hospitals operate with government subsidies, ambulatory facilities need consistent patient payment for care (i.e. insurance) in order to keep the doors open. 7

8 CRITICAL ASPECTS CONT. Critical Aspects by Title 8

9 ALTERNATIVE PAYMENT MODEL ADOPTION RATES One year ago, in 2015, our data showed that 36% of hospitals reported that they were adopting alternative payment models; 61% said they were not yet adopting such a payment model, but they would be in the future; only 3% said they would not adopt alternative payment models. It s interesting to see that this perspective has not changed much as value-based care continues to pick up steam. Luckily, providers elaborate on these decisions as pertaining to their opinions of value-based payment models in the sections below. Alternative Payment Model Adoption (Year-by-Year) Will your organization adopt alternative payment models for value-based care? 9

10 PAYMENT MODEL ADOPTION CONT. Adoption Rates by Title This trend seems to fit what would be expected: bigger hospitals are much more likely to have the resources to pull off a new payment model adoption than smaller hospitals. This trend has stayed fairly constant when considering last year s study as well; hospitals with less than 500 beds are likely to be the slowest to adopt, and the large hospitals are more likely to be confident in making the change. What we find interesting is the percent of outpatient participants suggesting they will wade out into the murky waters of valuebased care, despite the significantly different business models many of the facilities operate under compared to hospitals. Adoption Plans by Bed Count 10

11 WHY NOT ADOPTING? Providers who indicated they would not be adopting a value-based payment model offered up a variety of explanations. Some were of the opinion that doctors would be paid less than ever before due to noncompliant patients; outcomes determined primarily by patient compliance could lead to physicians cherry-picking patients whose outcomes will show higher levels of value. One provider even called the value-based system diabolical. [Alternative payment model] [o]utcomes are determined primarily by patient compliance and it is diabolical to blame doctors for this. Doctors should be paid on the basis of how much work they do (that is how every other professional is paid!), and not on the basis of patient compliance. Under this new model, physicians will start to cherry pick patients, and the sicker, less compliant patients will have no care. One opinion worth mentioning spoke to the metrics used by different payers; with no standardized approach, quality as measured by national organizations might not accurately reflect local volumes and supply and demand metrics. Metrics used by payers are not reflective of the true quality of services delivered. Payers have different metrics-- no standardized approach as a group of payers Payers change metrics in short term. 11

12 ALTERNATIVE PAYMENT MODEL ALPHABET SOUP A Key to Understanding APMs Knowing just how many options providers have when it comes to alternative payment models (APMs), and what types of payments each model covers, is critical in understanding the revenue cycle management decision-making process. Which payments are guaranteed and which ones rely on performance? Which payments depend solely on quality and which factor in quantity? The main APMs, according to the data at hand, are briefly explained in the section below. Accountable Care Organization (ACO) Groups of health care providers, ranging from hospitals to individual doctors, come together in Accountable Care Organizations (ACOs) to coordinate care and provide the best possible quality of service. Medicare offers differing ACO programs to incentivize providers, but participation is voluntary. Bundled Payments According to the Bundled Payments for Care Improvement initiative, under the Affordable Care Act, payments for multiple services provided in one episode of care are linked together. Bundled payments serve as a happy medium between fee-for-service billing and capitation. This initiative encourages more accountability when dealing with preventable conditions and coordination across health care providers. Capitation FULL Capitation payments are used to pay providers a fixed sum per patient for a specified amount of time. Capitation rates are typically determined on a per patient, per month basis (PMPM to use management jargon), and vary by local costs and the average utilization of services. PARTIAL Capitation payments are used to pay providers a fixed sum based on specific services that a patient receives for a specified amount of time; unspecified services will be paid on a fee-for-service basis. Comprehensive Primary Care (CPC) and CPC+ The Comprehensive Primary Care (CPC) initiative is a four-year, multi-payer, single-model initiative (ending December 2016) taking place in seven U.S. regions to encourage providers to support five comprehensive care functions. CPC practices receive a monthly care management fee. Comprehensive Primary Care Plus (CPC+) is a CPC redesign, beginning January 2017 and planned to run for five years. CPC+ will support up to 20 regions and will offer two payment tracks with requirements that should offer greater flexibility to care beneficiaries. Providers who participate in CPC+ will be paid up incentives up front, but will have to return their payments should performance not be up to par. 12

13 ALPHABET SOUP CONT. MACRA - MIPS and APMs The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) payment program can be broken down two ways: 1. Merit-Based Incentive Payment System (MIPS) - MIPS measures Eligible Professionals on quality, resource use, clinical practice improvement, and meaningful use of certified EHR technology. 2. Alternative Payment Models (APMs) - APMs pay participating providers who care for Medicare patients; examples of APMs include Accountable Care Organizations (ACOs) and bundled payment models. Pay for Performance (P4P) Pay for Performance (P4P) programs evaluate a hospital or individual provider s performance based on measures defined in a scorecard. P4P incentives include bonuses, investments in new health IT, or even non-financial incentives such as public recognition. Value-Based Purchasing (VBP) In an effort to increase the quality of health care, value-based purchasing (VBP) accounts for the largest share of Medicare spending as part of the Affordable Care Act (according to CMS). VBP uses hospital quality data to determine payment based on quality of service instead of quantity. A helpful resource, which helped compile this brief guide, is the Centers for Medicare and Medicaid Services (CMS) website ( explore for more information. 13

14 ALTERNATIVE PAYMENT MODELS Looks like providers are most interested in adopting a bundled payments model. Centers for Medicare and Medicaid Services (CMS) claims that bundled payments allow for greater provider adaptability and flexibility in deciding how payments are allocated. What specific payment models have you, or will you, adopt? * *Other = Payment process arrangements, next generation Medicare model Adopted Models by Bed Count beds 501+ beds 14

15 ALTERNATIVE PAYMENT VENDORS USED Vendors (Year-by-Year) This year we see a host of additional vendors being cited as helping providers with alternative payment models. In addition, there was a flattening out of responses with no single vendor dominating the landscape as was displayed last year with The Advisory Board Company and to a lesser degree OptumInsight. One thing s for sure: as APMs continue to take shape, a handful of these vendors stand to gain a significant new source of business. Data Available in Premium Report 15

16 ALTERNATIVE PAYMENT VENDORS USED CONT. Alternative Payment Model Vendors Used in 2016 Data Available in Premium Report Disclaimer: Alternative payment models for value-based care are being adopted at staggeringly slow rates (if at all). This report is a quick look at what s going on right now in this realm. The data reflects that-- take it how you will. 16

17 RECOMMENDATION RATINGS It s interesting to note that the vendors here are a mix of IT solution vendors and consulting/advisory firms. Are those differences enough to account for the slight variance in recommendation scores? Overall, these recommendation ratings are fairly decent when considering the number of deficiencies providers would like addressed (see the section for RCM Deficiencies on the next page). Recommendation Ratings Data Available in Premium Report 17

18 DEFICIENCIES Not quite the revelation we were looking for-- it s pretty obvious that an effective RCM solution should address all of these issues. Take one of the main issues, for example: RCM needs to help get the providers paid, right? It doesn t take a genius to figure that out, yet this is an issue providers feel desperately needs addressing. Money talks...and loudly at that. RCM Deficiencies * *Other: Standardized deductibles, better understanding by physicians and staff. 18

19 ALTERNATIVE PAYMENT VENDORS CONSIDERED While most providers have not yet adopted an alternative payment model, it s only a matter of time. Knowing this begs the question which vendors would they most likely adopt when the time comes? We see a veritable cornucopia of different options, from large RCM-focused firms such as Change Healthcare (Emdeon) to enterprise entities in the mold of Cerner to payviders like Aetna (ActiveHealth) to hybrid solutions providers along the lines of the Advisory Board Company. Traditional RCM was difficult enough to handle-- moving to models that are even more so moving targets (bundled payments, etc.), it s no surprise that the vendors being considered by the provider community are such a diverse lot. Alternative Payment Model Vendors Considered Data Available in Premium Report *Other: State of Md, Internal Corporate 19

20 VENDORS CONSIDERED CONT. Alternative Payment Model Vendors Considered (Year-by-Year) Once again, as we trend which APM vendors are being considered for new or replacement contracts between 2015 and 2016, we see additional vendors showing up to fill this growing need and the flattening out of trends this year in terms of who has the greatest mindshare in this space. Data Available in Premium Report 20

21 IMPACT OF VALUE-BASED ADOPTION A lot of governmental changes have taken place in the last year regarding value-based payment models, and it would seem the word has spread. Providers specific concerns about what impact value-based payment model adoption would have on their organizations is practically flip-flopped from this year to last. About the same amount of people are pessimistic, however. Impact of Value-Based Reimbursement (Year-by-Year) This graph includes only those responses that overlap between 2015 and

22 IMPACT OF VALUE-BASED ADOPTION CONT. Making the change to value-based payments is in a word...intimidating. Providers believe that this switch will drive the need for tighter clinical and financial integration, making it necessary to add resources dedicated to improving clinical-financial performance. Providers will feel more pressure than ever and will mostly likely have to start or expand care management programs to ensure quality standards are being met. And don t get us started on the magnitude of difficulty required in coordinating provider staff to drive all of this change...whew. Impact of Value-Based Reimbursement Unsure 22

23 IMPACT OF VALUE-BASED ADOPTION CONT. Impact by Bed Count 23

24 IMPACT OF VALUE-BASED ADOPTION CONT. Impact of Adopting by Title As is expected, those in different roles feel the impact of valuebased adoption differently. All feel there are reasons to be hesitant about adopting, but with varying degrees of concern. 24

25 OUTSOURCING Of the providers who determined that the impact of moving to a value-based reimbursement model would be a need to outsource more of their revenue cycle management, we asked which areas of revenue cycle management would need to be outsourced. Unsurprisingly, the only hospitals who felt they may have to outsource were small hospitals, falling into the 0-50 bed count category. Outsourcing by Small Hospital Bed Count 25

26 OUTSOURCING CONT. A blast from the past: our study from 2015 shows that providers were considering outsourcing several areas of revenue cycle management. This year, providers see a wider list of needs for outsourcing as displayed on the second graph. However, the same prevalent areas from 2015 are still unable to be managed. Could this be the place for vendors to look when deciding what solutions to innovate or develop? RCM Outsourcing (Year-by-Year) While the above graph compares outsourcing needs that overlap in 2015 and 2016, the graph below shows all outsourcing needs as chosen by this year s providers. We found the list of potential RCM segments that are seriously being considered for outsourcing has grown. RCM Outsourcing

27 CONCLUSION Effective RCM operations are absolutely critical to the overall health of every single provider organization in the country. When exploring alternative payment models, findings are less clear. It s not yet possible to pick out the nitty-gritty details of an ideal value-based payment system when so few providers are willing to try it out. As long as some providers think it s actually diabolical, and as long as the government continues to allow providers the choice to adopt or not, it seems likely that small hospitals will stick with the status quo. It will be very interesting to watch how quickly payers move in to assist provider organizations make the transition this adds a very different dynamic to the RCM market than ever seen before. For now, we wait. 27