Speaker: Compensation should be based on value, not volume
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Medicare fee-for-service payment cuts are hampering volume-based compensation for physicians, but the effects can be softened if a shift is made to value-based compensation, a speaker said at the International Symposium on Endovascular Therapy.
“Entitlement programs are driving change due to a decline in the trust fund balance, and the demand for high-reimbursement services, including cardiac catheterizations and certain vascular procedures, is falling,” Christopher J. White, MD, MSCAI, FACC, FAHA, FESC, professor and chairman of medicine and cardiology at Ochsner Medical Center and Ochsner Clinical School, said during a presentation. “Medicare fee-for-service payment cuts continue to get larger.”
An effect, according to White, is that operating margins for nonprofit hospitals are declining and will be negative in the aggregate starting in 2021 based on current projections. Stories such as the closing of Hahnemann University Hospital in Philadelphia due to bankruptcy could become more common in the future, he said.
This indicates that the future of volume-based compensation is bleak and that the field should shift to value-based compensation, according to White.
The current landscape exists because of past mistakes, he said. “The surge in managed care in the 1990s led hospitals to buy primary care groups,” White said. “They failed to correctly structure the compensation models, with an emphasis on gatekeeping and not access or productivity. Primary care doctors ‘squatted,’ productivity and access tanked and patients were left dissatisfied. The experiment failed and hospitals gave the practices back to the MDs.”
There is now underway a shift from a market environment based on fee-for-service to one based on value-based payment, he said.
“Fee-for-service is all about volume, reinforces work in silos and provides little incentive for real integration,” White said. “Hospital and physician providers must address how to optimize performance in the current environment while preparing to jump to value-based payment, which will be a better care experience for the individual, provide better health for populations and lower per-capita costs. Succeeding in this area requires scale, geographic distribution, highly efficient and cost-effective delivery points and high levels of documented and provable quality and service. Organizations that fail to embrace the value agenda will not be able to compete.”
The winners in this landscape, White said, will be “early adopters of the value agenda, who will reap huge benefits even if regulatory change is slow. By managing costs, providers will be able to maintain economic viability even as reimbursements decline.”
The solution, he said, is to create value to support compensation.
“Improve quality and safety, improve patient access and reduce waste/expenses in areas such as pharmacy, laboratories, physician preference items and clinical pathways,” he said. – by Erik Swain
Reference:
White CJ. Focused Symposium: Business of Healthcare. Presented at: the International Symposium on Endovascular Therapy (ISET); Jan. 22-25, 2020; Hollywood, Fla.
Disclosure: White reports no relevant financial disclosures.