Healthcare Managers Expect ‘Value-Based’ Contracts To Hurt Profits; Providers Pessimistic: KPMG Survey

Healthcare Providers Largely Unsure How To Leverage Me

Only 19 percent see results from improved information management from latest IT investments

Related content

According to a survey conducted by KPMG LLP, the U.S. audit, tax and advisory services firm, healthcare industry managers and executives are expecting profits to be hurt from the introduction of “value-based” contracting, which links reimbursement from health plans and government payers to efficiency and the quality of care.

The KPMG survey, which polled 240 representatives from hospitals, physician practices, health plans and pharmaceutical companies, found that approximately one third (33%) of healthcare managers said they expect value-based contracts to dampen operating results. In fact, more than 12 percent of the respondents expect operating income to fall 10 percent or greater from these agreements. 

“As a physician, and former hospital and health plan executive, I am acutely aware of these concerns,” said Dr. Cynthia Ambres, partner and member of the KPMG Global Healthcare Center of Excellence. “At KPMG, we are working with providers, health plans, and life sciences companies to address the revenue challenges they face in the short term. We understand the importance of establishing a sustainable value-based payment model and re-shaping our approach with patients and populations to achieve high-value care at lower costs."

"Ultimately, all stakeholders who drive their organizations to achieve efficiency in operations, quality outcomes, adoption of supportive technology, and a patient-centric culture, will not only survive but see their margins grow in the future. Building the bridge to that future is the key now," she added.

Respondents from hospitals, health systems and large physician groups appear especially pessimistic about the impact of value-based contracts, with 49 percent expecting lower operating profits.

Greater use of disease management, which places a greater emphasis on helping patients manage chronic illnesses such as diabetes and cardiovascular disease, is the most significant change to result from value-based contracts, according to 28 percent of survey respondents. Another 19 percent project a greater reliance on nurse practitioners and physicians assistants as the most significant change.

“The Affordable Care Act, as well as general market conditions are forcing providers and managed care companies to respond to the need for greater efficiency, access to appropriate sites of services and quality of services provided in healthcare. Some of these changes will come from rethinking patient care delivery, but technology and advanced clinical information systems are a large part of making this overhaul sustainable, as well,” said Joseph Kuehn, a partner at KPMG’s healthcare advisory practice, who was featured in the “Care System Redesign” Webcasts that generated the survey data. “These newer systems, and the use of data analytics will lead to greater coordination of care between physicians, hospitals, pharmacies and other providers, reducing what is today the fragmented delivery of care.”

Technology to boost care

Nearly a third of executives and managers (31 percent) expect clinical information technology to have the biggest impact on the quality of care and patient outcomes – ahead of financial performance (15 percent), clinical operations (13 percent) and patient engagement (7 percent) among other factors. Regarding the potential payoff for investing in more sophisticated clinical information systems, 33 percent expect cost reductions of 5-10 percent from more effective use of clinical data, while 18 percent see a 10-15 percent and another 17 percent see greater than 15 percent cost improvements.

Despite this optimism about the benefits, only 19 percent of those surveyed said their organizations are already delivering results based on their information management capabilities. Nearly 28 percent said they are currently implementing the capabilities, while 23 percent are in the planning stages. About 8 percent said they do not have a plan.

quo;Clinical information systems have evolved beyond tracking records and transactions to providing deeper analytics about treatment and patient outcomes,” Kuehn said. “Implementation of electronic medical records is one of the initial steps in healthcare information technology, catching errors and duplicate treatments, and providing a vehicle to share information amongst providers. Caregivers can now gain insights into the best course of treatment for patients, who may have very complex medical conditions.” More will be needed in terms of data and analytic capabilities to manage in a value-based system, but the movement has begun, Kuehn said.

About the survey

KPMG gathered results from participants of the series of “Care System Redesign” Webcasts during April and May 2014. Survey respondents were from hospitals and health systems, health plans, large physician groups, pharmaceutical companies and other industries. KPMG hosts a Webcast series under the theme of Care System Redesign to help healthcare executives and managers adapt to the CONVERGENCE around the traditional payer, provider, life science and public sector roles. The next in the series is July 9.


KPMG LLP, the audit, tax and advisory firm (, is the U.S. member firm of KPMG International Cooperative (“KPMG International”). KPMG International’s member firms have 155,000 professionals, including more than 8,600 partners, in 155 countries.


Bill Borden



On Twitter: @billbordenpr

Connect with us


Request for proposal



KPMG's new digital platform

KPMG's new digital platform