Value-based contracts are seen as a way to contain healthcare costs, but an increasing number of healthcare organizations contend these reimbursement arrangements will hurt profits, according to a recent poll nearly 300 health execs conducted by KPMG LLP, the U.S. audit, tax and advisory firm.
“Healthcare companies need to prepare for a dramatic shift in how they get paid,” said Dion Sheidy, KPMG’s Advisory Healthcare Leader. “They need to arm themselves with analytics to make the case that value and quality are being delivered in patient care and to compete more effectively in their respective markets.”
The Centers for Medicare & Medicaid Service set targets in January 2015 to move 90 percent of Medicare fee-for-service payments to value-based purchasing categories tied to quality or other payment models by fiscal 2018. Value-based contracts are connected to patient outcomes, cap the costs of certain procedures or pay providers to manage the health of a set population - all of which place risk on healthcare providers.
When 292 executives from healthcare providers, payers and life sciences companies were asked about the move to value-based contracts, 45 percent said they expected a drop in profits, compared with one third of respondents when they were asked the same question in 2014.
Among the biggest changes from two years ago, current respondents say there are greater expectations around the use of telemedicine and greater connections with retail, clinics, same day surgery and other lower acuity healthcare facilities. Respondents found that they expect less emphasis on disease management or the use of physicians assistants or nurse practitioners instead of doctors, compared with two years ago.
A majority of the 142 survey respondents (52 percent), who have identified themselves as working with healthcare providers, said they expect a drop in profits from value-based contracts. A quarter of providers said they expect a neutral impact on operating results and 23 percent expected improved profitability. When asked the same question two years ago, 49 percent respondents from hospitals, health systems and providers were pessimistic about the impact upon profitability.
This year’s survey, which was conducted during a webcast held on May 5 (click here for replay), found that updated healthcare IT systems among healthcare providers will have the biggest effect on the efficiency of care as certain processes get automated (34 percent) and upon the ability to measure and influence clinical quality and outcomes (32 percent). KPMG’s Michael Beaty, Joseph F. Kuehn, and Todd Ellis hosted the webcast, which was titled “Healthcare Transformation: Optimizing IT to Drive ‘Value.’”
KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative (“KPMG International”). KPMG International’s member firms have 174,000 professionals, including more than 9,000 partners, in 155 countries.