The Top Three Healthcare Financial Trends in 2017: Payment Transitions, Disruption, and New Skills

The Top Three Healthcare Financial Trends in 2017:
Payment Transitions, Disruption, and New Skills

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2017 – Top Three Healthcare Financial Trends
As 2017 comes to an end, the year’s
prominent healthcare financial trends
emerge, as do clues to potential new trends.
These slides examine three of 2017’s
significant trends—transitions in payment,
disruption from familiar players and
newcomers, and emerging data skillsets—
and how they might impact healthcare.
While much of the industry focuses on delivering better care at a lower cost,
or acknowledges the importance of doing so, healthcare struggles with
barriers and uncertainty around this goal.

Without a clear roadmap for the Affordable Care
Act (ACA), organizations struggle to embrace and
implement value-based care.
Meanwhile, establishment changes and influential
newcomers (e.g., Amazon) stand to disrupt the
business of healthcare, and new technologies are
altering the healthcare landscape—reframing the
industry’s understanding of both clinical and
financial outcomes and careers.

While the U.S. waits for final direction from the federal
government on overall healthcare policy, no one
knows exactly what to expect.
What is certain, however, is that the trend for value-
based purchasing (VBP) with alternative payments
will continue. Markets vary across the U.S., and
change isn’t occurring as quickly as expected.
While the industry is generally in favor of linking
payment with value, it’s unclear whether all
healthcare organizations will want to sign up for risk
on the upside and downside.
Data shows the following payment trends:
Trend #1: Transitions in Payment

According to a June 2017 publication in the
Health Affairs Blog, at the end of first quarter
2017, there were 923 ACOs across the U.S.,
which cover 32 million lives.
Compared to the same period in 2016, this
is a net growth of 92 ACOs (138 started
operations; 46 dropped their contracts).
That’s an ACO growth rate of greater
than 10 percent.
More ACOs

According to a study from business intelligence
firm ORC International, payers report they are now
58 percent along the continuum toward full VBP.
Payers are also shifting the increased network
management: 53 percent are using tiered
networks, and 42 percent are using narrow
networks.
Additionally, 75 percent of payers stated quality
as a driver for network selection. Hospitals rated
their organizations at 50 percent along the value
continuum—up four percent in the past two years.
Continuing toward value-based purchasing

The study stated that, in five years, 59 percent of
the overall payment models will be a mix of
capitation, P4P, and episodes, with bundled
payment growing fastest.
The study concludes that disruptive change in
healthcare payment hasn’t slowed.
The overall complexity of alternative payments on
a large scale remains a challenge for payers and
health systems alike.
Continuing toward value-based purchasing

CMS was actively pushing to move 50 percent of the
FFS payment to alternative payment by 2018.
It was on track to meet the 2016 goal of 30 percent.
The current administration, however, has not been
pushing as aggressively to meet these goals and is
taking time to develop its policies.
CMS less actively pushing away from fee-for-service (FFS) payment

The Health Care Payment Learning and Action
Network continues to advocate for a healthcare
system transition to shared-risk and population-
based models.
The Department of Health and Human Services
(HHS) established the network to bring together the
many stakeholders (private, public, and non-profit) to
transform the nation’s health system to emphasize
value over volume.
The shift to shared-risk and population-based models

In a 2017 survey of health systems about
population health, 82 percent of respondents
reported they continue to move ahead with
their population health strategies despite
uncertainty in healthcare reform.
Thirty-seven percent said their primary
concern for their strategy was financial
implication, and more than 50 percent said
they didn’t expect more than 30 percent
of their contracted population to have
downside risk within the next three years.
Population health progress

As the push in payment continues, the industry is
acknowledging innovation and transformation in this area:
In a September 2017 Wall Street Journal article, Seema
Verma, CMS Administrator, outlined her new direction
for the Center for Medicare and Medicaid Innovation,
which includes a continued focus on value and
movement away from paying for volume.
Verma also stated CMS is seeking to reduce complexity,
focus on outcomes, and work to increase choice and
competition in the healthcare market.
Innovation and transformation in payment

CMS had scheduled mandatory bundled payments in
specific geographic areas to start in January 2018.
In early August, CMS issued proposed rules to cancel
and rescind the regulations for these bundles.
CMS also revised aspects of the Comprehensive Care
for Joint Replacement (CJR) model.
This was the second delay for this program, leading the
industry to ask if this were a shift or just a pause.
Verma asked for more stakeholder input into the design
of the various payment models by October 2017.
Innovation and transformation in payment

The transition to VBP will increase
organization’s focus on cost.
Healthcare previously relied on payment
increases, particularly from commercial payers.
Now, with more risk associated with payment,
health systems must cover the cost of a
population.
Organizations see the expense trend growing
faster than the payment trend.
Cost

Entities have converted to new enterprise
resource planning (ERP) systems, often
replacing older reporting and control systems,
but not truly integrated them into the workflow.
For example, managers now review labor
performance on a dashboard, where they
previously received it in a biweekly report.
Organizations need to restate accountability
for operations, and make sure all levels of
management have the tools to understand
and leverage new systems.
Cost

Healthcare has spent many dollars deploying
EMR systems.
As of 2016, over 95 percent of hospitals
eligible for the Medicare and Medicaid EHR
Incentive Program have achieved meaningful
use of certified health IT.
The industry has installed software; now it
needs to enjoy its potential benefits.
Cost

2017 has seen disruption from the universal healthcare movement,
“Medicare for All,” the Medicare Access and CHIP Reauthorization Act
(MACRA), Amazon, Anthem, and CMS.
Trend #2: Disruption from Established Players and Newcomers

“Medicare for All” has become a slogan and
movement for universal healthcare (i.e., a single-
payer system).
A bill, H.R. 1, the Medicare Prescription Drug,
Improvement, and Modernization Act, was originally
presented in 2003, and H.R. 676, Expanded and
Improved Medicare for All, was introduced in
January of 2017.
“Medicare for All”: Universal healthcare

The Medicare for All movement website claims
tentative support from 27 percent of the members
of the House of Representatives.
This shows a willingness to discuss options for
healthcare in the U.S. and disruption that starts
debates, which can lead to new policies and
collaboration.
“Medicare for All”: Universal healthcare

The Medicare Access and CHIP Reauthorization Act (MACRA) passed in
2015 with bipartisan support to reform payment.
The bill creates a new framework for
rewarding clinicians for providing
higher quality care by establishing
two tracks for payment: merit-based
incentive payment system (MIPS)
and advanced alternative payment
models (AAPMs).
MACRA

As a disruption, MACRA had support and has correct incentives, but the
adoption process has not been easy. Despite this major change for
physician payment, surveys clinicians aren’t ready for MACRA.
They struggle to comply, and many
are not sufficiently familiar with the
law and how it will impact them.
2017 is MACRA’s base year, so health
systems need to submit data to avoid
a negative four-percent payment
adjustment in 2019.
MACRA

“We have a better framework to go forward,” said David Barbe, MD,
president of the American Medical Association. “It’s increasingly looking at
the value that care brings. That can be in terms of economic savings.
“It can be in terms of improved quality.
“It can be in terms of better interaction
between physicians and patients.”
Barbe also acknowledged that getting
participation from doctors and
healthcare organizations will be difficult.
MACRA

Amazon’s healthcare technology team, called
1492, is working on developing new capabilities
that involve electronic medical records systems
and telemedicine.
Their work has the industry asking a couple key
questions:
• Will this Amazon team help make information
available to consumers?
• Will this be the final push that is needed to open
our medical records?
Amazon

Apple, Microsoft, and Google continue to
investigate entering the healthcare market.
As innovators (and potential disruptors), these
companies could impact healthcare in many ways.
Amazon

In August of 2017, insurance plan provider Anthem
announced it would no longer pay for MRIs and CT
scans performed at hospitals on an outpatient basis;
this policy will be implemented by March of 2018.
As this large payer forces consumers to seek services
at less expensive imaging centers, hospitals will feel the
impact on their bottom line.
Anthem’s motive is to control costs, lower premiums,
and help the consumers with high-deductible plans.
How physicians, hospitals, and consumers, adjust to
the this announcement remains to be seen.
Anthem

CMS proposed regulations for 2018 for outpatient
services that aim to make costs more site neutral.
Services at off-campus hospital outpatient
departments will be paid at 25 percent of regular
outpatient rates.
Are both announcements the beginning of a trend?
How will other payers respond?
CMS

There is one area that needs more disruption—
the claims process.
There are new payment models, but, in most
cases, claims are still paid under FFS.
Then, at the end of a specific time period,
health systems see the results of a
reconciliation.
Did the bundle payment incentivize lower costs
for hospital, physician, and post-acute care?
Needs more disruption: The claims process

The party holding the risk may not know the
answer for 18 months.
While the industry needs to build history to
create the models, both providers and payers
need to push for change and simplification.
Only half of payers and 40 percent of providers
say they’re ready to implement bundles for the
technical side.
How much waste is there?

Healthcare tends to solve the problem by
adding a human resource to rework, redo, and
reconcile.
To focus on providing quality healthcare, the
industry needs a serious cost–benefit analysis
of the entire process to get a claim paid.

Healthcare continues to move away from the
inpatient hospital business.
Data from the American Hospital Association
shows inpatient hospital admissions are down
six percent for 2010 to 2014.
Overall, fewer people are being admitted. The
admission rate per 1,000 is down nine percent,
and the outpatient trend shows a 6.5 percent
growth in visits during the same period.
Needs continued disruption—Moving away from inpatient hospital business

A September 2017 article in the Wall Street
Journal summarized the capital spend
planned outside the traditional hospital, as
both for-profit and not-for-profit systems
invest in emergency rooms, surgery center,
and urgent care clinics.

Tenet Health stated its strategy is to increase
patient access points for convenience and to
enhance integrated care—as part of its
strategy to succeed as volume shifts from
hospital to ambulatory.
Since 2012, the ambulatory footprint has
increased from 117 sites to greater than 480.
As patients shift from the hospital setting,
new strategies need to provide continuous
care to the patients.

The job title “data scientist” is increasingly common.
Data is becoming more complex, generating the
need for more predictive work, and new roles
and skillsets.
A recent survey on the role of artificial intelligence
(AI) in accounting aske financial experts about
their current and planned use of AI, as well
as AI’s impact.
This is significant: when accounting is part of a
new trend, it’s a sign of a tipping point in favor
of that trend.
Trend #3: Emerging Data Skillsets

Community resources that support data
science skills are emerging, including open
source tools for machine learning.
There are several current examples of
machine learning in healthcare:
• Opioid addiction risk prediction.
• Readmission prediction for patients with
heart failure.
• Sepsis prediction within 24 hours of admission.
• Propensity to pay prediction (allows organization
to dedicate resources to outstanding bills most
likely to be paid).
Trend #3: Emerging Data Skillsets

Areas of Focus for 2018
It’s a good time for healthcare leaders to consider how the above activities
compare to their plans and investments.
Moving into 2018, they’ll also want to consider
how they measure growth, ensure their
organization is growing, and how to they
add value to the organization.
In addition to measuring how their organiz-
ation’s plans match up with forecasted trends,
healthcare leaders can address the following
areas as they prepare for 2018, and consider
how machine learning can help:
Where Hospitals Are Investing in Innovation Today

Areas of Focus for 2018
• Does the thought process revolve around the patient throughout the
continuum of care? (Readmission rate is a useful metric here.)
• How can the organization work with outside partners?
• Can the health system pilot small innovations and then scale them to larger
populations?
• Have the organization created too many silos? (If it takes many people to
answer a simple question, then yes.)
• Does the organization have the right talent to keep up with change (e.g.,
machine learning and predictive analytics specialists)?
• Is the business model sensitive to the new trends? How does the model
position the organization in five years?
Where Hospitals Are Investing in Innovation Today

Healthcare Trends in 2017 Reveal Industrywide
March Toward Patient-Centered Care
Healthcare’s financial trends in 2017:
• Transitions in payment
• disruption from both established players and
newcomers
• emerging data skillsets
This shows a combination of tentative
transitions with the slow, steady move to VBP
with alternative payments, meaningful
disruption, significant policy changes,
Amazon’s arrival to healthcare, and changing
roles with data expertise and responsibilities.

Healthcare Trends in 2017 Reveal Industrywide
March Toward Patient-Centered Care
Agile organizations will use their 2017
experiences to prepare for the new year and
determine how well they’re positioned for
the continued growth, change, and
consistencies forecast for 2018, especially
when it comes to patient-centered care.

For more information:
“This book is a fantastic piece of work”
– Robert Lindeman MD, FAAP, Chief Physician Quality Officer

More about this topic
Link to original article for a more in-depth discussion.
Top Three Healthcare Financial Trends in 2017: Payment Transitions, Disruption, and New Skills
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The 7 Best Ways to Prepare for MACRA Today
8 in 10 Hospitals Stand Pat on Population Health Strategy, Despite Uncertainty Over the
Affordable Care Act’s Future - Health Catalyst

Vice President of Financial Engagement for Health Catalyst, Bobbi Brown, started her
healthcare career at Intermountain Healthcare supporting clinical integration efforts before
moving to Sutter Health and, later, Kaiser Permanente, where she served as Vice President
of Financial Planning and Performance. Ms. Brown holds an MBA from the Thunderbird
School of Global Management as well as a BA in Spanish and Education from Misericordia
University. She regularly writes and teaches on finance-related healthcare topics.
Other Clinical Quality Improvement Resources
Click to read additional information at www.healthcatalyst.com
Bobbi Brown

The Top Three Healthcare Financial Trends in 2017: Payment Transitions, Disruption, and New Skills

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