Welcome to our Blog page. Here, you can read our firm’s latest blog posts about timely tax, accounting and audit issues.

The Challenges in Shifting from Fee-for-Service to Value-Based Healthcare

Posted by Erick Cutler, CPA on Dec 21, 2020 9:00:00 AM

One of the most significant goals of the Patient Protection and Affordable Care Act (ACA) is the volume-to-value transition (VVT) from a fee-for-service model to a value-based healthcare system. The shift is intended to trigger a series of cost-reduction initiatives to improve the quality of patient care and patient experience. The ACA encouraged the formation of Accountable Care Organizations (ACOs), which enable changing payment incentives as providers transition to outcome-based reimbursement.

The ACA set a goal to have 50% of Medicaid and commercial provider contracts use value-based reimbursement models by 2025. At the beginning of 2020, most hospitals and healthcare providers were working on the transition, although at different places along the continuum. Since the coronavirus pandemic struck, healthcare providers have been struggling with a myriad of issues. With a change in political leadership imminent and several court decisions upholding the ACA, healthcare analysts believe value-based healthcare is here to stay.

The Impact of COVID-19

In the years leading up to the pandemic, many providers struggled to determine how to handle VVT using outcome-based models. As COVID-19 and its economic repercussions push employers and consumers to achieve greater value and cost savings for medical services, healthcare providers will be under increasing pressure to move faster toward value-based care.

Many providers who made the VVT earlier are weathering the pandemic better than their fee-based contemporaries. As providers under the fee-for-service model experienced disruption to their ability to see and treat patients during peaks in the pandemic, they collected fewer reimbursements and saw a drop in revenue. The pandemic may have the effect of persuading reluctant providers to move faster to adopt value-based care.

Download Our 20GPP007-Custom-Ebook1-RCM-3D (ID 150224) (1)E-book: Strategies to Improve Your Healthcare Revenue Cycle Efficiency

Overcoming Challenges

Research has shown that value-based care models are successful in the long run, but making the transition can be arduous. Some of the challenges still facing healthcare providers include:

  • Lack of commitment – Strong leadership commitment is a critical success factor as it sets the pace for VVT. Research conducted by the Healthcare Financial Management Association found successful transitions are strongly endorsed by the organization’s CFO and finance team as well as clinical management.
  • Lack of long-term organizational commitment– The value-based model is built on the premise that healthier patients will require less care and fewer procedures over the long run. Healthcare providers must believe this approach will provide economic benefits to their practices. Because there will undoubtedly be some rough periods during the transition, the organization cannot afford to lose focus or divert its attention to short-term issues.
  • Inability to make an upfront investment –The transition can temporarily place a provider in a difficult financial situation as it navigates from fee-based reimbursement to a value-based model. Before the benefits of healthier patients are fully realized, fee-based services are reduced, so the provider must have adequate cash reserves available as their practice transitions to a new model. Healthcare accounting professionals are skilled at analyzing cash flow and helping providers develop strategies to meet expenses through the transition.
  • Limitations of electronic medical records (EMRs) – Although virtually all hospitals and healthcare providers have adopted EMRs, many providers still experience issues around integration and interoperability that limit their full effectiveness and cost-saving benefits. As they work to overcome these challenges, providers must remain committed to achieve the projected cost savings and efficiencies from EMRs.
  • Inadequate investment in technology and analytics – An essential component of the value-based care model is the evaluation of a patient’s care throughout the continuum of care, which may comprise several downstream partners such as rehabilitation facilities and specialists. To help with this evaluation, healthcare providers must have the ability to carefully analyze patient data. This usually requires an upgrade to their technology systems to add data analysis tools. Although these tools can quickly pay for themselves, the upfront investment requires a provider's financial commitment.

The uncertainty about the coronavirus could slow even the most dedicated efforts to shift patient care models to value-based reimbursement. While the delivery of a vaccine appears imminent, some patients may exhibit long-term symptoms that require additional care for months or years to come. Despite the pandemic, most healthcare analysts believe the tide has turned, and the transition will not slow down.

Download our e-book: Strategies to Improve Your Healthcare Revenue Cycle Efficiency.

Do you have questions about the challenges your healthcare practice faces in shifting to value-based care? The specialized medical practice accountants and advisors at GPP can help. For more information, contact Erick Cuter, CPA, at 214-635-2541.

Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.

Topics: Healthcare, Revenue Cycle Management, Fee-For-Service, ACA