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Understanding Costs is Key to Value-Based Healthcare Reimbursement

Savings CalculatorWhile it’s virtually impossible to predict the timeline for the transition of healthcare reimbursement from fee-for-service to value-based, there is absolute certainty that the impending shift will place significant downward pressure on a provider’s financial performance.

Attempts to grow lingering FFS volumes and profits cannot keep pace with the reimbursement shift to value-based reimbursements. CFOs frequently attribute this fear as a predominant worry that keeps them up at night. How can we best prepare our organizations for this transition?

Costs are the Key

To thrive in the new world of value-based reimbursements, a provider must consistently and diligently pursue options to reduce costs of patient care, while keeping quality as a paramount focus. Easy, right?

The first criteria in accomplishing this requirement is understanding your organization’s cost of providing care – by patient type, service line, department, and any other applicable combination of characteristics. Decision support/cost accounting should be in every financial officer’s vocabulary. Skilled resources should be included as critical members of their teams. Next, everyone in the organization must understand their costs of care – not in silos, and not by single patient encounters.

In addition to an organization-wide education effort surrounding costs, the following areas should also be in focus during your transition.

  • Maximize Revenue from Existing Value-Based Programs
    If you have existing value-based reimbursement programs, make sure you have experienced resources maximizing value from each contract. Remember – most of us have at least shared savings under Medicare that can serve as an incubator learning lab to prepare for larger and more complex commercial payer contracts that will likely bring higher financial risk.Successfully develop plans to navigate existing contracts. You will be well underway toward improving quality and lowering care delivery costs.
  • Standardizing and Determining What’s Necessary
    Standardize work flow – reducing variation will help eliminate added costs that occur in care variation. An added benefit of work standardization is a more exchangeable workforce that can flow to patient care when, and where, needed.Drill down on order sets – look for redundancy and unnecessary orders. This is a great opportunity to engage across your clinical staff and physicians and build the collaborative environment that’s going to be required in a value-based care delivery model. It’s all about quality outcomes at the lowest cost achievable – all while delivering on patient experience.Be hyper vigilant in the search for driving out costs through every means possible – and include everyone in the hunt. Sometimes the seemingly smallest changes add up to substantial results, and these suggestions come from all roles within the organization. Remember, the stronger your margins going into reimbursement transition, the more downward pressure your organization will be able to tolerate during the shift.

Payoff in the Long Run

Those who undertake and succeed in transitioning their organization into a value-based delivery model can anticipate returns – they can market themselves as the provider delivering higher quality, cost-effective care to payers. And payers will respond as they have clients (employers) who are demanding highest-performing provider networks.

This will be the push for increasing overall patient volumes to help counteract the loss in fee-for-service and unnecessary procedural volumes performed in the past.

Healthcare will always focus foremost on the patient. That will never change. But the knowledge base that everyone in provider organizations must develop is expanding to include the costs of care – and this is new to some, especially clinicians.

New perhaps, but not an option.

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