By Scott Leggett and Sohrab Gollogly, MD
For all its uncertainty in other areas, the past year in healthcare may well go down as a watershed in the transition to more cost-effective healthcare.
Players big and small moved decisively toward ambulatory surgery centers in 2017, continuing the shift away from higher-cost hospital settings. More of the same is likely ahead in 2018 as the industry prepares for what many see as an inexorable realignment of healthcare relationships and financial incentives.
"Right care, right place, right time, for the right reason, at the right cost," Mizuho Securities analyst Sheryl Skolnick told the Wall Street Journal. "High-cost inpatient facilities are the loser, oftentimes, in that scenario."
The transition could prove pivotal. Insurers and other healthcare payers are increasingly turning their back on hospitals' fee-for-service reimbursement model, and instead are embracing risk-based financial models such as bundled payments. This will allow surgery centers to compete more evenly, on the basis of cost, medical outcomes and patient satisfaction.
EXPANDED USE OF BUNDLED PAYMENTS EXPECTED WITH SHIFT TO RISK-BASED REVENUE – American Medical Group Association (AMGA) members indicated in a survey released in December that they expect nearly 60% of their Medicare revenues to come from risk-based products by 2019. This shift is expected to expand the use of bundled payments, in which independent physicians working in outpatient surgery centers offer competitively priced treatment packages covering everything from pre-operative work to rehabilitation.
HOSPITALS INVESTING IN OUTPATIENT CARE – Hospitals are themselves investing in outpatient settings. Faced with a continuing decline in hospitalization rates, they too are benefiting from technology that makes ambulatory surgery centers more and more capable of performing advanced medical procedures.
OUTPATIENT CATEGORIES ADDED TO BPCI MODEL – The Centers for Medicare Services, under its Bundled Payments for Care Improvements (BPCI) Initiative, announced BPCI Advanced, which added three outpatient categories to the BPCI model.
ANTHEM REQUIRES MRI, CT IN OUTPATIENT FACILITIES – In an effort to drive down spending, healthcare insurer Anthem announced in late summer of last year that it would no longer pay for outpatient MRI and CT scans done at hospitals without prior approval; instead, Anthem is requiring providers to send patients to dedicated outpatient imaging facilities. Anthem provides healthcare insurance coverage in 14 states.
MERGERS & ACQUISITIONS
• Managed health company UnitedHealth Group, through its Optum unit, agreed in December to buy DaVita Medical Group, owner of nearly 300 clinics, some three dozen urgent care centers and half a dozen surgery centers. This acquisition follows Optum’s purchase last year of Surgical Care Affiliates, owner or operator of 190 ambulatory surgery centers – many of which are operated as joint ventures with health systems and physicians. These purchases situate the industry giant firmly on the side of outpatient care in its long tug of war with hospitals.
• Humana joined in a December deal for Kindred Healthcare, a home healthcare and long-term care operator. The move extends the fourth-largest U.S. health insurer's reach into settings that cost less than hospitals.
• Hospital operator Tenet Healthcare, under growing pressure to cut costs, said in December it was looking to sell Confier, its technology and financial services arm. Tenet's shares fell in August after declining patient volumes forced the company to pare back its revenue outlook.
• As a backdrop to the healthcare marketplace shifting toward outpatient care and bundled payments, in a deal that could reshape the healthcare industry, chain-drugstore operator CVS announced plans to buy Aetna in a deal valued at about $69 billion. In addition, Catholic Health Initiatives and Dignity Health agreed to merge to create a $27 billion nonprofit healthcare system comprising 139 hospitals, the largest by revenue in the U.S.
"[I]f Medicare Advantage, bundled payments, Medicaid managed care organizations and Medicare accountable care organizations (ACOs) are factored together, alternatives to Medicare fee-for-service (FFS) are predicted to account for 59 percent of AMGA members' revenues by 2019, compared to 53 percent in 2017," Healthcare Informatics Managing Editor Rajiv Leventhal wrote in the magazine's December issue. He predicted greater use of risk-bearing contracts as a key trend gaining steam in 2018.
Count on seeing more focus on surgery centers in the months ahead as health insurers continue to issue new plan designs and rules leading subscribers away from hospitals. The share of Medicare and Medicaid patients enrolled in managed healthcare plans is only increasing, a sign that ever more influence will go to insurance companies, which tend to prefer outpatient care over hospitals because of the cost advantage.
As for federal policy, don't be surprised to see policymakers join the push for more risk-based contracting, bundled payments and all. There figures to be greater political pressure on cost controls as the U.S. population ages — and nothing accomplishes this more efficiently than competition based on costs and outcomes.
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Scott Leggett is co-principal, Global 1 and managing director, Convergent SameDay Orthopedic Strategies. With more than two decades working in orthopedics, Leggett’s experience includes founding a network of independent, physician-owned outpatient surgery centers. In addition, he served as the president and board member of the California Ambulatory Surgery Association (CASA). Contact Leggett at info@GlobalOneVentures.com or 760-494-9211.
Sohrab Gollogly, MD is the medical director for Global 1 and on the medical advisory board for Convergent SameDay Orthopedic Strategies. He is a board-certified orthopedic surgeon and fellowship-trained spine surgeon who also performs scientific research and participates in several volunteer surgical organizations. Dr. Gollogly earned his medical degree from the University of Washington School of Medicine and completed an internship and residency in orthopedic surgery at the University of Utah. In 2004, Dr. Gollogly completed a Fellowship in pediatric spine surgery at San Diego Children’s Hospital after a Fellowship in spine surgery at Centre Des Massues in Lyon, France. Dr. Gollogly has appointments at the Community Hospital of Monterey Peninsula and the Monterey Peninsula Surgery Centers.
Global One Ventures (Global 1) is a California-based, licensed third-party administrator (TPA) dedicated to developing and administrating an innovative medical payment and delivery system through its network of providers. With more than 10 years of experience, the focus of G1’s bundled payment structure is to deliver innovative, cost-effective surgical services that result in increased transparency, lowered costs and improved medical outcomes in an outpatient setting. For more information, visit: g1surgery.com.
Convergent SameDay Orthopedic Strategies is a full-service consulting company delivering contracting expertise, clinical education, process infrastructure and coaching in support of successful outpatient joint replacement programs. For more information, visit: convergentortho.com.