RESEARCH AND REPORT BY $ $ $ $ $$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $$ $ $ $ $ $ $ $ $$ $ $ $ $ $ $$ $ $ $ $ $$

$ $$ HEALTHCARE$ $ $ REVENUE $ $ CYCLE MANAGEMENT TRENDS IN ALTERNATIVE PAYMENT MODEL ADOPTION 2016

1 Contents

Executive Summary 3

Vendors Covered in this Report 4

Demographics 5

Most Critical Aspects of RCM 6

Alternative Payment Model Adoption Rates 9

Why not adopting? 11

Revenue Cycle Management Alphabet Soup 12

A Key to Understanding APMs Accountable Care Organization (ACO) Bundled Payments Capitation Comprehensive Primary Care (CPC) and CPC+ MACRA - MIPS and APMs Pay for Performance (P4P) Value-Based Purchasing (VBP)

Alternative Payment Models 14

Alternative Payment Vendors Used 15

Recommendation Ratings 17

Deficiencies 18

Alternative Payment Vendors Considered 19

Impact of Value-Based Adoption 21

Outsourcing 25

Conclusion 27

2 Executive Summary

Revenue cycle management (RCM) runs the show on the financial end of health care. RCM solutions come in all shapes and sizes from tracking patient data to appointment scheduling to insurance verification to coding...and beyond. A good RCM solution reduces time between service and payment-- and getting paid sooner is always a good thing-- while taking the load off of employees who have more important duties to perform. In this updated report from a similar study last year, providers shared their current opinions on what they believe the impact of alternative payment models for value-based care will be on their organizations, which areas of RCM they will most likely need to outsource, and what vendors they are considering (whether for the first time or in replacement of their current solution). Disclaimer: As alternative payment models for value-based care are being adopted at staggeringly slow rates (if at all), there are few providers who felt they could give informed recommendations or opinions on this subject. This Reaction Report is a quick look at what’s going on in this realm. The data reflects that-- take it how you will.

Research & Analysis: Jeremy Bikman Chris Jensen

Junior Analyst: Jordyn Crowley

3 VENDORS COVERED IN THIS REPORT

Disclaimer: We understand there is an array of payers and vendors who help providers with their varying revenue cycle management needs. In an attempt to simplify the lan- guage as we make comparisons, we will be referring to all as “vendors” throughout the report. 4 DEMOGRAPHICS

Our participants represent a broad spectrum of opinions and concerns in their varying roles. Each provides a different perspective that vendors need to consider when servicing their solutions. Different sizes of hospitals also have very different opinions, concerns, and needs from their RCM vendors.

Participants by Title

*Other = Assistant Administrator; Chief Nursing Officer; Comptroller; Deputy Director of Recovery; Manager of Applications & Integration; Physician; Regional Director of Risk, Compliance, Privacy Officer; RN

Participants by Bed Size

5 MOST CRITICAL ASPECTS OF RCM

With varying importance placed on each item of this list, one thing is clear: effective RCM operations are absolutely critical to the overall health of every single provider organization in the country.

Most Critical Aspects of RCM

6 CRITICAL ASPECTS CONT.

Critical Aspects by Bed Count

When segmented by organization size and by role, the individual trends generally follow the overall figures in the previous graphs, with most important aspects of RCM displayed on the left and less important on the right. However, we see a few segments breaking rank. Hospitals between 50-100 beds are more evenly concerned about these items with some exceptions. Where it becomes a little more interesting is in the 501-1,000 bed size organizations; this group appears to have a reverse trend in comparison to the other care facility sizes, with “clinical and financial outcomes” peaking in this segment. This group appears to be more concerned with the weight of an eventual, but inescapable, shift to true value-based care. In other areas, “eligibility and benefits” is the hot button for ambulatory facilities as they operate like small businesses rather than hospitals. Where many hospitals operate with government subsidies, ambulatory facilities need consistent patient payment for care (i.e. insurance) in order to keep the doors open.

7 CRITICAL ASPECTS CONT.

Critical Aspects by Title

8 ALTERNATIVE PAYMENT MODEL ADOPTION RATES

One year ago, in 2015, our data to see that this perspective has not changed showed that 36% of hospitals reported that much as value-based care continues to pick up they were adopting alternative payment steam. Luckily, providers elaborate on these models; 61% said they were not yet adopting decisions as pertaining to their opinions of such a payment model, but they would be in value-based payment models in the sections the future; only 3% said they would not adopt below. alternative payment models. It’s interesting

Alternative Payment Model Adoption (Year-by-Year)

Will your organization adopt alternative payment models for value-based care?

9 PAYMENT MODEL ADOPTION CONT.

Adoption Rates by Title

This trend seems to fit what would are more likely to be confident in making the be expected: bigger hospitals are much change. What we find interesting is the percent more likely to have the resources to pull off of outpatient participants suggesting they a new payment model adoption than smaller will wade out into the murky waters of value- hospitals. This trend has stayed fairly constant based care, despite the significantly different when considering last year’s study as well; business models many of the facilities operate hospitals with less than 500 beds are likely to under compared to hospitals. be the slowest to adopt, and the large hospitals

Adoption Plans by Bed Count

10 WHY NOT ADOPTING?

Providers who indicated they would not be adopting a value-based payment model offered up a variety of explanations. Some were of the opinion that doctors would be paid less than ever before due to noncompliant patients; outcomes determined primarily by patient compliance could lead to physicians cherry-picking patients whose outcomes will show higher levels of value. One provider even called the value-based system “diabolical.”’

“[Alternative payment model] [o]utcomes are determined primarily by patient compliance and it is diabolical to blame doctors for this. Doctors should be paid on the basis of how much work they do (that is how every other professional is paid!), and not on the basis of patient compliance. Under this new model, physicians will start to cherry pick patients, and the sicker, less compliant patients will have no care.”

One opinion worth mentioning spoke to the metrics used by different payers; with no standardized approach, quality as measured by national organizations might not accurately reflect local volumes and supply and demand metrics.

“Metrics used by payers are not reflective of the true quality of services delivered. Payers have different metrics-- no standardized approach as a group of payers… Payers change metrics in short term.”

11 ALTERNATIVE PAYMENT MODEL ALPHABET SOUP

A Key to Understanding APMs

Knowing just how many options providers have when it comes to alternative payment models (APMs), and what types of payments each model covers, is critical in understanding the revenue cycle management decision-making process. Which payments are guaranteed and which ones rely on performance? Which payments depend solely on quality and which factor in quantity? The main APMs, according to the data at hand, are briefly explained in the section below.

Accountable Care Organization (ACO) PARTIAL Capitation payments are used to Groups of health care providers, ranging from pay providers a fixed sum based on specific hospitals to individual doctors, come together services that a patient receives for a specified in Accountable Care Organizations (ACOs) to amount of time; unspecified services will be coordinate care and provide the best possible paid on a fee-for-service basis. quality of service. Medicare offers differing ACO programs to incentivize providers, but Comprehensive Primary Care (CPC) and participation is voluntary. CPC+

Bundled Payments The Comprehensive Primary Care (CPC) initiative is a four-year, multi-payer, According to the Bundled Payments for Care single-model initiative (ending December Improvement initiative, under the Affordable 2016) taking place in seven U.S. regions Care Act, payments for multiple services to encourage providers to support five provided in one episode of care are linked “comprehensive” care functions. CPC together. Bundled payments serve as a happy practices receive a monthly care management medium between fee-for-service billing and fee. capitation. This initiative encourages more accountability when dealing with preventable Comprehensive Primary Care Plus (CPC+) conditions and coordination across health is a CPC redesign, beginning January 2017 care providers. and planned to run for five years. CPC+ Capitation will support up to 20 regions and will offer two payment tracks with requirements FULL Capitation payments are used to that should offer greater flexibility to care pay providers a fixed sum per patient for a beneficiaries. Providers who participate in specified amount of time. Capitation rates CPC+ will be paid up incentives up front, but are typically determined on a per patient, will have to return their payments should per month basis (PMPM to use management performance not be up to par. jargon), and vary by local costs and the average utilization of services.

12 ALPHABET SOUP CONT.

MACRA - MIPS and APMs Pay for Performance (P4P)

The Medicare Access and CHIP Pay for Performance (P4P) programs evaluate Reauthorization Act of 2015 (MACRA) a hospital or individual provider’s performance payment program can be broken down two based on measures defined in a scorecard. ways: P4P incentives include bonuses, investments 1. Merit-Based Incentive Payment System in new health IT, or even non-financial (MIPS) - MIPS measures Eligible incentives such as public recognition. Professionals on quality, resource use, clinical practice improvement, Value-Based Purchasing (VBP) and meaningful use of certified EHR technology. In an effort to increase the quality of health 2. Alternative Payment Models (APMs) - care, value-based purchasing (VBP) accounts APMs pay participating providers who care for the largest share of Medicare spending for Medicare patients; examples of APMs as part of the Affordable Care Act (according include Accountable Care Organizations to CMS). VBP uses hospital quality data to (ACOs) and bundled payment models. determine payment based on quality of service instead of quantity.

A helpful resource, which helped compile this brief guide, is the Centers for Medicare and Medicaid Services (CMS) website (https://www.cms.gov/)-- explore for more information.

13 ALTERNATIVE PAYMENT MODELS

Looks like providers are most interested in claims that bundled payments allow for greater adopting a bundled payments model. Centers provider adaptability and flexibility in deciding for Medicare and Medicaid Services (CMS) how payments are allocated.

What specific payment models have you, or will you, adopt?

*

*Other = Payment process arrangements, next generation Medicare model

Adopted Models by Bed Count

101-500 beds 501+ beds

14 ALTERNATIVE PAYMENT VENDORS USED

Vendors (Year-by-Year) This year we see a host of additional vendors being cited as helping providers with alternative payment models. In addition, there was a flattening out of responses with no single vendor dominating the landscape as was displayed last year with The Advisory Board Company and to a lesser degree OptumInsight. One thing’s for sure: as APMs continue to take shape, a handful of these vendors stand to gain a significant new source of business. Data Available in Premium Report

15 ALTERNATIVE PAYMENT VENDORS USED CONT.

Alternative Payment Model Vendors Used in 2016

Data Available in Premium Report

Disclaimer: Alternative payment models for value-based care are being adopted at staggeringly slow rates (if at all). This report is a quick look at what’s going on right now in this realm. The data reflects that-- take it how you will.

16 RECOMMENDATION RATINGS

It’s interesting to note that the vendors these recommendation ratings are fairly here are a mix of IT solution vendors decent when considering the number of and consulting/advisory firms. Are those deficiencies providers would like addressed differences enough to account for the slight (see the section for RCM Deficiencies on the variance in recommendation scores? Overall, next page).

Recommendation Ratings

Data Available in Premium Report

17 DEFICIENCIES

Not quite the revelation we were looking needs to help get the providers paid, right? It for-- it’s pretty obvious that an effective RCM doesn’t take a genius to figure that out, yet this solution should address all of these issues. is an issue providers feel desperately needs Take one of the main issues, for example: RCM addressing. Money talks...and loudly at that.

RCM Deficiencies

*

*Other: Standardized deductibles, better understanding by physicians and staff. 18 ALTERNATIVE PAYMENT VENDORS CONSIDERED

While most providers have not yet adopted an to “payviders” like Aetna (ActiveHealth) to alternative payment model, it’s only a matter of hybrid solutions providers along the lines of time. Knowing this begs the questionꟷ which the Advisory Board Company. Traditional RCM vendors would they most likely adopt when the was difficult enough to handle-- moving to time comes? models that are even more so moving targets We see a veritable cornucopia of (bundled payments, etc.), it’s no surprise that different options, from large RCM-focused the vendors being considered by the provider firms such as Change Healthcare (Emdeon) community are such a diverse lot. to enterprise entities in the mold of Cerner

Alternative Payment Model Vendors Considered

Data Available in Premium Report

*Other: State of Md, Internal Corporate

19 VENDORS CONSIDERED CONT.

Alternative Payment Model Vendors Considered (Year-by-Year) Once again, as we trend which APM vendors are being considered for new or replacement contracts between 2015 and 2016, we see additional vendors showing up to fill this growing need and the flattening out of trends this year in terms of who has the greatest mindshare in this space.

Data Available in Premium Report

20 IMPACT OF VALUE-BASED ADOPTION

A lot of governmental changes have taken adoption would have on their organizations place in the last year regarding value-based is practically flip-flopped from this year to payment models, and it would seem the word last. About the same amount of people are has spread. Providers’ specific concerns about pessimistic, however. what impact value-based payment model

Impact of Value-Based Reimbursement (Year-by-Year)

This graph includes only those responses that overlap between 2015 and 2016.

21 IMPACT OF VALUE-BASED ADOPTION CONT.

Making the change to value-based payments and will mostly likely have to start or expand is in a word...intimidating. Providers believe care management programs to ensure quality that this switch will drive the need for tighter standards are being met. And don’t get us clinical and financial integration, making started on the magnitude of difficulty required it necessary to add resources dedicated to in coordinating provider staff to drive all of this improving clinical-financial performance. change...whew. Providers will feel more pressure than ever

Impact of Value-Based Reimbursement

Unsure

22 IMPACT OF VALUE-BASED ADOPTION CONT.

Impact by Bed Count

23 IMPACT OF VALUE-BASED ADOPTION CONT.

Impact of Adopting by Title

As is expected, those in different roles feel the impact of value- based adoption differently. All feel there are reasons to be hesitant about adopting, but with varying degrees of concern.

24 OUTSOURCING

Of the providers who determined that revenue cycle management would need to be the impact of moving to a value-based outsourced. Unsurprisingly, the only hospitals reimbursement model would be a need who felt they may have to outsource were to outsource more of their revenue cycle small hospitals, falling into the 0-50 bed count management, we asked which areas of category.

Outsourcing by Small Hospital Bed Count

25 OUTSOURCING CONT.

A blast from the past: our study from 2015 on the second graph. However, the same shows that providers were considering prevalent areas from 2015 are still unable outsourcing several areas of revenue cycle to be managed. Could this be the place for management. This year, providers see a wider vendors to look when deciding what solutions list of needs for outsourcing as displayed to innovate or develop?

RCM Outsourcing (Year-by-Year)

While the above graph compares outsourcing the list of potential RCM segments that are needs that overlap in 2015 and 2016, the seriously being considered for outsourcing has graph below shows all outsourcing needs grown. as chosen by this year’s providers. We found

RCM Outsourcing 2016

26 CONCLUSION

Effective RCM operations are absolutely critical to the overall health of every single provider organization in the country. When exploring alternative payment models, findings are less clear. It’s not yet possible to pick out the nitty-gritty details of an ideal value-based payment system when so few providers are willing to try it out. As long as some providers think it’s actually “diabolical,” and as long as the government continues to allow providers the choice to adopt or not, it seems likely that small hospitals will stick with the status quo. It will be very interesting to watch how quickly payers move in to assist provider organizations make the transition— this adds a very different dynamic to the RCM market than ever seen before. For now, we wait.

27