When it comes to transitioning to value-based reimbursement, health systems consistently ask two questions: Why should I invest in reducing utilization when 90+ percent of my business is still fee-for-service (FFS)? Where do I start? This value-based reimbursement road map can help systems transition from barely surviving to successfully arriving (while respecting both shared-risk and FFS worlds): Stop #1: Surviving—If you don’t get paid for the risk you take on, then you can’t survive long term. Stop #2: Sustaining—Numerous clinical interventions occur in hospitals that systems can focus on to help improve the bottom line. Stop #3: Succeeding—Build out competencies on a smaller population with aligned incentives so you can negotiate deeper alignment with key payers. Stop #4: Arriving—The ultimate destination, where the lines between traditional healthcare delivery and public health are blurred. Although healthcare is far from arriving at the value-based reimbursement destination, it can use this road map’s pragmatic strategies for heading down the right road.

1. From Surviving to Arriving:
A Road Map for Transitioning to
Value-Based Reimbursement
- Dan Unger

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Transitioning to Value-Based Reimbursement
I was given the luxury of reviewing the population health/ACO
market and where Health Catalyst® might help its clients navigate
this nascent space.
After meeting with dozens of current and prospective clients to
better understand their needs, two consistent questions stuck out:
1. Why should I invest in reducing utilization when 90+ percent of
my business is still fee-for-service (FFS)?
2. Where do I even start?
DAN UNGER
VP Product Development Financial Decision Support

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Transitioning to Value-Based Reimbursement
These client and prospect questions
revealed an unsettling disconnect:
They didn’t align with the content being blasted
out via mainstream healthcare outlets and
advertised at the major HIT conferences.
There seemed to be a lot of buzz around
an imaginary silver bullet to reduce the
cost of the riskiest, highest cost patients
and that this was population health.
How could our clients’ and prospects’ real
pain points be so different from the
solutions being sold and delivered?

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Transitioning to Value-Based Reimbursement
A data and hype reality surrounded the
shifting economics of healthcare, but
when it comes down to it, we are still
living in an FFS world.
A 2017 study by Philips highlights that
reality—only seven percent of healthcare
dollars are at risk; the other 93 percent
are still FFS based.
Having a few percentage points at risk for
shared savings or quality measures from
a small number of payer contracts does
not constitute a true economic incentive.

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Transitioning to Value-Based Reimbursement
Healthcare will not fundamentally change
until economic incentives are aligned with
the objectives of improving health outcomes
at a lower cost, and that the incentives (or
penalties) must be significant enough to
drive new behaviors.
But the fact is, we just aren’t there yet.

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Destination Value-Based Reimbursement:
On the one hand, this reality, combined with
continued uncertainty about the direction of
healthcare policy and how it will or will not impact
the shift to a value-based world, makes it difficult
for health systems to take action.
Pretending like incentives are aligned is a
dangerous endeavor that puts the financial
stability of healthcare providers at risk.
Many of them are surviving on razor-thin
margins and don’t have the luxury of investing
in what could be looked at as a risky experiment.
A ROAD MAP FOR SUCCEEDING IN BOTH WORLDS (SHARED RISK AND FFS)

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Destination Value-Based Reimbursement:
On the other hand, you can’t sit on the sidelines.
You can’t flip on a switch and start operating in a
value-based world.
The fundamentals of how care is delivered and
how you are paid are completely different.
Getting a massive, complex organization to turn
on a dime is impossible—it will take decades.
So, what can health systems and providers do to
make sure they are setting themselves up for
success in a shared-risk world while facing the
realities of living in an FFS world?
A ROAD MAP FOR SUCCEEDING IN BOTH WORLDS (SHARED RISK AND FFS)

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Destination Value-Based Reimbursement:
Here’s a roadmap to get you started:
Value-Based Reimbursement Roadmap
A ROAD MAP FOR SUCCEEDING IN BOTH WORLDS (SHARED RISK AND FFS)

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Destination Value-Based Reimbursement:
There are a couple important things to note about this roadmap:
Given these caveats, what follows is a brief explanation of each stop
within the roadmap:
This roadmap was created to address the top two client/prospect
questions mentioned at the beginning of this piece: “How do I not
damage my FFS business?” and “Where do I even start?”
This roadmap provides a strategy for pragmatic, tangible
interventions providers can work toward—there is no single path for
everyone, and each organization should assess its priorities based
on its individual financial situation, readiness, and capabilities.
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A ROAD MAP FOR SUCCEEDING IN BOTH WORLDS (SHARED RISK AND FFS)

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Destination Value-Based Reimbursement:
If you don’t get paid for the risk you take on, then you can’t survive in
the long run. There are a few key revenue competencies to focus on
that won’t damage (and can actually benefit) your FFS business:
ROADMAP STOP #1 ̶ SURVIVING
Optimize Risk
Adjustment
Risk adjustment is critical to
surviving an at-risk contract.
The inherent risk of the
population is real, and so is
their utilization. If you aren’t
getting compensated for
that risk, then you are in
trouble. Align incentives so
they have a reason to
spend time learning and
changing the way they do
diagnostic coding.
Maximize Quality-
Based Incentives
Make sure you understand
how much you have at risk
for the various quality
measures across all your
contracts. Leverage this
information to strategically
focus on the most impactful
measures and create
aligned incentives across
your organization. Keep it
simple—you can’t move the
needle on every measure.
Manage and minimize
uncompensated care
Providers must collect
patient debts. Health
systems should invest in
technologies, such as
mobile payments and
machine learning to improve
the process. We owe it to
patients to make it easier to
understand and pay their
bills, while ensuring
providers get compensated
for the services rendered.

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Destination Value-Based Reimbursement:
Numerous clinical interventions occur
within the four walls of a hospital that
health systems can focus on to help the
bottom line in both economic realities.
These interventions don’t require
investing in new ways of delivering care or
trying to change patient behavior outside
of your purview:
• All-cause patient harm
• Avoidable readmissions and length of stay (LOS)
• Clinical process improvement
ROADMAP STOP #2 ̶ SUSTAINING

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Destination Value-Based Reimbursement:
All-cause patient harm
Patient falls, hospital-acquired infections,
medication errors, etc., are hidden costs to most
health systems.
A 2016 article published in BMJ estimates that
medical errors are the third leading cause of
death in the US—a severely under-reported
crisis, making it hard to act on.
These events often lead to huge lawsuits costing
tens of millions across large health systems.
Systems must deal with this challenge across the
total care spectrum.
ROADMAP STOP #2 ̶ SUSTAINING

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Destination Value-Based Reimbursement:
Avoidable readmissions and length of stay (LOS)
One way or another, most health systems
are already getting penalized for readmissions
and keeping people in the hospital longer
than necessary.
Building competencies to reduce these issues is
good for patients and bottom lines, and will be
even more important in a fully at-risk world.
ROADMAP STOP #2 ̶ SUSTAINING

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Destination Value-Based Reimbursement:
Clinical process improvement
Optimizing clinical care delivery within your
four walls can help reduce waste, improve
outcomes, and increase margins regardless
of the reimbursement model.
Identifying variation and following best
practices in high-impact areas like sepsis,
total joint replacement, etc., is a good place
to start to build these competencies, and
may directly or indirectly lead to financial
improvements in these areas.
ROADMAP STOP #2 ̶ SUSTAINING

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Destination Value-Based Reimbursement:
There is still a huge benefit to investing in
changing the way you deliver care today, but I
recommend doing it in a safe setting where
your incentives are aligned (only for
populations you are at-risk for).
Not everyone can afford to invest in care
managers, triage call centers, telehealth,
etc., for an entire population when it may in
fact damage their largest revenue stream.
Be thoughtful and strategic about how you
approach this.
ROADMAP STOP #3 ̶ SUCCEEDING

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Destination Value-Based Reimbursement:
Build out and prove these competencies on a
smaller population with aligned incentives so
you can be armed to negotiate deeper
alignment with key payers:
• Care management for high-risk patients.
• Low-cost, targeted interventions for inlier populations
• End of life care strategies
ROADMAP STOP #3 ̶ SUCCEEDING

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Destination Value-Based Reimbursement:
Care management for high-risk patients:
ROADMAP STOP #3 ̶ SUCCEEDING
We can’t overlook the importance of
effectively treating the highest risk, highest
utilizers. The opportunity is just too large.
Death and leaving your network are the
biggest contributors to lower cost in this area.
However, new technologies, improved risk
stratification, and patient engagement are
showing promising early results.
This critical competency must be thoughtfully
implemented.

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Destination Value-Based Reimbursement:
Low-cost, targeted interventions for inlier populations:
ROADMAP STOP #3 ̶ SUCCEEDING
Everybody talks about the 5 percent that makes
up 50 percent of the costs. But what about the
other 95 percent; the other 50 percent of cost?
We need to expand our thinking to include
unnecessary ED visits, office visits, etc., that
lead to unnecessary utilization.
Health systems can combine clinical data and
healthcare analytics with targeted social
media and marketing campaigns to cut out
this waste at a price point that makes sense.

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Destination Value-Based Reimbursement:
End-of-life care strategies:
ROADMAP STOP #3 ̶ SUCCEEDING
It’s time we openly address this topic as a
nation—and it starts with individual providers
and the patients they serve.
Care in the last 12 months of life adds up to
25 percent of all Medicare spending (that’s
$150+ billion each year).
Even though most Americans would prefer to
die at home, only 24 percent of those over
65 do; the rest spend their last days in
hospitals or nursing homes.

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Destination Value-Based Reimbursement:
End-of-life care strategies:
ROADMAP STOP #3 ̶ SUCCEEDING
Get creative in engaging physicians, patients,
and their loved ones to have the tough
conversations early.
Make sure your patients understand
the clinical, financial, and lifestyle
ramifications of the various options,
so they can choose the best treatment
for themselves—this should result in
more humane end-of-life experiences
and lower costs.

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Destination Value-Based Reimbursement:
ROADMAP STOP #A ̶ ARRIVING
This is the ultimate destination, where the
lines between traditional healthcare delivery
and public health are blurred.
I can’t imagine that we will get here as a
country, even in my lifetime, but that doesn’t
mean we shouldn’t strive to.
Hopefully (and some systems are already
working in this space), we can get the
incentive pendulum swaying enough to
make the following population-based
initiatives feasible and sustainable:

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Destination Value-Based Reimbursement:
Expand competencies from “sustaining” to the entire population:
ROADMAP STOP #A ̶ ARRIVING
The first logical step is expanding your proven
interventions to the entire population: care
management, low-cost inlier interventions,
and an end-of-life care strategy.

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Destination Value-Based Reimbursement:
Policy, socio-economic, and community-based interventions:
ROADMAP STOP #A ̶ ARRIVING
It is fairly well known that only a small
percentage of health outcomes are related
to actual care delivery, which means the rest
is related to things outside the (current)
control of health systems (e.g., socio-
economic, behavioral, and genetic).

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Destination Value-Based Reimbursement:
ROADMAP STOP #A ̶ ARRIVING
Eventually, I hope it makes sense for health
systems to intervene at scale by impacting health
outcomes by lobbying for policy changes, building
community food programs, etc.
These interventions may take decades to see
measurable improvements across a population, and
unless state, community, and provider incentives
are aligned and stable, it won’t make sense for
anyone to invest in these long-term ventures.
Fortunately, there are some very progressive
organizations doing just this that give the
industry hope.

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Transitioning to Value-Based Reimbursement
Requires a Pragmatic, Strategic Approach
It’s time the healthcare industry admits
what it really is: a fee-for-service
business dabbling in other areas.
Hopefully, facing that reality with this
value-based care roadmap’s four key
stops and pragmatic, tangible strategies
will help healthcare organizations start
down the right road of successfully
transitioning to a value-based
reimbursement world.

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

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More about this topic
Link to original article for a more in-depth discussion.
From Surviving to Arriving: A Road Map for Transitioning to Value-Based Reimbursement
The Key to Transitioning from Fee-for-Service to Value-Based Reimbursement
Bobbi Brown, Senior VP; Jared Crapo, VP
The Formula for Optimizing the Value-Based Healthcare Equation
Brant Avondet, VP of Client Operations
A Service Line Approach Improves Women’s Health at UPMC ̶ Success Story
Against the Odds: How this Small Community Hospital Used Six Strategies to Succeed in
Value-Based Care ̶ Amanda Rich, Senior Director, Client Engagement; Brian Eliason, VP
Surviving Value-Based Purchasing in Healthcare: Connecting Your Clinical and Financial
Data for the Best ROI ̶ Bobbi Brown, Senior VP

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Dan Unger joined Health Catalyst in April 2014. He came to Health Catalyst after working
at Accretive Health where he managed a team that worked with the Intermountain Medical
Group to improve revenue cycle processes and reduce operational costs. Prior to
Accretive, Dan worked as a consultant at Equation Consulting (a physician economics
consulting firm) and as a pricing and profitability analyst at JP Morgan Chase.
He graduated from the University of Arizona with degrees in Finance and Entrepreneurship and
received his MBA in International Finance from the Thunderbird School of Global Management.
Other Clinical Quality Improvement Resources
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