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Trend: Reimbursement Reform

January 29, 2010
by Mark Hagland
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As the health insurance debate rages on, CIOs need to pay close attention and ensure they have the systems in place to prepare for reimbursement changes.

The Landscape: Whatever the controversies around health insurance reform on Capitol Hill, there's a strong bipartisan consensus as to the need for reimbursement reform, including a shift towards value-based healthcare purchasing under Medicare. For healthcare CIOs who will need to implement data reporting and sharing systems that can facilitate new reimbursement arrangements nationwide, the implications are huge.

The Future: CIOs and other leaders who have been involved in advocacy work say the time is now to prepare for the reimbursement reform changes to come.

Blair childs
Blair Childs

There are two things we know about reimbursement reform: it's coming, and it'll rock your world. First, let's differentiate from health insurance reform, which would seek to restructure how health insurance is provided and paid for in the United States. That policy and political issue is being hotly debated in the U.S. Congress. At the same time, lost amid mainstream media coverage has been the consensus on the part of policymakers from both major political parties on the need to move healthcare towards value-based purchasing.

Mike smith
Mike Smith

And when value-based purchasing under Medicare - as well as some other potential reimbursement innovations, including bundled payments and accountable care groups (ACOs) - becomes a reality, hospital and health system CIOs will have to have put in place the kinds of information and data reporting systems required both for complex clinical data reporting schemas, and for care delivery spread across multiple organizations. What's more, some of these reimbursement changes, particularly value-based purchasing under Medicare, could go into effect far faster than many might think.

“Hospitals, and for that matter all healthcare providers, are going to have to deal with substantial changes in the way they're paid,” says Blair Childs, senior vice president for public affairs at the Charlotte, N.C.-based health alliance Premier Inc. The system, Blair says, will transition from one that is based on volume to one “where they're at least partially paid on value, with the portion of payments coming from value ramping up over time.” He says, referring to bundled payments and ACO arrangements, “if you're trying to communicate among hospitals, post-acute care and long-term care, there need to be ways to transmit information easily and efficiently.”

Change, however, may be unavoidable. “Reimbursement reform is inevitable, because in the absence of that, healthcare costs will bankrupt this country,” says H. Stephen Lieber, president of the Chicago-based Healthcare Information and Management Systems Society (HIMSS). Lieber says he believes CIOs need to pay close attention, “because they've got to put the systems in place to handle that knowledge, and understanding why they have to do that will be as important as actually putting the systems in place.”

CIOs who have been involved with advocacy, whether through Premier, HIMSS, or CHIME (Ann Arbor, Mich.-based College of Healthcare Information Management Executives) agree that change is inevitable, and that they and their peers need to be involved in advocacy work, and to be prepared to lead the implementation of information systems to support new healthcare reimbursement arrangements.

“I think the days of fee-for-service healthcare are numbered,” says Mike Smith, CIO of four-hospital, 1,500-bed Lee Memorial Health System (Fort Myers, Fla.). The challenge, he says, is for CIOs to be involved in advocating for reimbursement changes that make sense for hospitals and for patients, while also preparing for the inevitable changes to come. “Clearly, all the reimbursement innovations being talked about, including bundled payments and ACOs, will require good information to operate effectively,” says Smith. CIOs, he urges, must begin to implement the information systems needed to prepare for reimbursement changes, even as they talk to policymakers about what issues are important and what strategies work. “If you believe in the kinds of activities we've talked about and believe in healthcare reform, you have to believe that information is key, and that the CIO is in a good position to inform on these issues,” he says.

Of course, knowing that reimbursement reform is coming doesn't necessarily mean that one is totally prepared for it. For example, says Dennis L'Heureux, senior vice president and CIO at the 396-bed Rockford (Ill.) Health System (which includes an employed physician group and long-term care), “Our legacy hospital patient billing system is not very flexible, so a switch to bundled payments would force me to replace that system sooner rather than later.” L'Heureux says he is going to have to make changes based on the shift to ICD-10, while he's already replacing his EMR to help qualify for meaningful use. “And I hardly have sufficient resources to do what needs to be done now.”

Inevitably, reimbursement reform will force CIOs to make tough choices in terms of technology upgrades and implementation options, L'Heureux says. Still, he says he believes that value-based purchasing, along with other payment innovations, is unavoidable. “We're going to be reimbursed by the results of care, and probably no longer simply by unit of care provided. Instead, did we make the patient better?”