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The Future Is Here Already: What Were You Waiting For?

May 18, 2011
by Mark Hagland
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WellPoint’s new quality-based payment system is both reflecting and intensifying current reimbursement trends

The recent announcement by the Indianapolis-based WellPoint Inc., which pays 1,500 hospitals for services to 34 million of its members in 14 states, that it was moving to a mandatory value-based purchasing program should light a major fire under most hospital organizations in this country. Not only is WellPoint one of the largest private health insurers in the U.S.; its market clout and reach alone mean that its decision to implement a mandatory quality-driven reimbursement program speaks volumes about where healthcare payment is headed, not in the next decade, but in the next few months.

The plan, as revealed and described in the May 16 edition of the Wall Street Journal, incorporates many familiar elements in other quality-based purchasing initiatives, and shares some commonalities with Medicare’s new value-based purchasing program, which is set to begin rewarding (and penalizing) hospitals for quality outcomes in 2013. Only this program is set to begin in the coming weeks, not in two years. What’s more, the program will use 51 indicators in order to judge hospitals’ quality success; and its formula for measuring care quality will be based 55 percent on health outcomes, 35 percent on patient safety measures, and 10 percent on patient satisfaction (and this last point is of particular interest, since the final rule for value-based purchasing under Medicare, and the most controversial element therein, is set to put 30 percent of its weight on patient satisfaction measures).

In recent years, WellPoint has been increasing payments to its network hospitals by an average of 8 percent annually. But under the terms of this new mandatory program, the insurer will begin to pay increases only to those hospitals that meet its quality requirements, among them doing systematic work to avert readmissions; adhering to patient safety checklists; and soliciting patient satisfaction scores.

As Samuel Nussbaum, M.D., WellPoint’s chief medical officer, told the Wall Street Journal, “To get any increase, it has to be earned.” Nussbaum also noted pointedly in the article that “Our hospitals are getting paid vastly more than Medicare.”

To say that WellPoint is speaking loudly and carrying a big stick would almost be an understatement in this case; for many, this will feel like the proverbial "shot across the bow," in fact. And what is eminently clear here is that private payers, at least as much as Medicare, are now moving quickly to apply quality-based standards to hospital payment in ways that might have seemed at least slightly radical even a few years ago.

CIOs and CMIOs of patient care organizations nationwide should take note: the future of value-based purchasing is no longer sitting on some hazy horizon years—and many to-do lists—away. It is literally here and now. So all the work that innovator organizations are doing around accountable care, around averting unnecessary readmissions, around clinical performance evaluation and improvement, is going to need to be harnessed pretty much right away, going forward. Because if WellPoint is moving ahead now, you can bet your bottom dollar that all the other major health insurers will begin to follow suit, as soon as it is practicable for them to do so. So all the IT foundational work that everyone already knew would need to be done is looking far more immediate as a priority for many organizations than it might have just a few weeks ago. Welcome to the future, right this second.

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Mark Hagland

Editor-In-Chief

Mark Hagland

@hci_markhagland

www.healthcare-informatics.com/blog/mark-hagland

Mark Hagland became Editor-in-Chief of Healthcare Informatics in January 2010. Prior to that, he...