Skip to content Skip to navigation

Health Catalyst: Hospitals Progressing Sluggishly toward HHS’ Value-Based Reimbursement Goals

June 9, 2016
by Rajiv Leventhal
| Reprints

Fewer than a quarter of U.S. hospitals are on track to hit the Obama Administration’s 2018 goal of providing at least half their patient care through value-based arrangements, according to new research from Salt Lake City, Utah-based analytics vendor Health Catalyst.

In January 2015, the U.S. Department of Health and Human Services (HHS) announced a plan to tie 30 percent of traditional fee-for-service, Medicare payments to quality or value through alternative payment models such as accountable care organizations (ACOs) and bundled payments by 2016, and tying 50 percent of payments to these models by the end of 2018. HHS also set a goal of tying 85 percent of all traditional Medicare payments to quality or value by 2016 and 90 percent by 2018 through programs such as the Hospital Value Based Purchasing and the Hospital Readmissions Reduction Programs.

However, the survey by Health Catalyst revealed that just 3 percent of health systems today meet the target set by CMS. Only 23 percent expect to meet it by 2019, just a year after CMS had hoped that half of all Medicare reimbursements would be value-based. The online survey of healthcare executives represented 190 U.S. hospitals with a total of more than 20,000 licensed beds.

According to the survey, the majority of health systems—a full 62 percent—have either zero or less than 10 percent of their care tied to the type of risk-based contracts identified by CMS as “value-based,” including Medicare ACOs and bundled payments. Not surprisingly, small hospitals with fewer than 200 beds comprised the majority of those reporting no at-risk contracts. A contributing factor may be that smaller hospitals are five times less likely than larger organizations to have access to sufficient capital to make risk-based contracting work, according to the survey.

Despite lagging behind the federal government’s goal, healthcare executives across the board intend to steadily increase value-based care and at-risk contracts. In the next three years, all but 1 percent of respondents expect their organizations to be engaged in at-risk contracts. Sixty-eight percent said they expect risk-based contracts to account for less than half their total care in that time frame. Only 23 percent expect value-based care to account for more than half of their care in the next three years. Eight percent of respondents said they could not predict the answer.

The most important organizational element needed for success with risk-based contracting is analytics, said responding executives at both small and large hospitals. In fact, 52 percent of respondents cited the prime importance of analytics, more than double the second most-selected answer: a culture of quality improvement. Twenty-four percent of respondents cited cultural alignment on quality as having the most impact on value-based care success.

“Transitioning from fee-for-service reimbursement to value-based payments is a goal that many healthcare organizations embrace but are having difficulty implementing as they juggle a number of other high priorities,” Bobbi Brown, Health Catalyst vice president of financial engagement, said in a statement. “This survey reveals that they’re making progress but they could use a little help – some of it financial and some of it technical in the way of better analytics to help identify at-risk populations and better manage their risk. The bottom line seems to be that while progress is slow, healthcare leaders are committed to making value-based care work.”

For the Health Catalyst Survey, over half of the respondents (51 percent) were CEOs or CFOs of large hospital-owned physician groups and hospitals ranging in size from 15 acute care beds to over 1,000 beds. The remaining respondents all held executive roles, including several CMIOs, CMOs and CNOs.

To this end, the 2016 HIMSS Cost Accounting Survey, unveiled at the annual HIMSS conference in Las Vegas earlier this year, also found that very few of surveyed organizations, indeed just 3 percent as well, believe their organization is highly prepared to make the pay-for-value transition.

Nevertheless, also at HIMSS this year, HHS announced that an estimated 30 percent of Medicare payments are now in fact tied to quality or value through alternative payment models, well ahead of the goal set to hit that target by the end of 2016. In a statement posted on its website earlier this year, HHS said that with the January 2016 announcement of 121 new ACOs as well as greater provider participation in other models, HHS has achieved that 30 percent goal well ahead of schedule. Those estimates were evaluated by the independent CMS’ Office of the Actuary and found to be “sound and reasonable,” the HHS press release stated.

CMS estimated progress toward the goal by multiplying the number of Medicare beneficiaries in alternative payment models (net any overlap or attrition) by the expected cost of their care and compared that figure to projected Medicare fee for service spending. As of January 2016, CMS estimates that roughly $117 billion out of a projected $380 billion Medicare fee-for-service payments are tied to alternative payment models, per the agency’s earlier data.




CMS Hospital Compare Website Updated with VA Data

The Centers for Medicare & Medicaid Services (CMS) has announced the inclusion of Veterans Administration (VA) hospital performance data as part of the federal agency’s Hospital Compare website.

CMS Awards Funding to Special Innovation Projects

The Centers for Medicare & Medicaid Services (CMS) has awarded 20, two-year Special Innovation Projects (SIPs) aimed at local efforts to deliver better care at lower cost.

Center of Excellence in Genomic Science to be Established in Chicago

The National Human Genome Research Institute has awarded $10.6 million over five years for the establishment of a new research center in Chicago to advance genomic science.

EHNAC and HITRUST Combine HIPAA Security Criteria, CSF Framework

The Electronic Healthcare Network Accreditation Commission (EHNAC) and the Health Information Trust Alliance (HITRUST) announced plans to streamline their accreditation and certification programs.

Halamka on MACRA Final Rule: “CMS is Listening and I Thank Them”

Health IT notable expert John Halamka, M.D., CIO of Beth Israel Deaconess Medical Center in Boston, recently weighed in on the Medicare Access and CHIP Reauthorization Act (MACRA) final rule.

Texas Patient Care Clinic Hit with Ransomware Attack

Grand Prairie, Texas-based Rainbow Children's Clinic was the victim of a ransomware attack on its IT systems in August, affecting more than 33,000 patients, according to multiple news media reports this week.