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Survey: Provider Finance Departments Not Ready for Value-Based Contracts

June 30, 2015
by Rajiv Leventhal
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Only 15 percent say  of finance departments at healthcare providers say they have the “very sophisticated” capabilities to support capitation, bundled payments, and quality-based payments that account for an increasingly larger component of revenue, according to a survey by KPMG, the New York City-based-based audit, tax and advisory firm.

The Centers for Medicare & Medicaid Services (CMS), which accounts for a substantial portion of provider revenue, has stated that it plans to have 90 percent of its reimbursement under value-based payments by fiscal 2018. This has forced some providers to look at matching pricing with patient risk and look to advanced analytics to improve efficiency and quality. When CMS set this target, only 26 percent of those surveyed said their strategic approach to migrating and preparing for value based payments has not changed.

The survey, which included more 164 healthcare providers, also found that 61 percent of respondents said their finance departments are gathering tools and conducting analysis about getting their finance function ready for this move. Another 13 percent described their finance function as “undeveloped” for managing risk and accounting for these new payment mechanisms. Many providers are well aware of the challenges of adapting to value-based payments. Only 4 percent of provider organizations view their senior management as uninvolved in addressing alternate payment arrangements.

“It has never been more crucial for providers to prepare their finance departments to address the demands that new care delivery models, such as accountable care organizations and alternative payment arrangements, will present as the industry moves away from fee-for-service reimbursement mechanisms,” Joe Kuehn, an advisory partner at KPMG’s healthcare & life sciences practice, said in a statement. “Medicare, Medicaid, and commercial health plans are all pushing toward paying hospitals and physicians for value, effectively pushing financial risk upon the providers Finance departments will need to prepare to manage these challenges and have better systems to measure performance against established targets including the cost and quality of care for example, so they can manage in this new environment.”

Providers see two significant tactics to address reimbursement changes from commercial and government payers, data showed.  In the survey, 20 percent said they are measuring risk and accounting for it in their fees and another 23 percent are using data and analytics to measure and improve efficiency and quality. Other respondents said they are revamping finance/accounting functions or updating their contracts.

Regarding the needs of finance departments at healthcare providers, predictive modeling (30 percent) and analytic tools (27 percent) were where organizations needed the most help, surpassing organizational culture, measuring clinical variability, showing the connection between quality and incentives, and improving reporting transparency to stakeholders.



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