HFM - From the Chair - October 2018

The Ongoing Pursuit of Better Payment Models

Kevin F. Brennan

Kevin F. Brennan


Chair, HFMA

Payment trends may be one of the hottest topics in our industry. It is a discussion, however, that has been going on for years.

Healthcare finance professionals have long grappled with economic issues and experimented with payment models. My own experience goes back to my first CFO position at Saint Michael’s Medical Center in Newark, N.J., where we implemented a new experimental reimbursement system. It was based on DRGs under which groups of relevant services were covered with single payments, with coverage also provided for bad debts and charity care. A few years later, the federal government adopted DRGs as the national reimbursement model, and the approach continues to be used today.

That experience was an enormous challenge. And reflecting on it, I see how invaluable my HFMA membership was during that period, because it provided me with access to timely education, resources, and a forum to connect with others facing similar challenges. It is a scenario that has repeated itself time and again throughout my career as HFMA has consistently led the way in providing the latest research and tools necessary for staying on top of payment-related trends, including managing the volume-to-value transition and implementing patient-friendly billing practices.

This past summer, HFMA released the results of its latest study analyzing performance results of accountable care organizations and other population-based value-based payment models. The study, conducted by HFMA, Leavitt Partners,and McManis Consulting, with support from The Commonwealth Fund, was different from others in that it focused on market-level, rather than model-level, impacts of value-based payment (VBP). The researchers found that early years of VBP models did not show a reduction of the total cost of care or improvement in clinical quality outcomes at the market level. Potential explanations include limited prevalence of VBP models in many markets, lack of strong financial incentives for managing the total cost of care, healthcare organizations’ preference for an incremental approach to risk, and employers’ reluctance to change benefit design. Based on these findings, the report recommends moderating the growth in total cost of care by continuing movement toward models that increase financial incentives; balancing the benefits of competition with those of integration; and supporting more transparent sharing of cost and quality information.

For more information on the study and its findings, I encourage you to visit the HFMA website at www.hfma.org/tcoc. While you’re there, be sure to check out HFMA’s other payment-related resources. With HFMA as your partner, you’ll be well equipped to not only take part in discussions about today’s payment models but also imagine ways to make them better for tomorrow.