The days of fee-for-service are 'running out'

By Laura Dydra / October 21, 2024

CMS is applying pressure on health systems to transition from fee-for-service to value-based care by 2030. While value-based care has been discussed for years, many institutions are not yet fully prepared for its impact, as this transformation is set to influence not only Medicare but also other payer systems that benchmark against Medicare’s policies.

"We've talked about value-based care forever, almost to the point where people are like, 'Oh, whatever, we'll just keep doing our fee-for-service thing,' but that day is running out," said Eric Leroux, MD, chief quality officer at Eisenhower Health in Rancho Mirage, Calif., during a session at the Becker's 9th Annual Health IT + Digital Health + Revenue Cycle Conference in early October.

He pointed out that, for organizations like Eisenhower Health where 75% to 80% of the patient mix is Medicare or Medicaid, this shift is particularly critical. Moreover, since many of their other contracts, including those with private payers, are benchmarked to Medicare, CMS’s influence is profound and far-reaching.

Pallavi Yadav, director of quality improvement, patient safety, and value-based care at the University of Toledo Medical Center, echoed this sentiment. "CMS is trying to have all quality measures digitized by 2030, and that’s going to change a lot for hospitals like ours," she explained. The challenge for healthcare leaders lies in aligning clinical care with quality-based incentives rather than volume-driven approaches.

One of the key insights from the session was the importance of not simply reacting to every new regulation but instead developing a strategic, sustainable approach to quality care. Dr. Leroux noted that healthcare systems can waste resources chasing regulatory measures, but the real solution is a cultural shift towards doing the right thing in care delivery.

"You can’t chase every single one of those — there are 46 measures on the CMS STAR score — you just end up kind of chasing your tail," Dr. Leroux said. Instead, he advocates for a more holistic approach that centers on high-quality care. By building a strong foundation of clinical operations that prioritize patient outcomes, hospitals can navigate the shifting landscape of value-based care without constantly scrambling to meet individual measures.

This perspective reflects a broader shift in healthcare towards systems-level thinking, where the focus is on creating robust, sustainable processes that automatically align with quality measures. Ms. Yadav agreed, adding that CMS's push towards interoperability and digital health reporting will make it easier for hospitals to track their performance in real-time.

However, she also acknowledged that this shift introduces challenges, particularly around ensuring data accuracy and avoiding errors. With more data being collected electronically, there is a risk of errors and inaccuracies, which could lead to financial penalties. To mitigate this risk, hospitals will need to invest in robust digital infrastructure and ensure that their teams are trained to manage the new requirements.

The financial stakes of value-based care are enormous and failing to meet CMS's quality metrics can lead to substantial penalties, while success can result in significant rewards. Ms. Yadav noted that CMS programs like the Hospital Readmission Reduction Program and value-based purchasing can affect up to 9% of a hospital’s Medicare payments, a substantial figure for any organization.

"These penalties and rewards are not minimal anymore. They’re multiple millions of dollars," Ms. Yadav said.

She added that while the transition to value-based care requires significant effort on the part of hospitals, the benefits are clear. Programs like the readmission reduction initiative have been shown to improve care outcomes at a macro level, and she is a strong proponent of CMS’s value-based initiatives.

"You’re improving care for people on a macro level," she said, pointing to studies that have demonstrated the effectiveness of CMS’s programs in reducing readmissions and improving quality metrics.

Dr. Leroux said value-based programs have a direct impact on his system's financial stability. The key to managing these programs successfully, he noted, is not to get bogged down in the minutiae of every individual measure but to take a broad, strategic view. "You have to have a cultural, holistic approach to doing the right thing," he said.