5 Healthcare Certainties in an Uncertain Environment
The state of the healthcare industry as it stands today, could most easily be summarized in one word: uncertainty. Between the transition to value-based care, the evolution of new reimbursement models and the introduction of the American Health Care Act, which could alter much of the legislation driving healthcare reform in recent years, there are many questions and many unknowns. Instead of speculating on what the future of healthcare may look like, we analyzed data from a national survey to identify five certainties for the state of the healthcare industry today.
For years, Katz, Sapper & Miller has worked in conjunction with the Neurosurgery Executives’ Resource Value and Education Society (NERVES) to not only conduct its annual socioeconomic survey, which focuses on practice statistics, production, compensation and other metrics, but to analyze and interpret the results. Though specific to neurosurgery, this year’s survey revealed several trends that we are seeing across the country – ones that have implications for all healthcare providers.
- The demand for physicians is steadily growing. As hospitals and hospital-owned medical practices continue to fuel competition by recruiting and directly employing providers, many independent practices are recruiting to remain competitive in their respective markets. Additionally, practices need more physicians to meet the increasing healthcare needs of an aging population. The supply of physicians, however, is not growing at the same rate as demand, which is creating a shortage of physicians. Though the physician shortage is not expected to be as severe in surgical specialties, the Association of American Medical Colleges estimates the physician shortage could be between 40,800 and 104,900 doctors by 2030. The increased competition in recruiting and retaining qualified doctors is also resulting in contracting leverage for physicians seeking new opportunities when they negotiate compensation and benefits.
- Reimbursement is continuing to shift toward value-based structures – even for commercial payers. The NERVES survey showed that the average commercial reimbursement as a percentage of Medicare has decreased by as much as 10 percent over the past year. This downward trend in aggregate commercial insurance spending is likely due to the shift from volume-based to value-based reimbursement, where excess cost and utilization are driven out of the system, thereby reducing overall reimbursement. Though commercial insurance carriers typically pay more than Medicare, they are all moving toward value-based reimbursement. However, one interesting development in this trend is the Mayo Clinic’s recent announcement that – if patients have similar conditions and seek care simultaneously – they will prioritize care for those who have commercial insurance so that the institution can make every effort to maintain financial viability.
- The vast majority of practices are using Electronic Medical Record (EMR) systems. More and more practices are utilizing EMR systems to help better capture data to achieve value-based incentives or to avoid value-based penalties. EMR systems capture data on patient satisfaction and improvements in the quality and value of care delivered. Approximately 92 percent of practices responding to the NERVES survey reported using an EMR system, and nearly 87 percent said they were attesting to Year 1 Meaningful Use standards. This corresponds with the most recent National Electronic Health Records Survey in which nearly 87 percent of office-based physicians reported using an EMR system. The adoption of EMR technology is setting up the practices for a higher degree of success with the new regulations and reporting standards. Physician groups are making investments in computer programs that are compliant with Meaningful Use and are using those programs to meet incentive targets. However, the introduction of this technology does create some new challenges. Because of these data-gathering and data-sharing requirements, practices must pay much closer attention to data security to ensure the protection of their patient and practice information.
- Accountable Care Organizations (ACOs) are gaining in popularity. As part of the ongoing healthcare reform initiative, practices in many markets are moving toward participation in ACOs. As more practices participate in ACOs, care is more efficiently managed across all specialties: more efficient care protocols are developed, patient satisfaction increases and the ACO begins earning value-based bonuses and reducing value-based penalties. According to the NERVES survey, 31 percent of practices are now part of at least one ACO, an increase of 4.5 percent from 2015. Of those practices taking part in an ACO, nearly 42 percent reported receiving savings – an increase of seven percent from the prior year. Though success varies from provider to provider, more practices are moving to an ACO model, which is a trend seen across the healthcare industry. The more successful groups are entering into creative partnerships with hospitals and other care providers in an effort to improve their value-based performance.
- The shift to value-based reimbursement is altering provider compensation. While compensation varies greatly by metropolitan area, geographic region, practice type and size of practice, compensation for those employed by hospitals and health systems saw greater declines than those in private practice. Similarly, call pay declined for both those in private practice and for those employed by hospitals and health systems; however, the greatest decline was seen for those employed by hospitals and health systems. Though the price paid for call coverage is heavily dependent on regional and local factors, hospitals are trying to find ways to save money, and they simply cannot continue to fund call pay at the same level that they used to. As part of the transition to value-based care, physicians are being asked to take on new roles helping redesign care processes, which will inevitably affect their clinical practice and resulting compensation. In order to compensate physicians for their new roles, many forms of stipends to physicians are being funded through co-management agreements and other similar arrangements. This allows hospitals to pay an hourly rate to physicians for administrative work and provides incentives to physicians when certain performance improvements are achieved. Whether the recent decline in compensation is indicative of an overall trend in physician compensation – and not just a brief dip as the industry shifts to new payment models – will be determined in the coming years as healthcare reform continues to evolve.
Undoubtedly, the state of the healthcare industry is being drastically impacted by the shift toward value-based care and reimbursement. Providers are doing what they can to stay competitive and profitable in the market – whether it is recruiting additional physician talent, participating in an ACO or restructuring physician compensation models.
If you need help determining ways your practice can stay competitive and profitable – whether it is related to strategy, operations or provider compensation – our team of healthcare experts is here to help.
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