‘Tectonic’ change involves new reimbursement models

An expert offers four recommendations for tackling value and care model innovation.


Hospitalists, and health systems in general, are undergoing change that is “tectonic in nature,” according to Bryce Gartland, MD.

“It can seem like a tremendous storm on the horizon. It's scary. It's daunting,” he said. “[There are a] tremendous amount of challenges going on … but this is the time and opportunity to really run towards those, because opportunities exist where challenge is.”

As part of tectonic changes in health care reimbursement hospitalist groups should be prepared to adopt new reimbursement models and should be working to reduce hospital subsidies Imag
As part of “tectonic” changes in health care reimbursement, hospitalist groups should be prepared to adopt new reimbursement models and should be working to reduce hospital subsidies. Image by Ian_Redding

Dr. Gartland, who is hospital group president and co-chief of clinical operations at Emory Healthcare in Atlanta, offered several insights on changes in payment and care models in his keynote address at Southern Hospital Medicine 2018 last October.

Payment models have been evolving for decades, starting with the advent of individual insurance around World War II and continuing with the development of Medicare and a fee-for-service system, Dr. Gartland said.

“As we've gone on, we're starting to see more and more of these transitions, initially with items like pay-for-performance, value-based purchasing, readmission penalties, hospital-acquired conditions. We've seen the advent of more episode payment models. … It's like acronym soup out there,” he said.

More payments have become population-based and accountable care organizations have sprung up, moving the system toward global payment and capitation, he noted. However, no matter what type of reimbursement is used, “reducing the overall cost of care, especially in that acute care episode, is really kind of our mandate imperative, particularly on that acute care side,” Dr. Gartland said. “That is our area of expertise where we have tremendous ability to impact.”

He also noted that “there is no magical tipping point” in these new value models and that health care systems will necessarily go through different transitions from fee-for-service to value-based care.

“There's market variability. There's system variability depending upon how your system's doing it. But in the end it is this transition from that fee-for-service world, or World A, into World B, of that value-based type of reimbursement, accountable care,” he said.

At the same time, patient cost-sharing has dramatically increased: A recent report from the Kaiser Family Foundation found that since 2008, the deductible for those with employer-sponsored insurance has grown eight times as fast as wages, a trend that has led to a higher level of consumerism in health care, he said.

Hospitals will also continue to see changes in case mix, Dr. Gartland said, particularly in their share of Medicare patients, since the entire baby boomer generation will be Medicare-eligible by 2030. “It's important when you think about this, though, to also recognize that not all Medicare is the same. In fact, we're moving from kind of that young-old to the old-old,” he said.

Younger Medicare enrollees are admitted to the hospital less often, and the most common reason for admission in this group is joint replacement surgery, he said. Older Medicare enrollees, in contrast, are admitted more frequently, most commonly with sepsis. This has significant implications for costs and reimbursement, Dr. Gartland noted.

Dr. Gartland also said that hospital reimbursement is declining as the population moves from PPO insurance to HMO to Medicare.

“And now [that] there are more people moving into Medicare, with that decline in reimbursement, Medicare from an annual increase has not been going up to the same degree,” he said. “It's the only government program I'm aware of that you're basically guaranteed to lose money from the outset.”

Historically, hospitals and health care systems have been able to cross-subsidize with other types of payment, such as HMOs and self-pay, to offset Medicare losses, but that model is no longer workable, Dr. Gartland said.

Hospitalist groups should be prepared to adopt new reimbursement models, such as the Bundled Payment for Care Improvement (BPCI) Initiative, and should be working to reduce hospital subsidies, since current levels are “not sustainable,” Dr. Gartland said. Overall cost of care can be reduced by ensuring staff work to the top of their licensure, he said.

“We talk about that a lot—we actually don't practice it a lot,” he said. “We have got to figure out how to make our model leaner or more efficient.”

This goes beyond salaries to overall design of the workforce, he said. “How did hospital medicine ever end up on a 7-on, 7-off, 15 patients [model]? Where did that even come from?” he asked. “What would it be like if all of a sudden, as opposed to a physician and a patient or a physician and an advanced practice provider and seeing patients, you had a physician with four or five [advanced practice providers] seeing a whole team of patients, and the physician was really managing [those]?”

Dr. Gartland made four recommendations to health systems and hospital medicine groups looking to tackle value and care model innovation.

1. Focus on reducing cost and improving quality. “That comes in items like length of stay,” which affects both of these variables, he said. “Every unnecessary day, not only is it causing potentially harm or putting somebody at risk for stuff, it's $640 of nursing labor.”

2. Eliminate unnecessary utilization. “We're still doing a lot of waste within our hospitals. We're inappropriate site of care for various items. How do we make sure that we take ownership and responsibility to remove that?”

3. Judiciously allocate new pharmaceuticals, technologies, and supplies. “Just because we have it doesn't mean it's better,” he said. “Appropriate utilization is a key item.”

4. Avoid any quality penalties and achieve any quality performance incentives. “Whether it's readmissions, whether it's hospital-acquired conditions, whether it's maybe incentives on various items, whether it's governmental, whether it's managed care organization, make sure you know where the opportunities are within your system, and get a line behind the system in terms of trying to drive performance on those,” he said.

Dr. Gartland concluded that while many changes in hospital medicine will come from outside sources, it's up to those working in the field to respond.

“There's tremendous economic and workforce necessities that are going to force a lot of change on our care models. They're going to push us to innovate, they're going to push us to design better models of care, they're going to push us to think differently,” he said. “I think that we're incredibly well primed to [lead change] in this coming era. Yet at the end, the decision to lead is really yours.”