I invite you to Google the top healthcare software/technology firms and look at the mission statements in each one. There is a really good chance that most of them mention improving clinical care and value-based reimbursement, or use similar verbiage. That’s because one of the only reasons a healthcare provider or system will even consider buying cutting edge software is if it meaningfully addresses patient care and improves financial performance. That’s a one and a two, not an or. Where healthcare technology firms find some of their best clients, and where they can really deliver value, are in organizations that participate in risk bearing contracts with health insurance plans (most notably Medicare and Medicaid). Not every healthcare system does, though. Unless patient care and reimbursement are somehow linked, it is oftentimes business as usual. Historically, “usual” means that the majority of healthcare reimbursement has been done on a fee-for-service (“FFS”) basis. In other words, the more you do, the more you get paid.
That’s a pretty bad incentive structure for a system that’s operating on a fixed budget. For more on that budget, I recommend an article by Juliette Cubanski, Tricia Neuman, and Meredith Freed that was published by the Kaiser Family Foundation, linked below:
https://www.kff.org/medicare/issue-brief/the-facts-on-medicare-spending-and-financing/
In contrast, groups like Accountable Care Organizations (“ACOs”) share risk with the insurance company and the patient in a number of ways. Each model is different, but there’s a few basic reimbursement mechanisms in play. The biggest is offering providers capitated payments in lieu of FFS payments. Rather than accepting dollars for each service delivered, the organization takes a flat fee per patient enrolled for care in its network. A full risk bearing contract means that the healthcare organization is going to get one flat fee from the insurance company for all of its patients, regardless of how much care they get. Shared savings and losses represent another mechanism. An ACO might accept FFS payments, but the insurance plan will set an overall spending goal. If the ACO comes under it, both the insurer and ACO share in the savings. If the ACO comes over it, they share in the loses. This varies by degree depending on the program.
Technology vendors thrive serving organizations running with something that looks like the ACO model, not the FFS one. Most technology developers (at least recent entrants) tend to be well-intentioned people who want to build things that help. Healthcare tends to attract people who are attracted to public mission (even if through the private sector). And their solutions are often focused on tightening care coordination, reducing costs and unnecessary procedures, and improving patients’ involvement in their own care. They help organizations that are engaged in intense competition with the cost curve. Remote patient monitoring, telehealth, and clinical decision support tools are really aimed at helping the patient spend less, and get better faster.
That’s cool and why I love what I do for a living. The people I work with are amazing. And I am very hopeful that their market space is about to grow a little more. In 2015, Congress passed the Medicare and CHIP Reauthorization Act of 2015 (“MACRA”), which in addition to doing the things in its title, also implemented a bit of payment reform on office-based physicians. The Merit-based Incentive Payment System (“MIPS”) formally started in 2017, and levies an incentive payment or penalty on each physician (and additional qualifying clinicians) based on how well they did on self-selected quality measures, using technology, general process improvement, and cost. It never really fully got off the ground until now because Congress designed it to have a bit of a ramp in its first five years, and by the end of 2021 we will have had had a public health emergency in effect for two of those. The changes CMS made to MIPS made it effectively toothless in that period.
However, CMS has proposed that starting in 2022 each clinician must earn an overall 75/100 to avoid a penalty. The potential downside (and upside) is up to 9% of that clinician’s Part B revenues. Cost is responsible for 30% of that, translating to 2.7% of a clinician’s Part B revenue. These numbers don’t sound like a lot. However, practices and health systems that find themselves in Medicare heavy neighborhoods often operate on fairly small margins. Let’s say a private practice comes in at 10% margin and takes 50% Medicare. That means that the cost portion of MIPS has the ability to eat at 27% of its profits. I would call that an incentive to change, albeit a modest one.
Finally, I’ll note that I have avoided commenting on the other categories as real change agents because I do not think they are, yet. MIPS’ current program’s design makes it clear to me that cost is where the real competition is. Quality can be gamed because you can choose your own measures. The category called “Promoting Interoperability” is all about buying the right product and doing the right workflows – regardless of the patient you’re seeing (it measures things like sending summaries of care, providing patients access to their records, etc). Again, that can be gamed. Another category is where the clinician can choose from other 90 different things to do to improve their practice, often the same one multiple years. That’s very ripe grounds for gamesmanship.
Personally, I hope that MIPS does create a viable business case for positive change in healthcare, and believe cost is its best bet. I’ve written about MACRA in the past – and mainly argued it needed to be implemented firmly but in an even-handed way. COVID-19 undermined the premise of that article. That said, the overall promise of MIPS remains.
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