Healthcare’s Alternative Payment Landscape

HRI’s closer lookHealthcare’s alternative payment landscape

© 2015 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. 38391-2016.KM

Source: PwC Health Research Institute analysis, Centers for Medicare & Medicaid Services

80%

20%

Quality based payment programs

• Hospital Value-Based Purchasing

• Hospital Readmissions Reduction

• Hospital-Acquired Condition Reduction

• End-Stage Renal Disease (ESRD)

• Quality Incentive

• Value-Based Modifier

Alternative payment programs

• Pioneer Accountable Care Organization

• Medicare Shared Savings Program

• Bundled Payments for Care Improvement

• Comprehensive Primary Care Initiative

• Patient Centered Medical Homes

• Comprehensive End Stage Renal Disease

• Oncology Care Model

• Medicare/Medicaid Financial Alignment

Current

85%

30%

By 2016

90%

50%

By 2018

CMS Payment Changes 2015-2018Medicare’s commitment towards quality-based payments grows.

All Medicare payments

Percentage of payments linked to quality programs

Percentage of payments linked to alternative programs



Accountable Care Organizations and bundled payment initiatives track closely with each otherAlternative payment initiatives find common ground.

Bundled Payment

Medicare Shared Savings Program ACOs

Pioneer ACOs

Puerto Rico

Hawaii

Alaska



Medicare Advantage Penetration Range 0-15% 30-45% 60-75%

15-30% 45-60% > 75%

Puerto Rico

Hawaii

Alaska

Medicare Advantage enrollees continue to grow across the USProviders see some crossover between MA and fee-for-service alternatives.

Market archetypesWhat’s happening at the community-level impacts how and when a healthcare organization moves into alternative payment models.

Vanguard

Source: Strategy&, PwC Health Research Institute analysis


Traditional

Lagging Emerging

IntegratedTransitioningFragmented

SlowEvolution

ModerateEvolution

FasterEvolution

A fast-moving market with insurers and providers already working together to implement population health. Health systems vie for as many advance contracts as possible to gain a larger share of the patient population.

Healthcare systems have some fragmentation but insurers and employers are beginning to explore innovative payment models. Hospitals and provider groups that do not evolve could be acquisition bait—especially if there is a health system that is farther along the alternative payment scale.

The market moves slowly, with sporadic insurer-driven initiatives focused on some quality-based payments. Care continues to be fragmented and hospital-based.

In emerging markets insurers are moving towards risk-based contracts—but payments are still a mix of traditional and new models. Health systems are making the investment in alternative reimbursement models.


Health System ReadinessRegional factors play a role, but a health system’s own goals should guide its decision.

Walker Jogger Runner SprinterA lack of revenue and high operational costs means this health system could stumble out of the starting blocks.

Conditioning needed: Improve overall quality and care management. Pilot new value-based care and quality payments. Reach out to post-acute providers to prepare for population health management. Consider partnerships with other provider groups.

Committed to value-based care, with several demonstrations underway. Needs to take the lessons from those pilot projects and tailor them according to the health system’s size and reach.

Conditioning needed: Regional or national expansion plans could position the health system at the front of the pack by improving its ability to perform population health. Expanding the types of medical services it provides could lead to an effective bundled payment program.

Thrives under traditional payments such as fee-for-service and wants to delay the move to alternatives for as long as possible. Typically this system is the dominant player in a community.

Conditioning needed: A dominant regional footprint can be a good platform for a population health or bundled payment model. Joggers should seek out insurer contracts that reward shared savings and build out ambulatory and retail clinic strategies to bring in more consumers.

Looking to increase revenue under a number of alternative payment models. A sprinter wants to differentiate itself from other health systems in the region.

Conditioning needed: Revenues are in line with costs. A strong connection with ambulatory, retail and home health. Physicians are aligned with the health system.

Source: Strategy&, PwC Health Research Institute analysis



Pioneer Accountable Care Organizations: Geographically disperse despite declining numbers

Pioneer ACOs

Puerto Rico

Hawaii

Alaska



Medicare Shared Savings ACOs across the US

Medicare Shared Savings Program ACOs

Puerto Rico

Hawaii

Alaska



Bundled payment programs grow as CMS moves to make some participation mandatory

Bundled Payment

Puerto Rico

Hawaii

Alaska

© 2015 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. 38391-2016. KM/RL

For more information, please visit:pwc.com/hri/alternativepayment