April 21, 2015 – Curant Health President and CEO, Patrick Dunham, in Modern Medicine – Medicare is in the midst of a seismic shift in how it reimburses providers. On March 26, the U.S. House of Representatives passed legislation repealing the old sustainable growth rate (SGR) formula, which reimburses providers for “activities and treatments.” In its place is a system that pays providers based on patient outcomes. Late in the evening on April 14, the Senate followed suit and overwhelmingly approved the sweeping $145 billion bill. As anticipated, President Obama signed the Medicare Access and CHIP Reauthorization Act of 2015 into law on April 16.
The big question is how converting the system will be funded. Cutting loose the 50 year old fee-for-service healthcare model dragging our system around like Jaws dragging the Orca will not come easy or cheap. Phasing out SGR is projected to cost $14.5 billion per year over the next decade and where that money is going to come from is unclear.
Shifting from fee-for-service to value-based pay depends heavily on the following five factors in order to update the U.S. healthcare playbook. If successful, this change will save tens of billions of dollars per year in health care spend and improve both patient outcomes and overall population health while invoking a genesis of innovative new companies and jobs.
Define value. Standardize a definition of value that takes into account the aggregate savings opportunity associated with improved health outcomes. This value is illustrated through the simple equation of outcomes divided by costs. The denominator in the equation, “costs,” is inherently defined, while “outcomes” is slightly more subjective and in need of clarity for the formula to work well. Examples of appropriate metrics for outcomes include readmission rates, medication possession rates, medication adherence rates and decreasing viral loads for HIV and Hepatitis C patients.
To read Patrick’s full article, visit Modern Medicine.
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