How To Prepare For The End Of Fee-For-Service

At this point, most providers have accepted the fact the fee-for-service (FFS) is eventually going away. The question now is, “When?”  Many have already begun preparing for this shift, while others are waiting watchfully. 

One challenge in this changing environment is that in some ways, FFS and value-based payment (VBP) work directly against each other financially.  In the FFS world, you are rewarded for volume.  Doing less actually decreases your bottom line; therefore, there’s little motivation to examine overutilization.  In VBP, any unnecessary hospital stay, imaging study or lab test performed is a liability, not a revenue driver. 

So with all this uncertainty, why start to make changes today?  Here are three reasons why watchful waiting is not a wise strategy:

1. Chances are, you’re already in capitated arrangements.

Waiting for capitation to hit before you start working on decreasing waste in your clinical enterprise?  Consider how much of your volume is paid on DRGs.  DRGs are to some extent, capitated payments.  The only way to increase revenue in a DRG is to cut out unnecessary cost (unless the government gives you a raise).  Also consider your self-pay patients.  That’s the ultimate capitation arrangement, where you receive little to no payment for services rendered.

2. Strategies that employ eliminating waste work in both fee-for-service and in value-based arrangements.

When it comes to eliminating waste in healthcare through clinical quality improvement, everyone’s a winner - especially the patient.  This doesn’t mean across-the-board cuts and lay-offs.  Smart waste reduction relies on the front-line healthcare team to determine which steps in their everyday work actually add value.  All non-value-add activities are modified or eliminated.  Driving the waste out of care processes in this fashion not only frees up resources, but also empowers the most valuable resource in your organization, the people.

This strategy works regardless of how you get paid, and it helps put you in an advantageous position moving forward into VBP.

3. Healthcare providers with self-funded health plans end up paying in the long run anyway.

In the end, high-cost health care impacts the consumer.  When you are both the provider and the consumer of high-cost healthcare, what comes around eventually goes around.  A surge in revenue in one quarter will end up being a cost for self-funded health plans the next quarter.  Conversely, when decreasing unnecessary cost, you win two-fold.  This is a prime example of what happens when the high cost of healthcare is actually transferred to the consumer without the murkiness of a third-party payer.  This is something we will probably be seeing a lot more of in the future.