Business Briefs: Reimbursement Crystal Ball: Wound Care Models in Value-Based Payment

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One of the most difficult reimbursement questions for this author to answer about the wound care industry is, “How will wound care be delivered and reimbursed two years from now in 2018 – just give me your ‘crystal ball’ answer?” Although no one knows for sure, we do know the current payment systems must change. We hear and we read, repeatedly, that United States healthcare costs continue to escalate rapidly and that the quality of our healthcare is not the best in the world. This article will serve as this author’s best attempt at making crystal ball predictions of how wound care models will probably look in 2018. 

As I prepared to write this month’s column, I reflected back on the original Medicare fee-for-service (FFS) program that paid á la carte for the services, procedures, and products provided by the few sites of care and medical professionals existing at that time. I remember patients had received many services, procedures, and products that were not always essential to their care, but were “nice to have” and “separately payable.” For example, nearly every patient admitted to a hospital received a full battery of diagnostic tests and a chest X-ray regardless of their admitting diagnosis. Patients who had experienced heart attacks were often hospitalized for more than one month. Patients who needed infusion therapy and/or tube feedings often remained in the hospital until they no longer needed those treatments. 

Therefore, Medicare changed the way it paid hospitals by instituting the diagnosis-related group (DRG) payment system, which pays hospitals a lump sum based on the resources needed to manage patients with similar diagnoses. If hospitals are able to discharge patients before their costs exceed their lump sum DRG-based payment, the hospitals may keep the entire DRG payment. If hospitals incur higher costs than their lump sum DRG-based payment, the hospital cannot typically request additional payment. As a reminder, when the DRG payment system was instituted, many people said the new payment system would cause hospitals to close and would cause many patients to die because of lack of care. Nothing could have been further from the truth. Medical professionals used their knowledge to develop protocols that provided the “right care” to the “right patient” at the “right time.” Patients no longer received unnecessary tests, etc. and were discharged from hospitals to sites of care that were more conducive to postacute care. 

Unfortunately, each of the postacute care settings has a different Medicare payment system with different incentives. These disparate payment incentives foster inconsistent care as the patient moves throughout the continuum of care. From a clinical perspective, medical professionals’ primary goals are to manage their patients’ medical conditions. From a reimbursement perspective, each site of care is concerned about its financial viability. Patients living with chronic ulcers are not exempt from this collision of clinical and financial goals. Wound care professionals are trained to manage chronic ulcers from inception to closure. Most wound care professionals do not have that opportunity because patients often move through various sites of care with various payment systems during the existence of their chronic ulcers. Many wound care professionals express concern because patients living with chronic ulcers do not always receive the appropriate diagnostic tests early enough in their care, may undergo duplicate diagnostic tests because their medical records were not shared with the next site of care, may be diagnosed inconsistently, may receive care based on inconsistent clinical practice guidelines, may waste surgical dressings due to different formularies, may experience inconsistent use of wound care devices and advanced wound care technology, may experience selection of services, procedures, and products based on reimbursement to the facility and/or to the wound care professional, and may receive less than optimum care due to the lack of chronic ulcer care-related quality measures. 

Medical professionals, patients, and payers know we can do better! Therefore, both governmental and private payers have taken aggressive steps to fix our “broken” volume-driven healthcare reimbursement system. Let’s take a look at some of these initiatives:

• Because the patients’ complete medical records must be available to all wound care professionals throughout the continuum of care, payers have incentivized medical professionals and facilities to adopt electronic health records (EHRs) and to ensure their various software systems can communicate with each other.  
• To encourage wound care professionals to manage wounds more aggressively, Medicare continues to refine the payment systems pertinent to wound care-related services, procedures, and products. For example, not paying for hospital-acquired pressure ulcers, requiring prior authorization for hyperbaric oxygen in a three-state demonstration program, packaging the cost of “high cost” and “low cost” cellular and/or tissue based products for wounds, etc. 
• Payers have designed and implemented a variety of alternative payment models based on value rather than volume. In one way or another these new payment models have begun paying for procedures and products packaged together, and/or for inpatient and postacute care for a disease state bundled together. The payers describe their value-based goal as the Triple Aim (established by the Institute for Healthcare Improvement) to:

1. achieve evidence-based quality outcomes, 
2. reduce total cost-of-care below current volume-driven payment levels, and
3. receive high patient satisfaction ratings. 

• In January 2015, the Centers for Medicare & Medicaid Services (CMS) announced a new program to help drive Medicare and the healthcare system at large toward rewarding the quality of care, as opposed to the quantity of care, provided to beneficiaries: Better Care. Smarter Spending. Healthier People: Improving Quality and Paying for What Works. CMS set several aggressive goals that have already been exceeded.

- Goal No. 1: Tie 30% of traditional (or FFS) Medicare payments to quality or value through alternative payment models such as accountable care organizations (ACOs) or bundled payment arrangements by the end of 2016. Tie 50% of payment to these models by the end of 2018.

- Goal No. 2:  Tie 85% of all Medicare payments to quality and value by the end of 2016. Increase to 90% by the end of 2018. 

As of Jan. 1, 2016, CMS officials announced 10 alternative payment models are contributing to progress towards these two goals. See Table 1 for CMS’ descriptions of these programs. 

As you can see, the alternative payment models do not totally eliminate the traditional FFS payment programs. Many of them pay the participants via their normal Medicare payment system and allow the participants to share in the savings generated by the payment models’ coordinated care — if they meet the Triple Aim targets specified in each program. Similarly, participants who do not meet their Triple Aim targets will be financially penalized. Therefore, medical professionals and facilities will have to balance two parallel payment systems: volume-driven traditional systems and value-driven alternative payment programs. 

This may sound like a difficult task, but the traditional volume-driven payment systems are rapidly changing to focus more on coordinated care, quality outcomes, total lowest cost of care and patient satisfaction. Let’s look at one example — the way Medicare changed the way they pay physicians. Prior to April 2015, Medicare paid the physicians based on the sustainable growth rate (SGR) formula. For many years, this led to a sizeable annual increase in payments to physicians. The SGR became problematic over the last few years when the economy took a downturn, and everyone seemed to agree the SGR was not the best way to pay physicians. Therefore, the Merit-Based Incentive Payment System (MIPS) was implemented April 1, 2015. This new payment system allows a maximum increase of 0.5% to the physicians’ Medicare allowable rates in years 2016-19.  Effective 2020, Medicare will no longer provide across-the-board rate increases to physicians. Instead, the MIPS will provide payment increases or reductions based on two value-based processes. The physicians can choose between the two processes:

1. Physician’s participation in quality programs that focus on four areas:

• outcome measures (including patient reported outcomes and functional status measures,
• patient experience measures,
• care-coordination measures, and
• appropriate-use-of-services measures (including measures of overuse).

2. Physician’s participation in alternative payment model that focuses on:

• coordinating care,
• improving quality, and
• reducing costs.

Physicians will become very motivated to meet these Triple Aim goals because their value-driven performance will determine if they receive a payment increase or reduction each year. Therefore, wound care physicians and other wound care professionals should proactively investigate whether or not their workplaces are participating in or is preparing to participate in an alternative payment model. Do not wait for someone to tell you! Because wound care professionals know how to manage chronic wounds from inception to closure, they should step up and offer to develop creative programs at their facilities that will manage the chronic wounds as the patient moves throughout the continuum of care.  

Now that you have a flavor for the value-based payment systems and alternative payment models that will pertain to wound care professionals and businesses, let’s talk crystal ball (see Table 2).