Managing Patients' Cost of Care Essential Under New Reimbursement Models

Posted by Continuum on Apr 18, 2016 11:00:00 AM

Quality. Cost. Patient Satisfaction.Charges_with_border.jpg

There are the three main areas in which physicians will be measured, as our healthcare system shifts from volume to value. The Centers for Medicare and Medicaid Services (CMS) has already begun tying reimbursement to these measures, and commercial payers are creating similar, value-based models.

In a previous post, we discussed how doctors can succeed under the new quality metrics. Here, we’ll explain how physicians can meet cost benchmarks.

Defining “cost”

The cost that’s relevant to payers is the annual amount spent by patients and their insurance providers for the patients’ care. It is not the provider’s cost of doing business, such as overhead costs. Moreover, “cost” is the total amount received by all of a patient’s providers.

To illustrate: Dr. Smith is a primary care physician with 100 attributed patients. He received $10,000 for their care. Dr. Smith’s patients also spent $90,000 with other providers. Therefore, Dr. Smith’s cost of care is $100,000.

Setting standards

CMS and other payers have developed cost benchmarks: predicted annual costs of care for particular populations, based on both risk factors and demographics (age, gender, zip code and the like). Providers must strive for overall costs of care that are under the benchmarks, while still maintaining high-quality care.

Here’s a hypothetical example: A payer’s cost benchmark is $15,000 for 70-year-old men who live in Marlton and have hypertension and diabetes. If your member patients in this population spend less than $15,000, you’re under the benchmark – which is good. If their cost of care is over $15,000, you’re over the benchmark – which is not good.     

For tips on lowering your overall cost of care, download our checklist, 5 Ways to Reduce Costs.

Rewards, penalties

Physicians whose overall cost of care is below payers’ benchmarks – and who also meet payers’ quality requirements – will usually be eligible for additional payments. Conversely, physicians who exceed cost benchmarks – and who also fall short on quality requirements – will increasingly be subject to payers’ financial penalties.

Many providers don’t realize they must score well on both cost and quality in order to receive added payments and avoid reductions. Indeed, doctors still must do right by their patients, which can mean ordering expensive tests or procedures when needed. But other costs can be avoided – such as preventable ER visits – to help reduce overall costs of care.

Physicians with a combination of the highest quality and lowest cost will receive the highest CMS payments; those with the lowest quality and highest costs will be hit with the greatest penalties. (For payment adjustment tables, please see our April 2016 white paper referenced below.)

Tracking costs

Doctors can keep overall costs of care low in many ways, from increasing patient engagement to referring patients to other value-oriented providers. Physicians should track their cost-related performance, so they can see how they’re doing and where they can improve.

A qualified enablement company can analyze a provider’s cost data, issue “report cards” on performance, and offer advice for improving results.

In Continuum’s case, we go a step further: We have a unique degree of access to physician cost data through our collaboration with CMS and commercial payers. This allows us to provide physicians with high-quality, lower-cost options for specialists, hospitals, skilled nursing facilities and other ancillary services.

The bottom line

However doctors choose to address the new cost requirements, they should do three things:

  • Know their costs of care.
  • Know the benchmarks.
  • Heed the warning signs if their costs exceed the benchmarks.


More resources

For more on the latest CMS reporting requirements, see our April 2016 white paper: How Physicians Can Win in the New Healthcare Environment 

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Topics: value-based reimbursement, medicare, CMS, lower cost of care

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