Why are Risk-based Payments in Hospital Medical Billing slowing down?

As the healthcare industry moves swiftly to a value-based care model in the USA, risk-based revenues are bound to rise. However, the numbers in surveys do not show much improvement in this sector. Moreover, top surveys show that the risk-based payments in hospital medical billing are decreasing by the day. According to a study conducted by Moody’s before the pandemic, out of the entire revenue collection of not-for-profit hospitals, less than 2% of the hospital medical billing came from risk-based payment pathways.

The value-based care models require more risk-based payments in their hospital medical billing. But even a year of pandemic and a series of legislations later, fee-for-service models take up more than 90% of the hospital revenue. On the other hand, the revenue collection or the patient experience has not improved significantly. It means that there is still an unaddressed gap between the means and the intent of the value-based care model.

This article has tried to identify these flaws in the system. Go through the details of how revenue leaders of provider organizations can inculcate the new system without missing out on revenue.

The Slow-down: Statistical Analysis

  • Several statistical studies have compared the risk-based and fee-for-service payment models from top consulting firms like Moody’s and AMGA.
  • For this article, we have referred to the report released by Numerof & Associates along with David Nash, MD, founding Dean Emeritus of the Jefferson College of Population Health, called “State of Population Health.”
  • The report took into consideration the views of around 300 C-suite healthcare leaders to analyze the upcoming changes in the industry.
  • In this year’s survey,around 40% of the leaders said that around 10% of the revenue came from risk-based contracts in their entire spectrum of hospital medical billing.
  • The number has shown an increase from the report’s last edition,where the risk-based cash inflowaccounted for less than 10% of hospital revenue.
  • However, in the last edition, more than 50% of leaders expected the revenue to increase to at least 15% by 2021.
  • With enabling legislation from the Government and payment plans from the CMS, the numbers indicate that the change has slowed down.

Barrier in Bridging the Gap: Fear of Change?

  • According to the different survey directors, the healthcare executives have cited various reasons they lag.
  • But the most common reason noted by the revenue leaders is the fear of change, and most importantly, financial loss due to the fast-paced evolution of the hospital medical billing model.
  • Rita Numerof, president of Numerof & Associates, said in a press conference, “Like many, we hoped that this year’s survey would show some progress toward value-based practice integration, yet we found many executives still failing to see the shortcomings of the fee-for-service status quo.”
  • The approach of the healthcare executives in this regard is not in line with the best interests of the financial health of the organizations if you take the statistical figures into account.
  • According to the American Hospital Association, the hospital systems can incur a loss of upto USD 120 billion in 2021, almost the same as 2020.
  • Similarly, the independent provider organizations and clinics saw a decrease in revenue by almost 50% due to the decreasing patient volumes during the pandemic.
  • Yet, the fee-for-service payment structure does not see much change though it has been proved to be tied to a significant load of revenue loss.
  • The contradiction in the results and the process shows a culture of fear of change that has been institutionalized for a prolonged time.

What are the other loopholes?

  • The 6th edition of the “State of Population Health” has shed some light on other reasons for the slowdown, though fear of change remains one of the top reasons.
  • According to several executives taking part in the survey, cultural change was another thorn in the way of improving risk-based payments in hospital medical billing.
  • Some of them have also said that the situation reminded them of the time EHR was introduced to the industry and how it was unpopular first.
  • However, the unprecedented pandemic in the last two years has made some serious changes to workflow management.
  • Changing traditional work culture ideas was one of them.This is probably the best time to get that plan in action.
  • The other shocking revelation was that most leaders did not have faith in their existing healthcare systems to implement an accurate and intricate model with minimized errors.
  • Monitoring the payment system and fine-tuning it to the level of each provider needs a robust platform that most of the organizations did not have.
  • “…in our sixth annual survey, 62 [percent] of respondents rated their organization’s ability to manage variation in cost at the physician level as ‘average’ or ‘worse than average’. If executives have so little insight into the cost differences between physicians, how they can possibly expect to control them?” said Michael Abrams, managing partner of Numerof & Associates.
  • The healthcare providers are in support of implementing the risk-based hospital medical billing model,given that the organizations put in the effort to scale up the systems.

What is the way forward?

  • Healthcare organizations need enabling organizations to take care of their data collection and analysis.
  • Some of these organizations help the healthcare organization with their automation technology solutions, making the data system error-free and easy to use.
  • Comparative study of cost and quality data and tallying physician revenue and data management costs are also equally important best practices.
  • However, the financial health of each organization is different and thus needs unique analysis to move forward.
  • You can get in touch with a leading revenue cycle management company to get yours analyzed today and get a tailor-made financial roadmap for your guaranteed success.

We hope this blog helped you understand the importance of risk-based payments in hospital medical billing and how you can reverse the slowdown. For any queries, write them below, and we will get back to you soon. For more such healthcare articles and news, subscribe to our blog.Follow us on Twitter, Instagram, Facebook, and LinkedIn for regular updates.

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