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As originally asked by Scott Nelson.
CMS has just begun to outline parameters for the Value-Based Payment Modifier, which will roll out between 2015 and 2017 and provide a positive or negative multiplier to payment rates based on quality and cost performance.
How will this affect medtech companies? And what should they be doing now in preparation for this new model of care?
Pamela V. Falk
For optometric services, even patients who have insurance with a percentage-of-fee copayment (as with Medicare) price shop to lower their out-of-pocket costs. Those who have a fixed copayment already have a “quote” because they know in advance what their copays are.
In these small-scale examples where patients choose their healthcare providers, they are often looking at price, not value. For third-party payers, though, value is a different animal.
I do agree with Greg that any value-based payment model is only as good as the metrics used, and that high-value performers will be unfairly penalized, no matter what their product, service, setting or mode of practice is.
Comparing group performance without taking into account geographic and other demographic metrics will not yield fair results. I can see this system further stretching the divide between service levels in different communities.
Leaving aside the unfairness of penalizing individual exemplary practitioners because of their group’s performance, a zealous and talented individual who deals with extreme or difficult cases will be unfairly penalized as we move towards individual assessments.
Todd Staples, MBA
The point I want to make here is that the changes with CMS that are being phased in over the next few years are making it more absolutely clear that every time a patient walks into a facility and is delivered care – the delivery of that care represents RISK to the facility. In a fee for service model, where profit comes from high patient volumes, it is only a matter of time before those business models will have to change to reduce the risk that the high volumes represent. If (as a healthcare provider) I am being paid to maintain those patient’s health and deliver necessary care rather than being paid on how many procedure I do, then I am incentivized to reduce hospital beds, minimize unnecessary procedures and readmits, and most importantly providers would be more incentivized to engage patients earlier in their disease progression and do everything in their power to keep them home and out of the hospital. This transition is slowly happening, though telemedicine will still have resistance in the medical community if it results in fewer services being offered (procedures) in a fee for service system.
To quickly summarize, yes value based products are absolutely necessary today – but I think as we transition more and more to a health maintenance model here in the US, the value based product model will once again undergo change as we shift toward a risk reduction paradigm (High quality, low cost, low morbidity/mortality, low readmits, low complications, etc) for necessary procedures, and the big focus will become early patient intervention via various telemedicine initiatives to keep patient volumes low in the acute care setting. Everything about the ACA seems to be designed to reduce Acute Care patient volumes while increasing access to healthcare for all. Ultimately this will mean big changes for our industry, but once again, those that see the writing on the wall will succeed and those that resist will most likely fall behind.
Todd Staples, MBA
It is imperative that medtech start ups have a compelling value proposition that has some customer validation if they expect to get funding and be successful entering the market, especially with these new CMS VBPMs being implemented. Historically, these types of Value proposition approaches were used at various stages of the marketing effort, but increasingly in today’s landscape, they are prerequisites to even getting off the ground.
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