Announcements by CMS and recent changes in the healthcare industry demonstrate that Ascendient’s forward-looking approach, aided by the HealthytownTM model we developed, has accurately predicted the road signs now visible on the path to healthcare transformation.
We have known for some time that the U.S. healthcare system as it exists is not sustainable. Costs continue to rise, while health outcomes haven’t necessarily improved. The Centers for Medicare and Medicaid Services said in its most recent annual report to Congress by the Boards of Trustees of the Medicare Trust Fund that Medicare Part A will become insolvent in 2026, three years earlier than was previously forecast. Meanwhile, national healthcare spending is projected to outpace GDP growth by 1 percent annually through 2026, according to a recent CMS report.
Everyone has known we were facing healthcare transformation, they just weren’t sure how it would play out in their community.
At Ascendient, we began working in 2013 to determine what a transformed healthcare system would look like. After more than two years of research, we created HealthytownTM, a model community built on national averages and one that represents an ideal delivery network where each patient receives the right care at the right time. Using this model, we explore what care delivery looks like under a transformed payment system, then provide specific examples of how hospitals and health systems might envision the future and build a long-term strategy.
Now that the picture of healthcare transformation is becoming a bit clearer, we can see that Healthytown accurately forecasted some major industry shifts. Here are a few of the most notable:
A bigger push for outpatient surgery
Healthytown projected that many surgical procedures, including knee and hip replacements, would be performed outside of the traditional hospital setting. We found that inpatient utilization volume will decline by more than 30 percent as insurers and CMS pushed more patients away from hospitals and to lower-cost facilities for routine procedures.
Outpatient surgery is already becoming one of the few growth areas in the transformed healthcare system. New technological advances in procedures and care means more routine operations can be performed out of the hospital in outpatient venues. Eliminating lengthy stays and the high overhead of hospitals can improve care and save money for both patients and payors. CMS has taken advantage of these advances by approving knee replacements for ASCs and continues to contemplate doing the same with hip replacements.
Transformed payment systems would shift risks to providers
The Healthytown model anticipated that a transformed payment system would shift risks to providers and incentivize them to provide care in the most effective, least costly manner. With such dramatic change to the financial constitution of a health system, we knew healthcare providers would have to fundamentally restructure their organizations—where they deliver care and how they deliver care—to ensure continued viability.
In August 2017, Anthem made waves when it said it would no longer reimburse for CT scans and MRIs performed in hospitals that could be performed in freestanding imaging centers. The insurer noted that it would help keep premiums low and give patients the opportunity to save hundreds of dollars in each instance.
Similarly, CMS is moving toward more site-neutral payment models with its 2019 change to hospital outpatient department payments for clinic visits. Even more notable is the change CMS has made in the payment model for physician services (MACRA), which for the first time ever will incorporate the cost of care into the physician’s payment formula.
Primary care would become the center of the care delivery system
The Healthytown model told us that team-based primary care demand would increase by more than 80 percent, driven by the expanded use of the Patient Centered Medical Home (PCMH), expanded insurance coverage, and shifts away from the inpatient and ER settings. We also determined that more than half of all primary care utilization would occur via virtual or alternative encounters, such as e-consultations, phone or in-person visits with an advanced practitioner. (See Primary Care Done Right)
New technologies, such as AI, wearables, and cloud-based software applications are already enabling this transition, and opportunities in virtual care will only expand in the coming years. A new device called IDx-DR was approve by the FDA in April and uses a retinal camera and software to diagnose diabetic retinopathy, a complication of diabetes that can lead to blindness. And in January 2019, CMS started allowing stand-alone reimbursement for care management virtual check-ins with Medicare patients and the use of telehealth in place of in-person care when appropriate.
We are in a period of profound change in the healthcare industry, and providers can no longer survive with a “business as usual” mindset. Healthcare executives must consider transformation and new levels of strategy, planning and feasibility that move beyond today’s models. We are now facing fundamental changes in the cost structures of our healthcare organizations, and only innovation can help us adapt while continuing to provide the same services. Keeping an eye on these changes and modeling with a forward-thinking approach can help your organization better plan and prepare for the future.