Ernst & Young Survey: Small Hospitals Struggling With Switch to Value-Based Models

Healthcare spending keeps climbing, but much of America’s health report card gets poor grades: chronic disease rates are rising, gaps between rich and poor are widening, and last year life expectancy fell for the first time in decades.

What’s going on? Ernst & Young sought to find out through its 2017 Health Advisory Survey, which gathered insights from 700 chief medical officers, clinical quality executives, and chief financial officers at health systems across the country.

The findings were troubling: hospitals and their workers are no less stressed than the rest of society, and smaller players are behind in payment reform. Worse, more than 20 years after the Institute of Medicine first began examining the quality of the nation’s healthcare system—medical errors remain unacceptably common. The survey found:

• Progress toward value-based reimbursement is not equal. The report found that 67% of the smallest health systems (revenues of $100 million to $499 million) and 61% of the next group (revenues of $500 million to $999 million) had no value-based reimbursement initiatives planned for 2017. By contrast, only 8% of the largest health systems (revenues of $5 billion or more) had no new initiatives for 2017.
• The smaller health systems were much less likely than larger health systems to have tried bundled payments or alternate payment models, and only a tiny fraction of small systems have provider sponsored health plans: 5% among those with revenues between $100 million and $499 million, and 6% among those with revenues between $500 million and $999 million.
• What the report calls a “talent crisis” plagues healthcare—physician burnout is an epidemic. In 2017, 51% of physicians reported feeling this way frequently, up from 40% in 2013. Nursing shortages are blamed in 24% of the 1609 cases involving patient death, injury or permanent loss of function since 1997.
• Only a little more than half (58%) of health systems surveyed are undertaking efforts to reduce medical errors in 2017, and 18% say such efforts are planned.

To understand the findings, The American Journal of Managed Care^® spoke with Yele Aluko, MD, MBA, a former practicing cardiologist who is a health consultant at Ernst & Young and one of the report's authors.

The Uneven March Toward Fee-for-Value

Ernst & Young’s findings arrive as providers adapt to requirements of the Medicare Access and CHIP Reauthorization Act (MACRA), which passed in 2015 to get rid of an unworkable reimbursement system and promote value-based based models. CMS first envisioned a more aggressive pace for physicians to move into fee-for-value payment models, but ended up allowing “pick your pace” options for this year’s performance period. A new draft rule for 2018 will shield even more small providers from MACRA penalties for failing for follow the Quality Payment Program.

But is CMS doing smaller players a disservice in the long run, allowing them to fall further behind larger healthcare enterprises in the march toward reform? Aluko said large organizations have advantages of scale no matter what CMS does.

“The gap between the smaller and larger entities is likely to be there irrespective of whether the pace of change persists or not,” he said.

Part of the chasm between smaller and larger health systems involves resources, but part of it is cultural (Aluko said resistance to change can be a problem at large systems, too). Small systems can overcome the gap in making the transition to fee-for-value by forming partnerships with larger systems, by ensuring they have the relationships for consults or transfers for complex cases, or even by making themselves candidates for acquisition.

None of this can occur, Aluko said, without a commitment to cultural change. “Visionary organizations already know the train has left the station,” he said.

Asked whether telehealth could help smaller, remote hospitals in the transition to fee-for-value, Aluko said the technology can create opportunities for savings if smaller hospitals can avoid a costly transfer by doing a remote consult instead. State-level barriers and reimbursement questions remain, however.

The Burnout Problem

Ernst & Young’s survey highlighted the problem of physician burnout, which is severe enough for the American Medical Association to report it by specialty. Aluko said the combination of physician burnout and nursing shortages means that critical, frontline workers “are essentially sounding a clarion call that there is a public health crisis.”

This is critical, he said, because of the “inflection point” that healthcare has reached in striving to make the move to fee-for-value. Achieving transformation with a workforce in crisis will be a tall order, and it’s not because doctors are aging—the burden is starting in medical school with increased administrative burdens, Aluko said.

While there’s been good scholarship on the problem, he said, “we need to go beyond the white paper conversation” and take concrete steps to improve the work life of doctors and nurses.

Medical Errors Still Occur

These challenges play out as medical errors, which still happen too frequently despite the movement toward measuring errors and quality. The survey uncovers gaps in the commitment toward reducing errors, which Aluko said must be systematically tracked. The findings arrive as Congress weighs a bill that would cap “pain and suffering” awards from medical errors at $250,000, on the grounds they lead to higher medical costs and defensive medicine.

Ending errors means “creating a culture of accountability and reliability in the organization’s system of checks and balances at every inflection point, through clinical processes and through all clinical algorithms and protocol,” he said.

It’s a lot of work, and it takes systems to identify errors and eliminate them, Aluko said.