Is healthcare in denial about pay-for-performance?

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Healthcare stakeholders offer contradictory notions of the direction of their business. Most believe current business models are sustainable even though economic and legislative trends point in a different direction, according to a recent KPMG survey.

The New York City-based accounting services firm questioned 104 executives representing healthcare providers, 51 payers and 54 pharmaceutical companies, and discussed the results during an Aug. 22 webinar.

Asked about the sustainability of their industry’s current business model over the next five years, the largest group of respondents from each group answered “somewhat sustainable” from five possible answers ranging from “extremely sustainable” to “not sustainable.” Fifty-three percent of payers’ representatives, 43 percent of pharmaceutical companies’ and 40 percent of providers’ answered similarly.

The largest provider and payer groups indicated they also believed that major changes are headed their way, with 65 and 41 percent of the two groups respectively reporting that “major changes” are en route. Only 24 percent of pharmaceutical companies reported the same. Similarly, providers and payers were more likely to foresee steady or rapid integration over the next several years. A majority of providers indicated that they plan to cut Medicare rates to a point where they will only break even, but 85 percent believed they have enough market power to influence commercial rates.

The findings suggest that many healthcare organizations are working to sustain the volume-driven status quo despite a shift in healthcare toward pay for performance, according to Ed Giniat, KPGM’s healthcare and pharmaceuticals national sector leader. The most successful will recognize that times are changing.

“Organizations are clearly considering the effectiveness of fee-for-service business models, but migration to more value-based models will take time, and will include a mix of old and new delivery and payment systems,” said KPMG’s Giniat. “The only way for more rapid integration to occur is for stakeholders to lead the change and make it happen, but many organizations are using techniques more aligned with sustaining existing models.”

Based on these results, researchers concluded that healthcare organizations from all sectors should develop short-term models in anticipation of revenue transformation and execute partnerships across sectors.