Covid-19 negatively impacted healthcare facilities around the country, and CMS altered reimbursement rates for 2021. With margins thinning rapidly, how can facilities maintain anything close to pre-pandemic profitability?

Last year, Dr. Rajiv Sethi, Chair of the Neuroscience Institute, Director of Complex Spine Surgery, and Medical Director of Health Economics at Virginia Mason Medical Center in Seattle, WA, predicted that another round of healthcare reimbursement reductions was likely imminent due to a continued reluctance to disengage fee-for-service (FFS) financial models. In late 2020, the Center for Medicare Services (CMS) released a new Physician Fee Schedule conversion factor reducing reimbursement rates approximately 10% for all procedure codes ($32.26, down from $36.09) - just as Dr. Sethi and his fellow authors anticipated.

As healthcare costs in the United States continue to rise each year pressure mounts to transform patient care toward value-based reimbursement (VBR). Both Obama and Trump’s administrations supported VBR efforts to control cost but changes have been moderate. There are many reasons for the continued reliance upon FFS (and VBR reluctance) and all share a common theme: misalignment of incentives. Unlike FFS, VBR incentivizes efficient use of resources and lower cost approaches that achieve desired patient outcomes. While efficiency sounds great, the reality is that most healthcare businesses are still profitable enough to ignore the need for reorganization toward VBR that require large amounts of time, effort, and financial resources.

The reduction in reimbursement rates will negatively affect profitability at a time when Covid-19 has already pushed many healthcare facilities to their limit. 2020 was a challenging year for multiple healthcare stakeholders as we saw states limit elective surgeries and divert resources to fighting the pandemic. 2021 is not looking much better (until we all get a vaccine) and facilities need to maintain profitability to keep the doors open and the lights on. How might care be delivered efficiently and effectively to maintain margins during this burdensome time?

One approach has been successfully implemented by Dr. Sethi and his team at Virginia Mason Medical Center. Guided by his research and thought leadership in value-based approaches, Dr. Sethi developed The Spine Safety Improvement Model along with recommendations to increase value and reduce variability throughout the patient care continuum.

Dr. Sethi recommends:

1. Incorporation of LEAN principles and methodology
2. Monitoring outcomes, utilizing registries
3. Standardizing post-op care
4. Coordination of care through co-management pathways
5. Comprehensive Unit Based Safety Programs (CUSP)
6. Mentorship and dual surgeon approaches

As reimbursement amounts continue to dwindle, more and more facilities will be scrutinizing variability and implementing practices mirroring the recommendations of Dr. Sethi. Without major disruption, the transition to VBR has been slow but the added pressures of Covid-19 to existing CMS’ reimbursement reductions will accelerate value analysis, variability reduction, and best practice implementation. Transforming the fee-for-service (FFS) model has been a consistent target of bipartisan support (who would have thought the Republicans and Democrats could agree on something?), and Covid-19’s effect on revenue may become the dominant disruption driving alternative reimbursement models to the forefront faster than previously predicted.

Technology will play a large role in healthcare transitions to come, as big data and machine learning identify areas of waste (variability), care improvement, and financial efficiency. At Relatable Healthcare, we’re tackling the inefficiencies surrounding medical devices and supplies. Our software provides real-time analytics to surgeons and administrators outlining both the costs and items used in every surgical case. Relatable can compare physicians, procedures, devices, and supplies at both a facility level and nationally. We offer financial analysis and instant recommendations for fair-market-value price or product conversion, eliminating waste in the operating room, preventing overspending, and improving margins. If you would like to learn more about Relatable’s transparency goals and how we can help you, check out our website or contact us through this link. 

Additional reading and resources:

Value-Based Approaches to Spine Care, Sustainable Practices in an Era of Over-Utilization by Rajiv K. Sethi, Anna K. Wright, and Michael G. Vitale.

Effective Value-Based Initiatives for Complex Spine Surgery by Kristin Della Volpe, reviewed by Rajiv K. Sethi, MD and Ali A. Baaj, MD

The Five Principles of Lean:

1. Defining Value
2. Mapping the Value Stream
3. Creating Flow
4. Utilizing a Pull System
5. Pursuing Perfection

CMS pitches physician payment rule for 2021: 6 things to know by Ayla Ellison (Becker’s ASC).

CMS pay cut for 26 spine surgeries included in 2021 proposal by Laura Dyrda (Becker’s ASC).

The CUSP Method by The Agency for Healthcare Research and Quality.

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