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Money management: hospital penalties may increase

October 18, 2016
From the October 2016 issue of HealthCare Business News magazine

For the CJR specifically, it is paramount that hospitals and health systems ensure clean, quality data across three months of joint replacement surgical care. All costs for the surgery and associated care are reimbursed to the hospital via a single payment. Then, the organization is responsible for properly and effectively distributing it. Hospitals that hold costs below the target price keep the difference.

Those that don’t must repay Medicare. To profitably manage the bundled payment model, it is critical to gain full transparency across the entire spectrum of a health system's costs, including labor and supplies. The ability to understand the clinical, operational and financial data at the line-item level within an entire CJR treatment plan is essential. The data must be relevant, clean and accurate across all providers within the bundled payment episode. According to one hospital chief financial officer, “If I don’t get my financials right, I could lead the hospital down a revenue loss path. Because this is mandated bundling, the overall costs will eventually come back to either bonus us or penalize us.”

Key considerations
Arguably, bundled payments may have less to do with the concept of great quality care and more to do with being able to efficiently manage care within a fixed fee, allowing CMS to better control its costs. Data availability and governance is crucial to succeeding in a bundled payment model. Not only must all relevant data be accurate and complete, it must also be tracked throughout multiple care settings across multiple disparate HIT systems. This has many providers aggressively pursuing merger and acquisition activity in the post-acute sector. Ironically, while many health systems were divesting themselves of skilled nursing and home-health agencies over the past 10 years, there’s now renewed pressure to re-acquire those same assets in order to regain control of patient care and patient data post-discharge (even though the business units themselves may still yield little to no profit).

Once data is obtained and continuity achieved, appropriate financial and quality analytics must be applied. Traditional revenue cycle analytics are no longer enough. As hospitals shift toward value-based care models, the utilization of analytics becomes more important, even vital, for survival. These new analytics will require detailed transactional data pertaining to clinical outcomes, revenue outcomes, costs and patient satisfaction. Organizations seeing early success in managing bundles are taking a proactive, data-driven, multi-disciplinary approach to analytics, garnering input from finance, revenue cycle, payer contracting, physician leadership, nursing, supply chain, pharmacy, decision support and the CMIO.

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