Hospitals, Pharmacies and Value-Based Purchasing

By Matthew Wolf |

The shift from fee-for-service means pharmacies can deliver more value.

Where’s the value in Value-Based Purchasing? While not exactly in the eye of the beholder, the concept certainly is up for consideration among hospitals and health systems.

The Centers for Medicare and Medicaid Services (CMS) Hospital Value-Based Purchasing (VBP) program provides payments to — or extracts penalties from — hospitals based on quality performance measures compared to other hospitals in the program and their own performance over time. In response, individual facilities or health systems are looking for ways to cut costs, enhance quality and improve margins as payers shift away from fee-for-service reimbursement.

For fiscal year (FY) 2017, CMS estimates $1.8 billion will be available for value-based incentive payments to hospitals.1 The amount is funded by CMS withholding 2 percent of VBP-participating hospitals’ Diagnosis-Related Group payments.2

About 55 percent of hospitals will earn positive pay adjustments for FY 2017, compared to 59 percent in FY 2016, according to analysis of CMS data. Payment changes will range between 0.5 percent and -0.5 percent for about half the hospitals in the program.3

At large, industry-leading organizations, such as Henry Ford Health System and Cleveland Clinic, executives say the financial impact matters less than adhering to program components that represent good care and doing the right thing for patients.4

However, many hospitals don’t have the resources and infrastructure of these large health systems, so there’s more to consider and evaluate when it comes to VBP, especially as it pertains to pharmacy operations.

Why Pharmacies Are Key Under VBP

As hospitals transition from fee-for-service to fee-for-value, there is a paradigm and cultural shift to understand that organizations can’t merely drive up patient volume to generate revenue. Hospitalizations will affect them negatively in the new model of value-based care, where key metrics focus on clinical and quality performance.

On one hand, we see this realization unfolding in mergers and acquisitions, where hospitals are buying physician practices, infusion centers and ambulatory surgery centers to extend their reach in outpatient service lines.

At the same time, hospitals are applying information technology to identify high-risk patient populations with chronic diseases — groups in which up to 50 percent of individuals fail to adhere to their prescribed drug therapy5 — and investing in resources to help manage these high-risk patients so that they don’t end up as readmissions.

Most hospitals are doing their part in-house to reconcile patients’ drugs, provide counseling around their disease state and medication regimen, and making sure they have an adequate supply of medications upon discharge. But, going forward, the bulk of medication management will take place in the outpatient world. In this regard, hospital-supported ambulatory pharmacies are uniquely qualified to provide coordinated, patient-centric drug therapy for patients and operate as the “gatekeeper” in managing medication adherence as patients transition out of the hospital and sustain in the community setting. In doing so, they will help the hospital control the care continuum, increase revenue and improve service quality.

Impact on Pharmacists

Today’s pharmacists must be equipped and competent to contribute their skills in concert with other patient “touch points” along the care continuum.
The reality is that a pharmacist may be following a patient after discharge and chronically managing that patient for 90 or 180 days, depending on the contracted level of risk in the care model. Practical examples of pharmacist involvement would include medication reconciliation, medication synchronization and a much deeper level of engagement in maintaining medication adherence and compliance. Pharmacy will also be asked to play new roles in clinical care and patient engagement both within the walls of the hospital and outside the walls in the community setting.

In some cases, pharmacists may need further education/training or renewed proficiencies. In particular, pharmacy leaders should fully grasp how their pharmacy department is performing within areas such as CMS core measures as they relate to readmission reduction. Additionally, pharmacists should be assertive in promoting the profession of pharmacy to health system leadership and the positive impact it can provide.

These efforts will lead to new opportunities to collaborate with health system executives and care teams in the emerging environment of transitional care and population health.

1. Centers for Medicare and Medicaid Services. Hospital VBP program tables.
2. Centers for Medicare and Medicaid Services. Hospital Value-Based Purchasing.
3. Modern Healthcare. Fewer hospitals earn Medicare bonuses under value-based purchasing.
4. Modern Healthcare. Should Medicare pull the plug on value-based purchasing?
5. American Society of Health System Pharmacists. Report of the 2012 ASHP task force on accountable care organizations. Am J Health Syst Pharm. 2012:69:e56-66; Academy of Managed Care Pharmacy. Pharmacists as vital members of accountable care organizations.

About the Author

Matthew Wolf

Senior Vice President, Business Development, Health Systems and Specialty Solutions
View Bio