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    Top 5 industry challenges of 2016


    It's not easy being a managed care executive today. Successfully navigating the changing healthcare environment can seem like an uphill battle. But despite the challenging nature of the industry, there are some bright spots on the horizon. Most of you agree, for example, that the movement to value, the rise of consumerism, and the use of new technologies could transform the industry for the better—it's just a matter of turning that potential into reality.

    Unfortunately, that's where many of you are struggling, according to the results of Managed Healthcare Executive's 2015 State of the Industry Survey. The survey findings, based on more than 600 responses from executives at health systems, health plans, pharmacy benefit organizations, and more, show the biggest challenges today and in the year ahead. Here's more on the survey results, and what industry experts say you can do to ensure your organization can meet these challenges head on in 2016.  

    Challenge #1: Transitioning to value-based payment

    Moving to value-based reimbursement continues to be a top challenge, according to our survey. While most respondents said their organization has at least started shifting its operations toward value, nearly one out of every five said they have not yet started transitioning and are "waiting to see what works for other organizations."

    Greg Scott, national leader of the health plans practice at Deloitte Consulting, LLP, cautions that this "wait-and-see" approach may be short sighted. "Every health plan and every large provider system has to recognize that demonstrated value will be a key element in payments not too many years down the road," he says. "Beginning to get more experience now seems to be critical so that two and three and four years from now, the learning curve is not too steep, the payment risk is not too high."

    Of the 81% of survey respondents who said they have started shifting operations toward value:

    • 35% said they have started a few initiatives in this area;

    • 23% said they have started many initiatives; and

    • 23% said most of their business/operations is focused on value.

    "The results, to me, demonstrate a fair degree of honesty, in that sometimes both plans and providers have a tendency to overstate how much value-based payment is occurring in their book of business," says Scott. "I think that 35% saying they have a few initiatives started, whether that might be bundled payments, or Patient-Centered Medical Homes, or quality-driven payments to supplement fee-for-service-based payments, that sounds about right. With a quarter saying the majority of their business is focused on value--that's quite conceivable. There are some plans, and some provider-based plans, and some integrated delivery systems that are working in a very heavily-capitated or prepaid environment or otherwise have significant value-based arrangements."

    In 2016, there will be some incremental growth in the percentage of respondents who are fully focused on value in 2016, but there likely won't be a "massive tipping point," says Scott. "[Focusing primarily on value is] hard to do in many parts of this country, no matter if you're a plan or a provider."

    Ceci Connolly, managing director of PwC’s Health Research Institute, agrees that it may take some time before the number of organizations fully focused on value significantly increases. In fact, she says, even some of the most advanced organizations with great desire to move to value currently only have about 5% of their revenue at risk.

    So what's holding managed care organizations back from fully shifting to value? Connolly says, for many, it may be a scaling problem. "... By that I don't necessarily mean scale of a company or of an organization, but scale of the effort to move away from fee for service," she says, citing findings from a recent PwC report. "What we found was the organizations that were doing some bundled payments and engaged in Medicare advantage, and were maybe a part of an ACO, all of those efforts combined got them to a critical mass, and you really need to head in that sort of a direction of a tipping point to walk away from the very solid revenue stream that fee for service provides."

    There are also operational challenges associated with the shift that may be holding some organizations back, says Scott. On the provider side, many lack the data-driven care management capabilities to be successful, and/or they lack incentive systems that change provider behavior to focus more on cost and quality, he says. On the plan side, many are struggling to collaborate more closely with providers who don't always have the right capabilities for a value-based model, and who might be concerned about how value will change their business model. "It's not just [about] throwing the dollars over the transom, but really working with providers in much more of a partnership model," says Scott.

    For providers gearing up to participate in a value-based reimbursement initiative, Connolly advises focuses closely on efficiency. "... For some period of time, the alternative payments may in fact generate less revenue, so you've got to be prepared as an organization for that initial financial squeeze," she says. It's also critical to remember that physicians who are accustomed to operating in a fee-for-service world are going to have to do their jobs very differently and rely much more on a coordinated approach to care that includes nurse practitioners, pharmacists, data experts, and so on, says Connolly.

    Next: Challenge #2 - Turning data into action 



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