Volume- to Value-Based Reimbursement: Impact on Hospitals and Radiology

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By Jordan Hermiller, MHA, CPHQ, RT(R)(QM) 

Americans pay nearly twice as much for healthcare as citizens of other developed countries, yet we aren’t twice as healthy and certainly don’t live twice as long. There are various causes for these high costs, but one trait they share is they’re at least partially caused by how we’ve traditionally paid for healthcare in this country: fee-for-service (FFS). Under this model, the only financial risk to the provider is to perform enough services to cover fixed costs. However, in all instances, more services are better, whether warranted or not. Not only does this lead to high costs; many argue it discourages quality care which would keep patients healthy and out of the hospital.

Skeptics argue that FFS promotes competition and works well in most other industries. However, the lack of cost and quality transparency in healthcare leads to misaligned incentives between primary stakeholders: hospitals, payers, and patients.

This was the impetus for the Affordable Care Act (ACA), which was the government’s answer to reduce costs by financially incentivizing value, rather than volume of services. Much of this was overshadowed by the highly politicized mandates to increase insurance access. Nevertheless, one belief that continues to receive strong bipartisan support is the need to reduce healthcare costs through holding hospitals financially responsible for the health of their patient population. Whether value-based reimbursement (VBR) is the next failed attempt at lowering healthcare costs remains to be seen, but we know it has strong support from key stakeholders and drives a substantial and growing share of healthcare.

As we continue on this transition from FFS to VBR, hospitals must be open to change and appreciate that each will have its own path to success. As leaders in radiology, we must understand our role in this bigger picture in order to participate in decision-making and ensure the success of our departments and hospitals.

Studies have proven radiology’s impact on population health through longer life expectancy and declines in mortality, as well as reducing costs through fewer readmissions and shorter lengths of stay. Nevertheless, radiology has been used as a scapegoat for high healthcare costs due to utilization rates and exam costs which far exceed those of comparable countries.

Radiology has historically been looked at as a key revenue driver for hospitals. Thus, leaders have been judged largely on revenue growth, primarily as a result of increased volume. While much of our value will still be in maximizing revenue, the formula for doing so will change.

Instead of acquiring the latest scanner to attract more patients and physicians, our job might be to convince them it isn’t likely to improve outcomes or population health to a degree that justifies the cost. In the past, excessive or unnecessary exams meant more revenue and job security for us all. Going forward, performing tests unlikely to improve health will only shrink profit margins and lead to cutbacks.

In my session at the 2018 Annual Meeting, “Volume- to Value-Based Reimbursement: Impact on Hospitals and Radiology,” we will explore strategies for hospitals and radiology departments to succeed in this value-based environment. I will also be presenting this session as a webinar on May 24 (free for AHRA members!).


Jordan Hermiller, MHA, CPHQ, RT(R)(QM) is a senior radiology advisor at Select Specialty Hospital in Columbus, OH. He can be reached at jhermiller@selectmedical.com.

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