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Hospital Efficiency Programs: The Evolution Of Service Line Management

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Hospital Efficiency Programs: The Evolution Of Service Line Management

In preparation for the continuing shift to payment structures that focus on clinical outcomes and best practices, hospitals/health systems have been considering a diverse array of operational and structural options. Many of the hospital and system-wide programs currently being considered and implemented represent an evolution of service line arrangements that link physician compensation to measurable improvements in quality and clinical outcomes (e.g., co-management arrangements).

One of the challenges inherent in the newly developing performance-based payment systems involves the reality that the achievement of enterprise-wide operational goals will require multiple, and often disparate service lines to work together for the attainment of common objectives. As a result, there has been a trend toward expansion of single service line co-management arrangements into more comprehensive hospital or system-wide arrangements, which incorporate multiple service lines across one or more hospitals. These types of arrangements, often referred to as hospital efficiency programs ("HEPs") or hospital quality & efficiency programs ("HQEPs"), may also be thought of as hospital or system-wide, multi-service line co-management arrangements.

The overarching goals of these comprehensive arrangements are to utilize incentive-based compensation to improve outcomes, efficiency and quality while reducing costs. The achievement of these goals will prove critical as value-based purchasing and shared savings programs continue to exert significant pressure on hospitals/health systems to meet operational and quality targets or face significant financial penalties.

Consultant and Doc Discussing.jpgFurthermore, combining the advantages of a HEP/HQEP with a hospital or system-wide clinically integrated network or "CIN" offers further advantages, including the addition of population health and post-acute care initiatives as well as collective contracting with payors based on arrangements that drive clinical and operational improvement such as pay-for-performance and value-based purchasing programs.

FMV Pitfall

Performance-based compensation measures may include several types of incentives, including (i) quality measures that may not have any direct dollar savings associated with their achievement; (ii) performance improvement measures that tie compensation to the achievement of specified performance thresholds; and/or (iii) gain-share like incentives that link payment to a percentage of savings achieved. However, incentives that link payment to a percentage of achieved savings must be capped to ensure that the total amount of payments, including all performance-based incentives and fixed-fee tasks, do not exceed the upper limit of the calculated FMV range.




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