Repeal? Repeal and replace? Repeal and delay? As of this writing, the U.S. Senate is working its way through a short list of alternatives and likely finding that none of them will succeed. There seems to be a growing consensus that the Affordable Care Act (ACA or “Obamacare”) will not be repealed or replaced. Rather, it will likely be modified in a bipartisan effort to improve its deficiencies, and probably be given a new name.
These political maneuverings could absolutely cut critical funding for Medicaid (and Medicare), and impact providers’ ability to seek reimbursement for their services to a range of patient populations. However, by working closely with healthcare clients we know that many providers had already begun their own transformational journeys long before the current Senate voting frenzy. Charged with driving the “Triple Aim” of clinical quality, patient experience, and efficiency, many have assessed their patient populations with respect to managed care, Medicare, Medicaid, and uncompensated care and have identified specific services which they can grow and for which they can be compensated at higher rates. They are not necessarily able to stop providing specific services or to stop serving certain patient populations. Rather, it is their ability to improve their expertise and capacity for providing expanded targeted services to specific types of patients that will drive revenue to offset the diminishment associated with having to continue providing ongoing services to other types of patients. Those more exposed to Medicaid reimbursements and/or who believe that the current administration will indeed take away funding are more compelled to change their care strategy.
Executing new business strategies in healthcare, including all of the capital, human, and physical asset investments necessary, is hugely expensive. Seemingly all hospitals and healthcare systems are actively engaged in some type of move towards efficiency, with value-based payment reform key among many. Forming accountable care organizations requires providers to improve care coordination across the continuum of care and to deliver better outcomes, which in turn requires structural changes to the organization, integration of IT across platforms, and often the hiring of additional staff. Again, those sensing a greater need for efficiency are more compelled to action; healthcare organizations are at many different stages of risk-based contracting, from those operating solely in a fee-for-service environment to those that are taking on considerable risk across all or most patient populations.
Ramping up effectiveness in certain areas of care and achieving efficiencies by living up to risk-based contracts requires sustained collaborative contribution across the executive team. Many provider boards are choosing to position executive compensation as a dynamic management tool to align with the successful execution of these immediate and transformational strategies.
Pearl Meyer has observed that almost all provider organizations, regardless of patient demographics or level of risk-based contracting, utilize short-term incentive plans designed to drive performance against critical financial, clinical, service, and employee goals. The use of long-term incentive arrangements, however, seems to be most prevalent among those organizations whose board believes that their success journey is more transformational and tortuous, and among those believing that traditional executive compensation in healthcare is not effective in the current environment. Directors hope that the executive team can balance their efforts between meeting the immediate needs of fee-for-service reimbursement and building an organization designed to excel in the future. Those that have the capacity to invest in the required value-based payment infrastructure and that can allocate the expense across a large patient population can succeed. It is not surprising then that Pearl Meyer sees quite a number of these long-term plans driven heavily by growth. Many also rely on Triple Aim measures such as patient experience and quality.
While there is no cookie cutter approach to aligning compensation and strategy, themes are beginning to emerge which should help guide those hospitals and healthcare systems that are just now beginning their journey.
