A September 2014 report by the Commonwealth Fund found that 25percent of hospital spending in the U.S. is related to administrative expenses – a whopping $200 billion. One of the major components of hospital administrative costs in the U.S. is the complexity involved in working with multiple payers with varying payment rates, rules and documentation requirements. As we consider leveraging alternative payment models to improve the quality of care received in the U.S. we must be mindful of the administrative costs associated with doing so.
The transition from fee-for-service to pay-for-value has been referred to as one of the greatest financial challenges the U.S. healthcare system currently faces. The first annual HIMSS Healthcare Cost Accounting Survey was designed to check the pulse of provider readiness for making this change, and provide a better understanding of how the industry can help providers manage this major challenge in the most effective, least disruptive way possible. Responses to the survey clearly indicate that although hospitals and provider organizations are willing to embrace value-based payment models, few believe their organization is well-prepared to do so. Healthcare providers and delivery systems are looking to the industry to help them develop a consistent approach to the terminology/definitions and business processes and tools used to support these new payment models and to build the technical infrastructure necessary to facilitate the underlying activities. They are specifically interested in:
- Tools to track and evaluate quality of care;
- Better communication between disparate providers;
- Consistent definition of quality by specific type of disease; and
- A consistent approach to:
- Cost accounting;
- Establishing price;
- Sharing pricing information with patients; and
- Managing the exchange of clinical and financial information between all entities involved in a particular episode of care
Providing this level of leadership and support to those being held accountable for achieving the goals of payment reform – improved quality of care for specific populations, reduced per capita health care costs, and improved patient experience – will ensure a smoother transition and greater opportunity for success. Adopting a consistent approach to clinical requirements, business process and rules of engagement will guarantee that cost savings achieved on the clinical side are not negated by additional expenses being incurred on the administrative side.
The HIMSS Alternative Payment Model (APM) Infrastructure Task Force will address these and other important issues related to the business side of administering APMs. We are looking for healthcare payer, provider, vendor and association professionals with direct cost-accounting, provider-payer contracting, quality reporting and revenue cycle management experience to join this effort. If you are interested, please contact Pam Jodock at (312) 507-9924 or firstname.lastname@example.org, or Joanne Bartley at (312) 915-9251 or email@example.com.
About the author: Pam has more than 25 years' healthcare industry experience. As the Senior Director of Health Business Solutions for HIMSS, she oversees the overall management and strategy development for HIMSS Health Business Solutions initiatives.
 Common Wealth Fund. “A Comparison of Hospital Administrative Costs in Eight Nations: US Costs Exceed All Others by Far.” September 8, 2014. http://www.commonwealthfund.org/publications/in-the-literature/2014/sep/hospital-administrative-costs
 Brown, Bobbi and Jared Crapo. “The Key to Transitioning from Fee-for-Service to Value-Based Reimbursement.” 2014. https://www.healthcatalyst.com/hospital-transitioning-fee-for-service-value-based-reimbursements