stethoscope

This post was written by Ryan Baum, Director here at Jump. You can find him on Twitter @RMBaum, or get in touch with him directly by commenting on this post.

Last Monday, we were met with big news about a change in Medicaid reimbursement policy that’s going to change the way doctors and hospitals get paid.

Even with all the excitement around ACOs, most health care today is still paid for using a “fee-for-service” model. That means the doctor or hospital gets paid for each service they provide regardless of whether the patient gets healthy or not. What the Obama administration announced last Monday, however, is that by 2016, 85% of Medicare payments will be tied to outcomes.

There are still many concerns about the right way to measure “outcomes,” but regardless of that debate, this is still a big deal. As recently as 2011, nearly 0% of Medicare payments were made on alternative pay-for-care models. That number has grown to about 20% today, and we’re already seeing improvements in metrics like hospital readmission. With this new focus—and with proof from the past few years that a model like this improves outcomes—this could have a big impact on the way that care is delivered.

As with all big changes in policy or business, some organizations will struggle with this while others succeed. But one thing is pretty clear: similar to the way schools began “teaching to the test” when school funding became tied to test metrics, hospitals and care providers are going to begin their equivalent of “teaching to the test.” In practice, that means increasing scrutiny around metrics that are likely to impact their reimbursement rates.

One such area that’s certain to get significant attention in the next few years is hospital readmissions. With more at stake financially, we are about to see hospitals and businesses invest significantly more money to improve the transition patients make back to their home. This period of transition is incredibly interesting and challenging for hospitals because even though the patient is physically leaving the contained ecosystem of the hospital, the hospital is still financially responsible for making sure that the patient is not readmitted.

Of course, transition care isn’t an entirely new space. There are reimbursement codes for transition care management and many companies are actively trying to figure out how best to support hospitals as they transition patients home. This includes everything from companies building care management platforms like Qualcomm’s HealthyCircles to health education companies that provide educational pamphlets and videos like Elsevier’s ExitCare. But these companies, as well as hospitals, should prepare for a large influx of investment and competition in this space.

The hospitals and companies that are going to emerge successful from the next few years have a difficult adoption problem to solve. They need to balance the often-conflicting needs of patients–who want to return to a life that feels normal–with the needs of the hospital –which wants to change the patient’s life to protect them from a world that got them into trouble in the first place.   But not even that nuanced understanding of human behavior is enough. These organizations will also need to design compelling solutions that integrate into a complicated healthcare business model that has technologies and reimbursement protocols that are constantly in flux.

Succeeding in the world of transitional care will require strong leadership and the unique ability to develop a new business offering in a hybrid way. That means uncovering the needs of multiple stakeholders, designing a compelling new offering, and developing a business model that fits into a system that’s currently in flux. This will require increased attention and experimentation now—before it really starts impacting the bottom line.

Those who can figure out how to effectively manage the moment of transition will win big—both financially and by improving the lives and outcomes of millions of people. Those that don’t will be left behind with a very expensive and outdated model.

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photo credit: Stethoscope via photopin (license)