In what seems to be an ongoing trend with no end in sight, consolidation in the U.S. health care industry continues to progress on every front. Merger-and-acquisition activity in 2015 reached a record high, giving rise to ever-larger payer entities, health systems and accountable care organizations (ACOs), integrated delivery networks (IDNs) and physician groups – including in radiology –all amidst some major vendor shakeup.
Perhaps the biggest corollary trend to this seemingly unstoppable consolidation drive is the shift of risk across the health care value chain. Significant risk transfers are being carried over by the new shared-risk agreements and payment models that are slowly but surely being inked between health care payers and providers.
The Inevitable Shift of Risk from Payers to Providers and Patients
Close to 800 public and private ACOs, with a growing catchment of approximately 20% of the U.S. population, are at the table with their payer partners at various stages of developing and implementing new types of risk-sharing contracts.
While there is no clear indication as to which of the ACO, the capitated or the bundled payment model will ultimately prevail, these new payment structures all have one thing in common: they have providers take on much of the financial risk, which, under the conventional fee-for-service payment models, used to be borne single-handedly by the payers.
This also holds true for the newly introduced payment structures under Medicare Payment Reform (MACRA), of which Merit-Based Incentive Payment System (MIPS) will likely be the main model used to remunerate radiologists’ professional services.
What’s more, with increasing insurance premiums and co-pays that incentivize them to be more engaged in and responsible for their own health, the patient is essentially being led to absorb some of the risk, too.
Next Logical Step: Shared-risk Contracting with Vendors
As a natural consequence of this shift of risk onto their customers on the provider side, the large imaging vendors have stepped up in their financial willingness and organizational readiness to take on more risk.
Under risk-based contracting, just like they get paid by payers based on the value and outcomes of their health care services, providers pay vendors based on the value and outcomes a technology solution has provided—not a pre-set price.
The U.S. market is currently witnessing what seems to be an accelerating pattern of large-scale, long-term, enterprise-level partnerships between vendors and IDNs through managed equipment services (MES)-type contracts built around shared accountability, including shared gains and vendor penalties.
While not fully shared-risk contracts, the risk element in these multi-hundred-million dollar deals is maturing at an increasing pace. Similarly, while they pertain mainly to capital purchasing of big-iron imaging equipment, some of these deals extend into the less capital-intensive areas of patient monitoring and informatics as well.
Existing Business Models Containing Risk Mitigation
In effect, any IT system’s service-level agreement (SLA) that provisions vendor penalties, typically against under-performance or downtime, is essentially a way of mitigating financial risk between the vendor and the customer—of course provided the SLA is enforced and these provisions executed.
The same can be said about the application service provider (ASP) and other related managed services models applied to imaging IT, which tend to be purchased by providers through operating expenses (OPEX).
Although these managed service models have not been adopted in a significant way in the U.S.—with a few notable exceptions, including Philips Healthcare in radiology PACS, and to a lesser extent McKesson and Carestream Health—they are becoming more attractive as imaging IT infrastructures become more service-oriented and virtualized.
In the same vein, the new generation of cloud-based software-as-a-service (SaaS) and infrastructure-as-a-service (IaaS) imaging informatics solutions, with the various usage-based pricing models they entail, push the risk mitigation agenda even further.
Over the next few years, we can expect to see risk-sharing in imaging IT gain more ground, while various existing business models evolve further towards outcomes-based operational purchasing.
Which Metrics Could Be Used for Risk Contracting in Imaging?
Clearly, the ability to pinpoint the quality outcomes and quantify the added-value of imaging technology, most likely through analytics, is a prerequisite step to any effort on the part of vendors and customers to agree and contract around various key performance indicators (KPIs) or outcomes metrics.
“What are the outcomes of imaging?” is perhaps the most challenging question posed to the field of radiology as it embarks on its transition to value-based imaging. There is clearly no single answer to this question yet, but a growing body of possibilities and pointers.
At a high level, the discussions are advancing around the feasibility of tying imaging technology investments to the same outcome metrics that health systems are being measured on and benchmarked against.
For example, some organizations are inching closer to finding more robust ways of quantifying imaging technology’s impact on reducing the average length of stay (LOS), the 30-day readmission rate, the mortality index, the 30-day mortality rate, the time to service in the emergency department, the Medicare Spend per Beneficiary (MSPB) index or the complications index. This appears to be feasible in patient care pathways that involve a large imaging component.
Similarly for measuring the impact of imaging on HCAHPS scores, which would indicate a better patient experience from imaging episodes, or on Core Measures, which would indicate greater care compliance in the appropriate use of imaging.
Developing Outcomes Metrics Specific to Imaging
Drilling down into metrics that are more directly attributable to imaging, vendors and providers are starting to tap into some existing resources – such as the Physician Quality Reporting System (PQRS), the Healthcare Effectiveness Data and Information Set (HEDIS) or the National Quality Forum (NQF) – in which between 2% and 5% of the outcomes metrics laid out pertain to imaging. In addition, new metrics are under development notably though the ACR Imaging 3.0 or RADPEER initiatives.
In the not-so-distant future, we can start to envision a higher degree of shared-risk contracting around outcome metrics specific to radiology. These will likely stem from imaging IT vendors working with some of their close customer partners.
The Next-generation Vendor Pitch
Concretely, here’s anecdotally how a vendor pitch could sound like under a shared-risk selling approach:
“We are in a position to commit to the fact that our latest imaging workflow and collaboration platform can help drive measurable improvements in the productivity and quality metrics of your imaging service line.
They will drive shorter report turnaround times and time-to-access to imaging equipment, and higher relative value units (RVU) per radiologist, patient throughput, and asset utilization. They will further drive incremental increases in the in-sourced study volume currently being outsourced, in the proportion of inaccurate interpretations corrected through peer review, and in the average time spent by radiologists consulting with physicians.
As is, the licensing costs for this solution in an organization of your size would be $1 million, though we are willing to deploy it at-cost and have you reward us $10,000 for every percentage point increase to each of these outcomes metrics.”
Time will tell whether providers will develop a bigger appetite for this type of working arrangement with their vendors, and, if they do, whether vendors will be able to execute on the deep internal transformations required by these new business models.
As some vendors start to elevate this type of conversation with some of their customers, for example by implementing the Capability Maturity Model Integration (CMMI) of the CMMI Institute, it seems that the imaging IT industry is indeed starting to move in this direction.