Bob Matthews

January 29, 2018

A Really Confusing Year In Washington – Part 2

Medisync Blog

In another posting we explored the effects on large health systems and some independent groups if the ACA was terminated. We predicted that the loss of Medicaid and subsidized Exchange health coverage would decimate many health system’s revenues at a time when provider financial performance is already very distressed.

There is a second issue under consideration: Is the federal government going to continue an aggressive push to meaningful value based payments? Under the Obama administration, the shift towards Medicare and Medicaid payments based upon value was remarkable, even intense.

We find that there are three attitudes about the shift from volume to value among medical group and health system leaders:

  1. People who wish that value would just go away so that we could stay in the fee world which we understand very well. People seldom embrace change and the shift from volume to value is huge and scary.
  2. Those who believe that value is inevitable and who want to limit value to as small a degree of total compensation as possible.
  3. Those who believe that, if we are going to do value, let’s get to a form of value where we can make real money on the delivery system side. Value agreements that are plus or minus a silly, trivial amount of money don’t help anybody; they are just an annoyance. In the face of declining fee revenues, we need meaningful opportunities to increase provider revenues.


Those who prefer fees based upon volume have typically not been watching what is happening in the fee environment. The significant, even relentless, erosion in real income to providers has continued to a point where groups and hospitals are directly threatened.

I haven’t met anyone who believes that traditional physician and hospital fees are going to be increased. Both Medicare and the commercial carriers are dealing with a total cost of care that is unsustainable for employers or for the government.

Thus, providers need to deal with a relentless decline in real revenue or, as an alternative, find opportunities for real revenues from value. Value is the only way that I can see to financial stability on the provider side.

Prior to the election, it was the general impression of most people that MACRA was simply a waypoint on the journey towards a more compelling – and, therefore, potentially more remunerative – form of value in which groups could make up for what they are losing on the fee side.

When he was Secretary of Health and Human Services, Dr. Tom Price did not appear to be very favorably disposed towards value. Many believed that, had he remained, he would have done all that he could to stretch out the process of introducing MACRA, water down the requirements and in other ways make the MACRA components less meaningful and influential to medical groups and health systems. Secretary Price quickly ruled that two thirds of the physicians in the US did not have to participate in MACRA, at least in the near term, which pretty much killed the entire force behind MIPS (i.e. competition based upon quality and cost).

If the federal government slows its push and commitment to value, then provider organizations – systems and groups – will have an even more complicated set of strategic issues and decisions to face. The first is, how long can they hold on in the face of declining real revenues and escalating overhead?

Many of today’s mergers between systems are driven by the hope of getting commercial revenues to increase. But the price of health insurance premiums is so high that employers and their employees are increasingly tapped out except in the most lucrative economic sectors. Google and Facebook can pay their employee health benefits, but how many more companies have that kind of money?

The years 2018 and beyond look very challenging for medical groups and health systems in all but the most highly compensating markets.

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