PHOs Let Quality, Cost Guide Them Toward Value-Based Reimbursement

Thursday, April 16th, 2015
This post was written by Cheryl Miller

Instead of focusing on volume, physician-hospital organizations (PHOs) are concentrating on value-based care, says Travis Ansel, senior manager with the Healthcare Strategy Group. The once revenue-based organizations are now focused on quality and cost, realizing that if they can’t manage those two things, their reimbursement will go down.

Why is the PHO model going to work now? We always get this question. This comes more from doctors than it does from administrators: why are PHOs going to work now, when they didn’t work before? The simple answer is that before, PHOs were revenue-focused. They were about getting the biggest number of physicians into the model regardless of their quality. It was run by the hospital as a methodology for increasing rates. Then fee-for-service (FFS) didn’t really give anybody the incentive to work together.

They gave everybody the incentive to sign their name on the contract and hope for better rates. What we’re seeing PHOs focus on now is quality and cost, with the idea that if they can’t manage those two things, their reimbursement is going to go down. We have clinical integration guidance from the Federal Trade Commission (FTC), which gives everybody the framework for developing joint contracting capabilities and defines legally how we can work together. What we’re seeing now, since there’s more of a clinical than a revenue focus for PHOs, is that they are more dominated by physician leadership. The hospital keeps control over the purse strings, but gives the governance of the group to physicians. They are letting them take the leadership on the cost and quality protocols that they need to develop to be successful.

There is also the way that payment reform is transitioning the incentives. They’re focused on getting quality and cost across populations or across episodes of care. They’re giving the right incentives for collaboration, which the PHO model provides the forum for.

Source: Physician-Hospital Organizations: Framework for Clinical Integration and Value-Based Reimbursement

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Physician-Hospital Organizations: Framework for Clinical Integration and Value-Based Reimbursement describes the relevance of the PHO model to today’s healthcare market, offering strategies to leverage the physician-hospital organization for maximum clinical outcomes, competencies and value-based reimbursement.

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