Recently we explored pricing transparency as one of the three major factors contributing to the consumerization of healthcare. This week will explore how government regulations are becoming another major driving force.

Government regulations are affecting the reimbursement of healthcare organizations. The Hospital Value-Based Purchasing (VBP) Program is a Centers for Medicare & Medicaid Services (CMS) initiative that rewards acute-care hospitals with incentive payments for the quality of care they provide to Medicare beneficiaries.

As VBP continues to expand across the continuum of care, sustainability of full-risk medical practices is directly tied to patient retention and long-term patient enrollment. Prompt service recovery for any issues is imperative for these healthcare organizations to sustain.

Just as in other industries, with VBP we are witnessing the rise of the subscription economy. Today, we are used to getting our entertainment through Netflix, our razorblades through Dollar Shave Club, our food through HelloFresh all for a fixed amount each month.

Healthcare is applying similar methodologies in the form of full risk models with organizations getting paid a fixed amount per member per month. Of course, patient care is a significantly more complicated than a typical subscription model. But the basic business economics still apply.

During the first 12-36 months until a Risk Assessment Factor (RAF) score is established and approved by the payer, the healthcare organization is actually treating that patient at a net-loss. Once the RAF score has been established, then the healthcare organization starts to receive the higher pmpm (per patient per month) reimbursement from the payer. In order to sustain in this new risk-based economy, there are five (5) key considerations which we will highlight in our upcoming release of The Arrival of the Subscription Economy in Healthcare (Chapter 2 of The Next Decade of Innovation in the Patient Experience) which features our conversation with Phil Fegan, CIOP3 Health Group.


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