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Custom Data in Action: Rural Hospital Payment Analysis Determines Viability of Alternative Payment Model

Alternative ways to pay for health care are gaining traction across the nation. Major players in the industry like the Centers for Medicare & Medicaid Services are moving away from the traditional, fee-for-service payment models and exploring innovative approaches to improve care and contain costs.

Though they may support the intention behind the changes, for facilities and providers, the shift toward these new models is not without risk.  Health care billing is an established system and large overhauls can have significant consequences. Claims from the Colorado All Payer Claims Database (CO APCD) are perfectly suited to helping facilities, providers, hospital systems, and health plans gauge how a new payment model may impact their business.

Recently, a health plan approached a hospital in rural Colorado about implementing a capitated payment model where the facility would receive a set amount of dollars per patient, regardless of diagnosis or treatment. Under this pay-for-performance type of system, in order for the hospital  to remain viable, cover costs, and potentially make money, they have to provide exceptional care to each patient and minimize complications or costly services like readmissions and ER visits. The theory is that, over time, revenue generated from providing exceptional care and keeping patients healthy will make up for costs associated with treating the sicker or more complicated patients.

Knowing that they serve many uninsured patients as well as those without sufficient coverage, the hospital was unsure that their already low reimbursement rates and charity care expenses would make the proposed model financially viable. To analyze the impact of the new model and to see how their current reimbursement rates compared to other rural hospitals in the state, they used claims data from the CO APCD. They compared average charges, allowed amounts, plan paid information, and member responsibility for other Colorado hospitals serving similar populations to their own. The analysis determined that the hospital’s pricing was in line with other rural facilities and, in some cases, lower. As a result, the health plan did not move forward with the capitated payment model.
 

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