Market Overview

Study: Despite Improvements, Academic Medical Centers Trail Non-Academics on Cost and Quality Metrics

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Navigant analysis of Medicare cost and quality data suggests higher
AMC operating expenses aren't contributing to better quality performance
compared to non-AMCs

Despite steady improvements, a new analysis shows academic
medical centers (AMCs) generally trail non-AMCs across a variety of cost
and quality metrics. The study
from Navigant
(NYSE:NCI) also found that quality outcomes are not
significantly better at high-cost AMCs and non-AMCs, compared to
low-cost ones.

According to the analysis, Medicare median wage and case mix index
(CMI)-adjusted cost per case was 5.8% higher at AMCs versus non-AMCs in
2017. This equates to an estimated $3.1 million in average added annual
operating expenses for traditional fee-for-service (FFS) Medicare
patients per AMC analyzed.

In addition, a 22% cost per case disparity exists between high (25th
percentile) and low (75th percentile) performing AMCs, compared to 19.8%
for non-AMCs. Thus, the differential for low performers would amount to
approximately $12 million per AMC and $9.2 million per non-AMC in added
annual operating expense attributed to Medicare FFS patients, compared
to high performers.

Analysis results also suggest:

  • AMCs received more overall value-based program penalties from
    2016-2018, with 40% getting seven or more of nine possible penalties
    versus 23.1% of non-AMCs.
  • Although AMC overall weighted performance on CMS readmission,
    hospital-acquired condition, and value-based program measures
    increased 10.4% from 2016 to 2018, AMC scores still trail
    non-AMCs by 1.3 points.

"While AMCs have earned strong reputations for cutting-edge and
specialty care, our previous experience has found most AMC admissions
and procedures could also be performed at non-AMCs," said study author
and Navigant Director Christopher
Stanley, M.D.
"As healthcare transparency increases, AMCs performing
poorly on analyzed measures of care may face lower patient volumes, a
decrease in revenue through CMS and commercial value-based payment
models, and less favorable payer partnership opportunities. Results from
this analysis reinforce the need for AMC quality and cost performance to
be in line with non-AMCs."

Facilities struggling with value-based programs could face further
financial pressures due to such trends as:

  • Quality indicators driving patient-care decisions: With consumers
    increasingly using value-based program indicators to decide where to
    seek care, poor performance on such metrics could impact patient
    volumes – specifically commercially insured patients.
  • Growing revenue at-risk through alternative payment models (APMs):
    Traditionally active APM participants, AMCs performing poorly on
    quality measures may face penalties and miss bonus opportunities under
    both public and commercial models.
  • Partnerships impacted by performance: As accountable care
    organizations look to increase influence on patient-care decisions and
    payers become more selective in contracting choices – including
    through increasingly popular Medicare Advantage plans – facilities
    with poorer quality and cost performance may be cast aside by these
    influential partners that drive patient volumes.

Approaches AMCs can implement to minimize these negative implications
and improve quality and cost include:

  • Utilize industry-wide benchmarking data comparing performance against
    peers.
  • Engage leadership, physicians, and other staff for buy-in on
    enhancement strategies.
  • Focus on retaining customers by building tight provider network
    relationships across the care continuum and common standards for
    access, quality, and cost.
  • Leverage evidence-based clinical protocols to address clinical
    variation.

Navigant's analysis is based on data from 387 U.S. hospitals (175 AMCs,
212 non-AMCs) with more than $500 million in annual net patient revenue
and 10,000 annual discharges. Facilities that didn't report financial
data in 2016 and CMS value-based program scores for FY 2018 were
excluded from the analysis.

About Navigant

Navigant Consulting, Inc. (NYSE:NCI) is a specialized, global
professional services firm that helps clients take control of their
future. Navigant's professionals apply deep industry knowledge,
substantive technical expertise, and an enterprising approach to help
clients build, manage, and/or protect their business interests. With a
focus on markets and clients facing transformational change and
significant regulatory or legal pressures, the firm primarily serves
clients in the healthcare, energy, and financial services industries.
Across a range of advisory, consulting, outsourcing, and
technology/analytics services, Navigant's practitioners bring sharp
insight that pinpoints opportunities and delivers powerful results. More
information about Navigant can be found at navigant.com.

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