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Life in the Gap


This year will be a pivotal one in the brave new world of healthcare reform. While fee-for-service and volume-based reimbursement will not disappear, most would concede that those programs’ days are numbered, as public and private payors inexorably migrate to value-based payment mechanisms that hold physicians and hospitals increasingly accountable for more coordinated, safer, higher-quality, and more efficient care.

The Centers for Medicare & Medicaid Services (CMS) is busy putting more provider skin in the game as its shifts from volume to value. It has ramped up its Hospital Value-Based Purchasing Plan (VBP) by adding a third performance domain—quality outcome metrics—to the existing domains of core measure care processes and patient satisfaction scores. VBP will penalize hospitals for preventable readmissions. Armed with a new innovation center established by the Affordable Care Act, CMS is accelerating its experiments with such care and reimbursement models as bundled payments, accountable-care organizations (ACOs), and medical homes. Can it be very long before invitations for provider participation become subpoenas?

While the brunt of value-based reimbursement incentives have so far been directed at hospitals, “At what point will this shift begin putting the practicing physician at risk?” asks Sean Muldoon, MD, MPH, FCCP, FACPM, senior vice president and chief medical officer of Louisville, Ky.-based Kindred Healthcare’s hospital division.

“We’re living in a time of great uncertainty—from the economic, regulatory, and legislative standpoints—and we have to make the best decisions based on what we currently believe is coming,” says Ron Greeno, MD, FCCP, MHM, chief medical officer of Cogent HMG and chair of SHM’s Public Policy Committee.

As change un-folds, some see great opportunity. “Hospitalists are in an enviable position as drivers of change,” says David B. Nash, MD, MBA, professor of health policy and dean of Thomas Jefferson University’s School of Population Health in Philadelphia. “As frontline troops of hospital-based care, they are going to play a critical role in ensuring the most efficient patient stay possible to help hospitals survive under new reimbursement models.”

Evolving Environment

Priorities in an age of reform

  1. Patient satisfaction. These scores continue to weigh heavily in Medicare’s VBP program, comprising 30% of a hospital’s overall quality score. HM needs to weigh in on industry concerns that patient satisfaction survey data are poor measures of quality, Dr. Greeno says. Even so, because hospitalists account for a lot of face time with a lot of patients, they will continue to be on the hook for ensuring that patients have a satisfying experience.
  2. Readmissions and hospital-acquired conditions. As government and private payors increasingly penalize hospitals for preventable readmissions and hospital-acquired conditions, hospitalists are going to be held accountable by their institutions for putting into place process measures that are proven to reduce these problems—DVT prevention protocols, Project BOOST interventions, and other care-transition-improvement programs, Dr. Greeno says.
  3. Greener pastures? Be prepared for another potential impact of health reform: competition for patients. As coverage is extended to millions, voluntary medical staff who previously did not want to take charity-care patients may now be more willing to take ED call, Muldoon says. A hospitalist’s patient pool may shrink further if ACOs catch on, as one of the goals of that model is to prevent hospitalization. In response, Muldoon believes that more hospitalists might look to other care settings (i.e. skilled nursing facilities), where he says reimbursement is approaching that of short-term care hospitals.

Confidence that HM is well-positioned to drive value is especially welcome as the field looks back on 15 years of its existence in a soul-searching appraisal of just how much value it has driven thus far. The evidence is mixed. The profession’s clearest documented success has been preventing delays in patient discharge. That achievement has yet to be buttressed by clear evidence of concomitant gains in quality attributable to hospitalist care.

In fact, a widely publicized study in the Annals of Internal Medicine this year has caused a good deal of hand-wringing, as it suggests that HM-driven efficiency improvements may simply be attributable to shifting costs elsewhere because their patients tend to have higher readmission rates.1

That finding highlights a defining challenge of healthcare reform: how to achieve better value (quality per unit cost) within a care delivery and payment infrastructure that still pays for fragmented care. That infrastructure is trying to achieve the integration that is needed—both in the hospital and post-discharge, with preventive and acute care, at the individual patient and population levels.

“We’re being asked to prepare for an entirely different system, one which cares for populations of patients and tries to keep them out of the hospital,” Dr. Greeno says, “but our payment encourages just the opposite.”

Transitioning to value-based models while still functioning largely in a volume-based, fee-for-service environment is much like having one foot on the dock and one foot on a boat that is leaving the dock. That’s how the American Hospital Association put it in a report it released in September, “Hospitals and Care Systems of the Future.” Providers are struggling to navigate “life in the gap” between a volume-based “first curve” environment that inadequately rewards innovation and a “second curve” environment in which reimbursement is integrally tied to delivering coordinated care that demonstrates value, the AHA notes, using terminology coined by healthcare futurist Ian Morrison.


Hospitalists will need to seize collaborative opportunities with hospitals to develop strategies to navigate this “life in the gap” during the transition to value-based reimbursement models of the second curve. As Jeff Glasheen, MD, SFHM, physician editor of The Hospitalist, provocatively wrote in his September 2011 column: “We must improve the quality of care to levels that, if necessary, Medicare would happily pay more for. This must be our singular goal” (see “Fiddling As HM Burns,” The Hospitalist). Assuming that money will follow quality, hospitals should be willing to invest in hospitalist-led processes and safety improvement activities, which likely will be the standard of care tomorrow, even if they do not turn a profit today.

Hospitalists will be the “effector arm” of crucial care-management practices under new payment models, Dr. Nash predicts. He says HM should focus on helping to make the model work—for example, championing evidence-based protocols and approved drug formularies, eliminating wasteful tests, and promoting better medication reconciliation and care transitions (see “Reconciliation Act,”).“Because they are on-site full-time, hospitalists are in the cat-bird seat to teach other attending physicians about the importance of reading from the same hymnal on these best practices,” he adds.

Dr. Greeno agrees reform needs to be cost-effective as well as patient-focused.

“The pressure on hospitalists to demonstrate our value has never been higher,” he says, urging hospitalists to pay particular attention to key features of reform to which they are already accountable, such as improving patient satisfaction and promoting evidence-based interventions that prevent readmissions and hospital-acquired conditions (see “Priorities in an Age of Reform,” left).

Dr. Greeno notes that SHM’s advocacy activities have been ramped up significantly to stay on top of reform developments—and ensure that policymakers hear hospitalists’ voices. “If we want to have a positive impact, we must track these changes, understand them, influence them, implement them, and make them successful,” he says. “That’s the challenge our field faces. There’s no physician organization that knows more about what goes on in a hospital than we do, and we will help policymakers and hospitals to make intelligent decisions.”

Chris Guadagnino is a freelance medical writer based in Philadelphia.


  1. Kuo YF, Goodwin JS. Association of hospitalist care with medical utilization after discharge: evidence of cost shift from a cohort study. Ann Intern Med. 2011;155:152-159.

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