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Perspectives

Moving Away from the Zero-Sum Game: Getting MACRA Right (Part One of a Two-Part Series)

2018-10-30


Healthcare organizations must move beyond risk-shifting and take steps to compete on clinical quality and value to improve patient outcomes and win under the Medicare Access and CHIP Reauthorization Act (MACRA).

The intent behind the Medicare Access and CHIP Reauthorization Act (MACRA) was to generate value, defined by improving health outcomes while reducing costs. That’s the basis of value-based competition, which would benefit providers, payers and patients. 

However, instead of setting up that win-win situation, value-based reforms in the industry to date, including MACRA, so far have mainly driven a zero-sum game, in which one party’s loss is another party’s gain. Here’s why that game is so harmful to the industry: 

  • Reform incentives have been less about zeroing in on what creates value and much more about shifting risk — typically from payers to providers.

  • Zeroing in on risk-shifting drives the wrong type of competition. That focus could actually increase healthcare costs without delivering better health outcomes and lead to harmful patient experiences

  • It’s driving additional unintended consequences, including competition to increase competitive bargaining power; competition to capture patients and restrict choice; and competition to reduce costs by restricting services. These adverse consequences lead to situations in which healthcare organizations can boost quality ratings while subverting the intent of the regulation, such as institutions that “make numbers” by turning away complex cases. 

  • Playing the zero-sum game leaves providers and payers ill-equipped for true value-based competition, which is centered on clinical conditions and which entity can deliver the best outcome for the greatest value. Meanwhile, new industry entrants are lining up to compete on exactly those terms.

The industry needs to execute a new strategy and compete at a clinical condition level to improve patients’ health and drive down health costs. Achieving those goals will require cooperation across the entire continuum of the care value chain to improve communication among clinical team members, reduce gaps and redundancies in delivering care and increase patient satisfaction. To reduce costs in this scenario, care teams must identify clinical conditions early and focus on short- and long-term management of those conditions to improve overall population health. That’s where MACRA could help.

Adopting the Spirit of MACRA

MACRA provides alternative payment models that address clinical condition levels and offers providers a path to design their own payment models. It attempts to simplify and streamline former quality programs while establishing frameworks that support providers’ evolution toward value-based competition. And it offers flexible reporting and qualification criteria for resource-strapped providers and incorporates their feedback. 

However, while MACRA was designed to promote value-based competition, it hasn’t yet done that, for a variety of reasons. Like most legislation, MACRA is subject to different interpretations. To date, it’s generally been used as justification to strongly promote zero-sum competition among industry players by shifting risk from payers to providers instead of generating a mutual commitment to improving medical clinical outcomes. 

Here are some of the reasons why MACRA has yet to drive value-based competition:

  • Initially, MACRA has incented providers to reach for short-term goals, such as opting to be scored on quality measures they already meet vs. stretching to improve in other areas — behavior that would align better with competing on clinical outcomes. 

  • As with most legislation, MACRA comes with hidden costs. It requires education and potentially new processes that may add to employee workloads, which in turn can lead to increased attrition rates. Most organizations don’t identify these costs upfront and don’t allocate enough resources to these tasks, so there’s little capacity for optimizing MACRA’s application.

  • Innovation can be slowed because of the legislation’s regulatory and administrative complexity. By detailing measures and processes, the path provides guidance but can also inhibit creative thinking. 

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Figure 1

Nonetheless, MACRA and other reforms designed to drive value-based competition are leading the industry in the right direction. Like most new initiatives, MACRA requires fine-tuning based on lessons learned from its first year of operation. While specifics may change, value-based competition is the future of the U.S. healthcare system, and payers and providers that comply with MACRA’s intent will be in a strong position to succeed at competing on conditions. 

Providers are closest to the clinical conditions. They must identify the areas in which they provide excellent care and create the right partnerships to deliver the full spectrum of care on those conditions, from prevention to correct diagnosis and short- and long-term management of them.

Payers’ optimal role in the value-based competition world is complementary. We work with leading payer organizations that see opportunity in partnering with providers, empowering them by providing insights from stores of data, and helping to simplify billing processes and promote pricing transparency.

The only way to truly reform healthcare is to reform the nature of industry competition, shifting the focus away from passing costs from one player to the other, to value delivered to the end consumer.1 Providers and payers each bring unique skills that can truly reform healthcare if they are willing to give up the zero-sum game in favor of the long game, which will deliver real and lasting benefit to all. This may require them to accept that MACRA and its incentives toward value-based competition are here to stay, a topic we’ll tackle in the second half of this article.

1 Michael Porter and Elizabeth Olmsted Teisberg, Redefining Heath Care: Creating Value-Based Competition on Results, HBS Press, 2006, pp. 33-35, https://www.hbs.edu/faculty/Publication%20Files/20060502%20NACDS%20-%20Final%2005012006%20for%20On%20Point_db5ede1d-3d06-41f0-85e3-c11658534a63.pdf.

The next installment in this series will explore the MACRA landscape. To learn more about MACRA, visit the Healthcare section of our website.

This Perspectives series was written by Octavia Costea, MACRA Lead and Manager, Healthcare, Cognizant Business Consulting, and Steven Rounds, Senior Consultant, Healthcare, Cognizant Business Consulting. For more information, please contact us at inquiry@cognizant.com.

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Moving Away from the Zero-Sum Game: Getting MACRA Right (Part One of a Two-Part Series)