Penn Medicine CEO: COVID-19 financial crisis is 'clarion call' to move to value-based models

Money and medicine
"We’re all going down the drain together. We need to shift to where patients are, which is more ambulatory and virtual and we need to get there in a hurry," Kevin Mahoney, the CEO of Penn Medicine, said. (Getty/holwichaikawee)

The financial crisis for hospitals and physician practices caused by the COVID pandemic is a "clarion call" for the healthcare industry to move from a fee-for-service payment model to value, said Kevin Mahoney, chief executive officer of the University of Pennsylvania Health System (Penn Medicine).

"The hospital sector has taken a giant hit. We keep hearing about 'the new normal.' The lesson that we learned is that there is nothing new or normal about a pandemic, there's just been an acceleration of trends,"  Mahoney said during a recent virtual event hosted by the University of Pennsylvania. "It has laid bare how dependent hospitals are on commercially-insured, elective procedures, and without them, we don’t make money."

Mahoney noted that as a result of the financial crisis many health systems are furloughing or laying off workers.

Jefferson Health plans to eliminate between 500 and 600 positions by not filling vacancies and will reduce pay for the organization's "most senior executives" in response to losses incurred during the COVID-19 pandemic, the Philadelphia Business Journal reported earlier this month.

"We’re all going down the drain together. We need to shift to where patients are, which is more ambulatory and virtual and we need to get there in a hurry," Mahoney said.

RELATED: UnitedHealth Group CEO: Pandemic pushes providers to take more serious look at shift to value

Health policy expert Farzad Mostashari, M.D., founder and CEO of Aledade, said physician practices engaged in value-based care and payment contracts generally have weathered the storm better than those reliant on fee-for-service payment.

"One change I’ve seen is more talk about primary care capitated payment. There is still hesitancy among practices to embrace this, but it's an interesting model to keep an eye on. Data suggests that we’re going to see an acceleration of the movement to alternative payment models, including independent practices," he said.

Mahoney said his goal in the next five to seven years is to get Penn Medicine more closely aligned with an alternative payment model system.

"I think the only way forward is a closer payer-provider relationship," Mahoney said. "I need a method where the more efficient I become, the more financially stable I become."

RELATED: AHA: Hospitals could lose $20B a month for rest of 2020 due to COVID-19 impact

He added that value-based payment models are needed to build an ambulatory safety net for local communities, noting that 22 hospitals have closed in Philadelphia since 1980.

"There are only a few inpatient facilities left. We need an ambulatory safety net where people don’t have to come to the hospital," he said.

'Telehealth was a lifeboat'

Hospitals and physician practices have accelerated their use of telehealth and remote monitoring tools to continue to provide clinical care to patients and monitor patients who test positive for COVID-19.

"We learned that testing is critical, and managing patients at home is even more critical," Mahoney said. "We developed COVID Watch, a remote monitoring system to keep track of patients at home. We were able to get upstream more on nursing homes and congregate apartments, where people tend to have bigger outbreaks and we were able to manage patients in their home environments through remote monitoring."

RELATED: Independent, smaller hospitals will need to make tough choices to survive COVID-19 financial crisis: analysis

Telehealth visits were a "lifeboat" for community health centers across California that rely on fee-for-service payments, according to Andie Martinez Patterson, vice president of government affairs at the California Primary Care Association, a nonprofit that represents community health centers in California.

As a result of shifting to telehealth visits, no-show rates for behavioral health visits dropped from 40% to zero, she said. 

"We see Latino men doing behavioral health visits for the first time. There is a tremendous opportunity for us with telehealth," she said.

The rapid uptake in telehealth indicates that the adoption of virtual care is a payment and regulatory issue rather than a technology issue, Mostashari said.

"I think we saw how quickly the system can move. We made decades’ worth of progress in literally days," he said.

Many healthcare leaders are advocating for telehealth flexibilities to stay in place after the COVID-19 pandemic subsidies.

Mostashari said he has a different take: "I think we should use this a way to extend flexibilities to organizations, groups, and providers, who are taking on [financial] risk on the total cost of care. That way, we don’t have the churning incentive of the traditional fee-for-service system. We can use this crisis as an opportunity to push the system away from fee-for-service and toward capitated payment models," he said.