Widespread uncertainty shrouds current business model sustainability

A new survey from tax and audit advisory firm KPMG showcases uncertainty among health plan, provider and pharmaceutical executives as to whether the existing business models are sustainable, despite the common belief that the broader healthcare economy is unsustainable in its current form.

The largest proportion of senior executives among providers, health plans and pharmaceuticals (40 percent, 53 percent and 43 percent, respectively) said their current system was “somewhat” sustainable over the next five years, while only 20 percent to 27 percent responded that their company’s current business model was “not very” or “not at all” sustainable over that period.

"The findings really underscore the key question of whether or not any organization can be both committed to non-volume-based care economics while at the same time working to sustain a volume-driven reimbursement status quo," said Ed Giniat, national sector leader, KPMG Healthcare & Pharmaceuticals, in a press release. "The institutional schizophrenia that emerges will be challenging to manage at best.”

Despite the fact that most executives feel their models are at least somewhat sustainable, 65 percent of providers and 41 percent of insurance executives expect major changes in business models over the next five years. Pharmaceutical executives, however, were out of step in their view of the coming changes as 63 percent reported they expect only moderate changes.

But the transition away from fee-for-service payment models may take some time to accomplish. While nearly half of provider and health insurance executives and one-third of pharma executives would like to see a more rapid transition to a value-based payment model, most anticipate the actual transition will occur more gradually, with less than one-in-four provider reimbursements expected to be fashioned on value-based models.

"Organizations are clearly considering the effectiveness of their fee-for-service business models but migration to more value-based models will take some time, and will include a mix of old and new delivery and payment systems," added Giniat.

The only way for change to occur more rapidly is for all stakeholders to aggressively adopt and lead the change, Giniat concluded, but that may be a difficult switch considering that many organizations are still operating in ways that would tend to sustain the existing models.

The KPMG survey was conducted between January and June 2012 and reflects responses from 104 healthcare system executives, 51 health plan executives and 54 pharmaceutical executives at leading organizations in the United States.

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