Reducing utilization can help organizations decrease

costs and increase their eligibility for narrow or tiered

networks. To participate in these highly selective net-

works, hospitals and health systems need to demon-

strate to payers that they can reduce costs significantly

by driving utilization out of the system. In exchange,

payers agree to direct more patients their way and

potentially share a portion of the savings.

Several urban markets already have seen compelling

utilization declines as large regional providers position

themselves for success in this market. A major health

system in Pennsylvania, for example, reported an

18 percent drop in hospital admissions and a 7 percent

26 APRIL 2013 healthcare iinancial management

ETCETERA

decline in patient costs three years after launching its

patient-centered medical home model in 2007

(Gilfillan, R., et al., “Value and the Medical Home:

Effects of Transformed Patient Care,” The American

Journal of Managed Care, Augusi20^0).

Providers that do not proactively participate in new

value-based care and payment programs leave them-

selves vulnerable to utilization declines, without the

benefit of shared savings or value-based payments.

In addition to anticipating declines in utilization, hospi-

tals and health systems should expect changes In their

payer mix that are likely to decrease revenues. For

example, more people will become eligible for Medicaid

and new federal and state insurance exchanges, which

are expected to reimburse close to Medicare levels or

below. Estimates of the number of commercially