As public and private insurers move away from traditional fee-for-service payments, healthcare organizations are struggling to make the leap. Market share, regional characteristics, financial health and an organization’s mission and culture are shaping the path as the flow of money shifts and the skills to manage and measure risk are being redirected in largely untested ways.

1. HRI’s closer look
Healthcare’s alternative
payment landscape

2. ©2015 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal
entity. Please see www.pwc.com/structure for further details. 38391-2016.KM
Source: PwC Health Research Institute analysis, Centers for Medicare & Medicaid Services
80%
20%
Quality based payment programs
• Hospital Value-Based Purchasing
• Hospital Readmissions Reduction
• Hospital-Acquired Condition Reduction
• End-Stage Renal Disease (ESRD)
• Quality Incentive
• Value-Based Modifier
Alternative payment programs
• Pioneer Accountable Care Organization
• Medicare Shared Savings Program
• Bundled Payments for Care Improvement
• Comprehensive Primary Care Initiative
• Patient Centered Medical Homes
• Comprehensive End Stage Renal
Disease
• Oncology Care Model
• Medicare/Medicaid Financial Alignment
Current
85%
30%
By 2016
90%
50%
By 2018
CMS Payment Changes 2015-2018
Medicare’s commitment towards quality-based payments grows.
All Medicare
payments
Percentage of
payments linked
to quality programs
Percentage of
payments linked to
alternative programs

3. ©2015 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal
entity. Please see www.pwc.com/structure for further details. 38391-2016.KM
Source: PwC Health Research Institute analysis, Centers for Medicare & Medicaid Services
Accountable Care Organizations and bundled payment
initiatives track closely with each other
Alternative payment initiatives find common ground.
Bundled
Payment
Medicare Shared Savings
Program ACOs
Pioneer
ACOs
Puerto
Rico
Hawaii
Alaska

4. ©2015 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal
entity. Please see www.pwc.com/structure for further details. 38391-2016.KM
Source: PwC Health Research Institute analysis, Centers for Medicare & Medicaid Services
Medicare Advantage
Penetration Range 0-15% 30-45% 60-75%
15-30% 45-60% > 75%
Puerto
Rico
Hawaii
Alaska
Medicare Advantage enrollees continue to grow
across the US
Providers see some crossover between MA and fee-for-service alternatives.

5. Market archetypes
What’s happening at the community-level impacts how and when a healthcare
organization moves into alternative payment models.
Vanguard
Source: Strategy&, PwC Health Research Institute analysis
©2015 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal
entity. Please see www.pwc.com/structure for further details. 38391-2016.KM
Traditional
Lagging Emerging
IntegratedTransitioningFragmented
Slow
Evolution
Moderate
Evolution
Faster
Evolution
A fast-moving market with insurers and providers already
working together to implement population health. Health
systems vie for as many advance contracts as possible
to gain a larger share of the patient population.
Healthcare systems have some fragmentation but insurers
and employers are beginning to explore innovative payment
models. Hospitals and provider groups that do not evolve
could be acquisition bait—especially if there is a health
system that is farther along the alternative payment scale.
The market moves slowly, with sporadic insurer-driven
initiatives focused on some quality-based payments.
Care continues to be fragmented and hospital-based.
In emerging markets insurers are moving towards
risk-based contracts—but payments are still a mix of
traditional and new models. Health systems are making
the investment in alternative reimbursement models.

6. ©2015 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal
entity. Please see www.pwc.com/structure for further details. 38391-2016.KM
Health System Readiness
Regional factors play a role, but a health system’s own goals should guide itsdecision.
Walker Jogger Runner Sprinter
A lack of revenue and high
operational costs means this health
system could stumble out of the
starting blocks.
Conditioning needed:
Improve overall quality and care
management. Pilot new value-based
care and quality payments. Reach
out to post-acute providers to
prepare for population health
management. Consider partnerships
with other provider groups.
Committed to value-based care,
with several demonstrations
underway. Needs to take the
lessons from those pilot projects
and tailor them according to the
health system’s size and reach.
Conditioning needed:
Regional or national expansion
plans could position the health
system at the front of the pack by
improving its ability to perform
population health. Expanding the
types of medical services it
provides could lead to an effective
bundled payment program.
Thrives under traditional payments
such as fee-for-service and wants
to delay the move to alternatives
for as long as possible. Typically
this system is the dominant player
in a community.
Conditioning needed:
A dominant regional footprint can
be a good platform for a population
health or bundled payment model.
Joggers should seek out insurer
contracts that reward shared
savings and build out ambulatory
and retail clinic strategies to bring
in more consumers.
Looking to increase revenue under
a number of alternative payment
models. A sprinter wants to
differentiate itself from other health
systems in the region.
Conditioning needed:
Revenues are in line with costs. A
strong connection with ambulatory,
retail and home health. Physicians
are aligned with the health system.
Source: Strategy&, PwC Health Research Institute analysis

7. ©2015 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal
entity. Please see www.pwc.com/structure for further details. 38391-2016.KM
Source: PwC Health Research Institute analysis, Centers for Medicare & Medicaid Services
Pioneer Accountable Care Organizations:
Geographically disperse despite declining numbers
Pioneer
ACOs
Puerto
Rico
Hawaii
Alaska

8. ©2015 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal
entity. Please see www.pwc.com/structure for further details. 38391-2016.KM
Source: PwC Health Research Institute analysis, Centers for Medicare & Medicaid Services
Medicare Shared Savings ACOs across the US
Medicare Shared Savings
Program ACOs
Puerto
Rico
Hawaii
Alaska

9. ©2015 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal
entity. Please see www.pwc.com/structure for further details. 38391-2016.KM
Source: PwC Health Research Institute analysis, Centers for Medicare & Medicaid Services
Bundled payment programs grow as CMS moves to make
some participation mandatory
Bundled
Payment
Puerto
Rico
Hawaii
Alaska

10. ©2015 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each
member firm is a separate legal entity. Please see www.pwc.com/structure for further details. 38391-2016. KM/RL
For more information, please visit:
pwc.com/hri/alternativepayment