Navigating Value-Based Care: Strategies for Physician Practices and Hospital Reimbursements

Ben H.

Hatched by Ben H.

Sep 09, 2023

5 min read


Navigating Value-Based Care: Strategies for Physician Practices and Hospital Reimbursements


In today's rapidly evolving healthcare landscape, both physician practices and hospitals face challenges in optimizing their operations and maximizing reimbursements. With the shift towards value-based care, it is crucial for healthcare providers to understand the various programs and services available to support their efforts. This article explores the Managed Services program offered by Interwell Health for physician practices and demystifies how the Medicare severity diagnosis-related group (MS-DRG) system determines hospital payments. By understanding these concepts, healthcare providers can make informed decisions to improve patient outcomes and financial sustainability.

Interwell Health's Managed Services Program:

Interwell Health, a leading organization dedicated to reimagining kidney care, has recently launched its Managed Services program. Designed exclusively for network members, these services aim to help nephrology practices succeed in value-based kidney care agreements. By focusing on improving outcomes while lowering the total cost of care, Interwell Health offers support in various areas, including auditing, financing and refinancing, contract negotiations, and group purchasing. These services provide physicians with valuable insights and practical recommendations to enhance practice operations and productivity.

Key Features of Interwell Health's Managed Services:

1. Practice Review:

Interwell Health's Managed Services program begins with a comprehensive practice review. This process identifies opportunities to adjust practice operations and productivity measures. By analyzing current practices, physicians can gain valuable insights into areas where improvements can be made. The program provides tactical recommendations to enhance efficiency and patient care, ultimately improving financial outcomes.

2. Debt Cost Insights:

Another essential aspect of Interwell Health's Managed Services is debt cost insights. Recognizing the financial burdens faced by physician practices, Interwell Health and its partners assist in identifying areas for cost reductions, specifically related to current and future debt instruments. By optimizing debt management strategies, practices can allocate resources more efficiently, leading to improved financial stability and sustainability.

3. Expense Control:

In today's healthcare environment, controlling expenses is vital for the success of physician practices. Through Interwell Health's Managed Services, physicians receive a detailed analysis of expense reductions in all facets of practice operations. By identifying areas where costs can be minimized without compromising patient care, practices can achieve greater financial efficiency and profitability.

4. Payer Analytics:

Maximizing payer contractual relationships is essential for optimizing reimbursements. Interwell Health's Managed Services program includes payer analytics, which enable physicians to assess and enhance their existing relationships with payers. By understanding the intricacies of payer contracts, practices can negotiate better terms and secure more favorable reimbursement rates. This, in turn, positively impacts the overall financial health of the practice.

Understanding Hospital Reimbursements through DRGs:

Alongside physician practices, hospitals also face unique challenges in navigating the complexities of payment systems. Medicare's DRG system, known as the Medicare severity diagnosis-related group (MS-DRG), plays a crucial role in determining hospital payments. When a patient is admitted as an inpatient, the hospital assigns a DRG based on the care provided during the hospital stay. The hospital then receives a fixed amount for that DRG, regardless of the actual cost incurred in treating the patient.

The DRG system operates on the principle of relative weights, where each DRG is assigned a specific weight based on its resource intensity. DRGs with higher weights require more resources and are consequently more expensive to treat. On the other hand, DRGs with lower weights are less resource-intensive and less costly to treat. By multiplying the DRG's relative weight by the hospital's base payment rate, the hospital can determine the reimbursement amount received for a specific hospitalization.

Factors Influencing Hospital Reimbursements:

Medicare assigns different base payment rates to hospitals based on factors such as healthcare resource costs, labor variations, facility maintenance costs, and geographical location. Hospitals in areas with higher labor costs and resource expenses tend to have higher base payment rates. Additionally, Medicare considers other factors when determining a hospital's blended rate, including teaching hospital status, rural location, and care for the poor and uninsured population. Each of these factors can impact a hospital's reimbursement rates, highlighting the complexities involved in hospital payment systems.

Actionable Advice for Physician Practices and Hospitals:

1. Embrace Value-Based Care Initiatives:

With the shift towards value-based care, healthcare providers must proactively participate in programs that align with this model. By joining networks or organizations that offer Managed Services, such as Interwell Health, physician practices can gain access to valuable resources and expertise to navigate value-based care agreements successfully. Similarly, hospitals should explore opportunities to enhance patient outcomes while controlling costs through initiatives that align with value-based reimbursement models.

2. Invest in Financial Management Strategies:

To thrive in an increasingly complex healthcare landscape, both physician practices and hospitals need to prioritize financial management. This includes regularly reviewing practice operations, identifying areas for cost reduction, and optimizing debt management strategies. By investing in robust financial management practices, healthcare providers can improve their financial stability and ensure long-term sustainability.

3. Foster Collaborative Relationships with Payers:

Establishing strong relationships with payers is crucial for maximizing reimbursements. By conducting regular payer analytics and negotiations, physician practices and hospitals can secure favorable contract terms and reimbursement rates. Building collaborative partnerships with payers allows healthcare providers to advocate for fair compensation while delivering high-quality care to patients.


As the healthcare industry continues to evolve, it is essential for physician practices and hospitals to adapt and thrive in value-based care models. Interwell Health's Managed Services program provides valuable support to physician practices in their journey towards successful value-based kidney care. Concurrently, understanding the intricacies of hospital reimbursements through the DRG system allows hospitals to optimize financial outcomes. By implementing actionable strategies, healthcare providers can navigate the complexities of value-based care agreements and payment systems, ultimately improving patient outcomes and financial sustainability.

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