Why Value-Based Reimbursement is the Future

Change is a constant in the healthcare industry, and the transition from fee-to-service model to value-based reimbursement is one of the most recent disruptors. As per common knowledge, in a fee-for-service model, providers are incentivized to perform “services,” which can encourage inefficient or unnecessary care. For providers to make more money, they have to do more — prescribe more and often overspend. In contrast, the fee-for-value model, or value-based reimbursement, incentivizes providers to offer effective care. As we know, the resulting coordination between all providers — a cornerstone of value-based care — promotes higher-quality care across the board while cutting healthcare costs. 

Originally launched by the Affordable Care Act, value-based care is a much more collaborative, holistic method of treatment. Value-based reimbursement naturally follows value-based care. The challenges of value-based reimbursement, however, are not small — including, but not limited to, the requirement of population health management programs, robust data analytics, and adherence to electronic health records for reporting. Thankfully, there are a variety of options for value-based reimbursement, and providers can choose from different models based on spending trends and IT capabilities. 

Pay-for-performance models are straightforward and reimburse providers for services using a fee-for-service structure. In addition, performance determines value-based incentives or penalties. This option is especially popular within small practices where the cost of implementing expensive technology is prohibitive. 

Under shared savings arrangements, providers are also reimbursed under a fee-for-service model, but if the provider can reduce spending below a certain number, then they can keep a set portion of the savings produced. Bundled payments are a clear example of this model: If providers can deliver care and treatment for less than the designated reimbursement amount, they can keep some of the difference. The downside of this model is that if the costs exceed the set amount, providers do not receive the revenue guaranteed from a traditional payment model. 

Capitation payments are on the furthest end of the value-based reimbursement spectrum, requiring providers to take on full financial risk for healthcare spending and the quality of care. In this model, providers receive a fixed amount per patient, per unit of time. This reimbursement is dependent on a set of services, and if the provider produces healthcare savings, then they can retain all of the difference. In contrast, if the cost of care and treatment is over the designated amount, the provider must recoup the lost revenue. 

Today, two-thirds of payment is based on value, and the decline of the fee-for-service model is happening faster than predicted. And, so far, value-based care and reimbursement seems to be a positive change for both patients and providers. On average, unnecessary medical costs have been reduced an average of 5.6% (although some providers noted savings over 7.5%), care quality has improved, and patient engagement is on the rise. Almost 80% of payers report improvements in care quality, and 64% report positive changes in patient-provider relationships. There is also a link between value-based reimbursement and an increase in preventive care. Patients of physicians with value-based reimbursement agreements had more breast cancer screenings (78%) when compared to fee-for-service (69%) and bonus arrangements (69%). The hypothesis following an uptake in preventative treatment is that patients will ultimately need less intensive care in the future, saving a wide variety of healthcare costs. 

It has been established that value-based care will redefine the healthcare system, as it creates an entirely new definition for care that is no longer limited to doctors and nurses. Within value-based care, a dedicated community of providers work together to treat the “whole” patient rather than a specific illness or disease. Care plans, the delivery of care, and providers all work in tandem to offer a more integrated, thorough approach to treatment. 

This is a dynamic period in American healthcare that requires continuous, nimble adjustments. As with many other changes to the healthcare system, the move from volume to value was primarily to provide a better level of care at a lower cost. As more providers and healthcare players transition to value-based care, the data will prove — or disprove — the hypothesized success of this new model.