New Marketplace

Survey Snapshot: What Would Accelerate the Adoption of Value-Based Care?

Insights Report · November 27, 2018

Provider revenue from value-based care has been mired at modest levels for some time. In the New Marketplace Survey: Transitioning Payment Models: Fee-for-Service to Value-Based Care, NEJM Catalyst Insights Council members report that value-based reimbursement at their organizations currently stands at 25% of revenue. What single change do they think would accelerate the adoption of value-based care?

Responses to this question are illuminating. According to Frederick Southwick, MD, FACP, CPPS, Director of Patient Care Quality and Safety, Division of Hospitalist Medicine and Professor at the University of Florida in Gainesville, there are complex structural elements in the health care industry that can only be overcome through a government mandate.

“Most institutions are hesitant to embrace value-based care because their systems are inefficient and fail to provide proper feedback,” says Southwick. “Only through mandating this change will value-based care come to pass.”

As a frame of reference, Southwick mentions his “Fixing Healthcare Delivery” course at the University of Florida and Coursera, which examines the potential of applying Lean methodology and the Toyota Production System to health care. He observes that, “Every system is perfectly designed to produce the results it achieves. Our system is presently designed to be wasteful, costly, error prone, and inefficient.”

Paul Manner, MD, a practicing orthopedic surgeon at the UW Medicine Hip and Knee Center at Northwest Primary and Specialty Care, and Professor of Orthopedics and Sports Medicine at the University of Washington School of Medicine in Seattle, says that one of the issues holding back further progress is the absence of a universally accepted definition of value-based care.

“Right now, it’s a convenient term that means whatever the speaker wants it to mean. We’d have as much information if we called it ‘wikalix-based care.’ As in: We urgently need to change from fee-for-service to wikalix-oriented care.”

Along with the need to establish a practical definition of value-based care, Manner says there are other aspects hindering its adoption. “A fundamental problem is that the interests of payers, patients, and providers do not coincide, except in the broadest sense. We can all agree that patients should get the best possible outcome at the lowest cost, but we can’t even agree on how to define ‘cost,’ let alone ‘outcome.’ And that’s not going to change with a single-payer system, by the way.”

Barriers to Implementing Value-Based Reimbursement Models

From the New Marketplace Insights Report: Transitioning Payment Models: Fee-for-Service to Value-Based Care. Click To Enlarge.

Chris DeRienzo, MD, MPP, a practicing neonatal physician and Chief Quality Officer at Mission Health in Asheville, North Carolina, sees the current state of value-based care as a transitional stage in the health care industry’s move to assuming greater risk. He says that only through the adoption of greater risk will value-based participation grow.

“Value-based care is by definition a transitory stop on the journey from fee-for-service to full risk,” says DeRienzo. “The biggest driver by far is market conditions — in markets where payers (public and private) along with employers are willing and able to play, health systems have responded. In markets where health systems have grown into the payer space, the market responded. In markets where either party lacks the will or ability to move to risk, no change in policy or practice will drive change.”

Cautious Optimism That Value-Based Reimbursement Will Become Primary Revenue Model

From the New Marketplace Insights Report: Transitioning Payment Models: Fee-for-Service to Value-Based Care. Click To Enlarge.

Survey respondents express a high level of uncertainty regarding future prospects for value-based care. Manner says he believes that value-based care will be the primary revenue model, particularly given the federal government’s increasing commitment to value-based programs. However, he says that providers will respond to these programs in a variety of ways.

“In the joint replacement world, we see bundled care, which includes a carrot and stick approach from the federal government. The carrot is slightly higher reimbursement if you hit certain targets; the stick is the fact that your organization is responsible for all costs. So as a provider, you have a few options. One is to comply vigorously and work at cost containment, no matter what. Another is to cherry-pick and lemon-drop — you keep the healthy, engaged patients in your system, and send the sicker, less advantaged patients elsewhere. My expectation, frankly, is that patients with government insurance (Medicare, but especially Medicaid), will be covered under value-based care plans, and the providers taking care of them will be working harder for less.”

Ultimately, DeRienzo sees some form of value-based reimbursement as the primary model for the industry, although he believes that the industry is in the middle of an evolutionary process that will end up with a population health model.

“We’re currently in the middle ground,” he says. “Some folks refer to it as having a foot in two canoes, but I like to think of it as being on the platform of a catamaran and we are moving from one hull to the other.”

“I think the most mature version of the model will be moving to true population health–based payment mechanisms — for example, Medicare Advantage plans, full-risk ACOs, and bundles, in part because federal payers are demanding predictability in spend. And one way for CMS to have predictability in spend is to transfer that risk onto someone else. So, what we are seeing is really a spectrum of being drawn into the population risk space.”

Interestingly, when asked about their organizations’ value-based care status, 51% of respondents reported that they either already are or expect to be providing value-based care in 3 years. This finding indicates that, while respondents are uncertain as to whether value-based care will ever be the primary revenue model, they still believe that it will be part of the reimbursement landscape in one form or another.

DeRienzo points out that many providers are already there, given that value-based care rates can vary quite widely depending on the definition being used, geography, and the number of Medicare and Medicaid patients an organization has.

“I think that number is representative of the variability across the United States. If you’re in Utah, you are already there. If you’re in Danville, Pennsylvania, you’re definitely already there. In other parts of the country, they are still catching up. Certainly, anybody playing in the CMS space is already there. Outside of CMS, over the next 10 years most of America is going to be in some kind of value-based care arrangement.”

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