New Marketplace

New Marketplace Survey: Transitioning Payment Models: Fee-for-Service to Value-Based Care

Insights Report · November 8, 2018

Analysis of the NEJM Catalyst Insights Council Survey on the New Marketplace: Transitioning Payment Models: Fee-for-Service to Value-Based Care, sponsored by Optum. Qualified executives, clinical leaders, and clinicians may join the Insights Council and share their perspectives on health care delivery transformation.

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Advisor Analysis

By Thomas W. Feeley and Namita Seth Mohta

In a survey of the NEJM Catalyst Insights Council in July 2018, sponsored by Optum, 42% of respondents say they think value-based reimbursement models will be the primary revenue model for U.S. health care. Indeed, this transition is already happening. Respondents report that a quarter of reimbursement at their organizations is based on value, on average. While three-quarters of their revenue remains fee-for-service, we see a remarkable change to a reimbursement system that was static for decades.

In particular, survey respondents’ organizations are pursuing two value-based strategies: accountable care organizations, which often use capitated payments; and bundled payments, which provide single payments for multiple services addressing a single condition.

Nearly half (46%) of respondents — who are clinical leaders, clinicians, and executives at U.S.-based organizations that deliver health care — say value-based contracts significantly improve the quality of care, and another 42% say value-based contracts significantly lower the cost of care. While this data suggests considerable support for value-based reimbursement, it is worth mentioning that a significant number (36%) of respondents say they are uncertain that this will ever become the primary revenue model for U.S. health care, indicating that for many, the jury is still out.

Fee-for-Service Continues to Account for the Majority of Revenue

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

This finding deserves some informed speculation. Some respondents may want to adhere to the fee-for-service system. Others may want to see more evidence that value-based reimbursement actually improves outcomes and controls costs. Others may be unfamiliar with what value-based reimbursement actually represents. All of these concerns we have heard repeatedly over the past several years, and they are reflected in verbatim comments from survey respondents.

Clinicians, in particular, have reservations about value-based reimbursement. Fewer clinicians (37%) and clinical leaders (39%) than executives (51%) say they think value-based reimbursement will be the primary revenue model of the future. Fewer clinicians (38%) than executives (55%) and clinical leaders (47%) believe that value-based contracts significantly improve the quality of care, and fewer clinicians (36%) than executives (50%) and clinical leaders (42%) think value-based contracts significantly lower the cost of care.

As with several other questions in this survey, a significant number of respondents are undecided. More than one-third (37%) say they neither agree nor disagree that value-based contracts significantly improve the quality of care, and 41% neither agree nor disagree that value-based contracts significantly lower the cost of care.

We find it interesting that 23% of respondents say they don’t know their organizations’ status with regard to value-based care, with more clinicians (34%) than clinical leaders (16%) and executives (12%) indicating that they don’t know. This could suggest a need for greater transparency from leadership regarding value-based activities. It could also indicate something far more fundamental – a lack of consensus on what exactly constitutes value-based care.

While there is broad agreement that value in health care is represented by the balance between the patient-centered outcomes of care achieved with the costs to reach those outcomes, many individuals do not completely understand that concept. For example, in a written survey comment, a clinician suggests that one of the obstacles to developing value-based models is “Defining value and value to whom. I think patient value is not yet fully integrated in the equation.” Another clinician comments: “Defining what [value] is exactly. Right now, it’s a convenient term that means whatever the speaker wants it to mean.”

The survey identifies the leading barriers to implementing value-based reimbursement models. Infrastructure requirements, including information technology (indicated by 42% of respondents), and changing regulation/policy (34%) are the top two. Additional barriers include problems related to change management – administrative details (33%) and concerns about sustainability (28%).

There is strong consensus by Insights Council members on the broad metrics that are most important for measuring value-based care. All five metrics mentioned in our survey – outcomes, costs, safety indicators, patient experience indicators, and process measures – are rated as important by more than 85% of respondents. Outcome measures top the list, with 60% of respondents saying they are extremely important.

To us, this survey suggests that many in health care see value-based reimbursement as a real solution to the nation’s current health care crisis. Until payers and providers become better aligned, however, there will be challenges in scaling and accelerating this approach. The survey participants say what is needed is a better understanding of value and better ways of assessing value. Collectively, we must measure outcomes that matter to patients seamlessly in the workflow, through advances in information technology, and then reward those outcomes in a value-based reimbursement system.


What single change would accelerate the adoption of value-based care?

“Mandatory rule.”
— Clinician at a small nonprofit health system in the Midwest

“A move to a single payer system.”
— Director of a large nonprofit health system in the Northeast

“Successful models gaining market share. Possibly the likes of Oak Street Health.”
— VP of a large nonprofit health system in the Midwest

“Quit making us document a ton of stuff that isn’t applicable to our particular practice and that stops us from being able to work with our patients to achieve better outcomes. When we are having to document in the late hours of the night, or look at lab results in the late hours of the night because we have spent a good part of our day motivationally interviewing our patients to get them involved as partners in their own health care, it leads to physician burnout and lack of empathy for our patients.”
— Clinician at a large nonprofit teaching hospital in the West

“Physicians had been taught for decades that they were the final arbiter of everything that happens to their patient. When, and until, we change the culture to one of team-based care where the patient belongs to the team, we will continue to struggle with adopting value-based care. As an example, a physician with a length of stay that is 10 days longer than his peer average once told me that the hospital has a length of stay problem because the hospital gets paid a single fee for the entirety of care.”
— Executive at a large nonprofit hospital in the South

Download the full report for additional verbatim comments from Insights Council members.

Charts and Commentary

by NEJM Catalyst

We surveyed members of the NEJM Catalyst Insights Council — who comprise health care executives, clinical leaders, and clinicians — about transitioning payment models from fee-for-service to value-based care. The survey explores value-based care models currently being pursued, the percentage of revenue from fee-for-service and value-based reimbursement, the status of organizations’ movement toward value-based care, agreement with value-based care statements, value-based reimbursement as the primary revenue model, barriers to implementing value-based reimbursement models, and the importance of various metrics in measuring value-based care. Completed surveys from 552 respondents are included in the analysis.

Insights Council members indicate that a quarter of their revenue comes from value-based reimbursement, on average, and three-quarters from fee-for-service. This modest level of value-based activity suggests that the health care industry is exercising an abundance of caution as it slowly transitions to value. Around two-thirds of executives and clinical leaders are able to provide the breakout of their organizations’ revenue, compared to half of clinicians.

Health Care Organizations Are Pursuing a Range of Value-Based Care Models

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

Half of survey respondents say their organizations participate in Accountable Care Organizations (ACOs). Bundled payment programs follow closely among value-based care models that health care organizations are actively pursuing. Responses for Patient-Centered Medical Homes and shared savings approaches form a second tier. Shared savings models are more prevalent in the Midwest (39%), Northeast (37%), and South (36%) than the West (24%). A number of respondents cite Medicaid DSRIP (Delivery System Reform Incentive Payment programs) under the “Other” category.

Download the full report to see the complete set of charts and commentary, data segmentation, the respondent profile, survey methodology, and sponsor perspective letter.

Download Full Report

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