The Healthcare Hub

Value-based Reimbursement Models: Still much to learn

Wednesday, July 11, 2018

In 2015, the U.S. Department of Health and Human Services (HHS) defined a goal to link 30 percent of Medicare payments to value-based reimbursement (VBR) models by 2016 and increase to 50 percent by the end of 2018. Until this development, Medicare reimbursement was primarily fee-for-service. The shift to a VBR model places more emphasis on the outcome of a treatment plan, that is quality over quantity.

Since the announcement was made, there have been significant changes to the healthcare landscape as healthcare providers adjust to the new reimbursement guidelines. There is not one definitive path to value-based reimbursement and still much to be learned in how to quantify success, but the journey in this direction has begun.

Types of value-based payment models

Several models have been developed to comply with the VBR guidelines. These models are not one-size fits all as they can be tailored to meet the unique needs of the different healthcare providers. 

Accountable Care Organization (ACO)

The Center for Medicare and Medicaid Services (CMS) defines an Accountable Care Organization as a network of doctors, hospitals, and other healthcare providers that coordinate and collaborate to offer high-quality care to Medicare patients. Some examples of ACOs are Medicare Shared Savings Program, Advance Payment ACO model, and Pioneer ACO model. There are two risk-based models for an ACO but the overall goal is to help the healthcare system reduce its overall spending by rewarding value instead of volume.

Bundled payments

This is also known as episode-based payments and according to Centers for Medicare & Medicaid Services (CMS) "rewards hospitals that work together with physicians and other providers to avoid complications, prevent hospital readmissions and speed recovery". A single bulk payment is made to cover the costs of an instance of care such as cardiac care. The bulk payment includes reimbursements to all parties involved in the provision of care. If the cost of the care provided is less than the bundled payment, the parties retain the extra savings. Alternatively, if the bundled payment is less than the cost of care provided, the parties take a financial loss

Patient-centered medical home

This model emphasizes coordination and delivery of healthcare with the involvement of the patient's primary care physician (PCP). The PCP coordinates and monitors all parties involved in the care offered to the patient to ensure that value-based care is being offered. Recent studies have shown the patient-centered medical home model to deliver positive results in reducing unnecessary service utilization and related cost reductions.

Challenges to value-based reimbursement

Despite the increase in VBR adoption, barriers remain that could slow growth and adoption:

  • Insufficient IT infrastructure: A robust IT infrastructure is essential in order to access, collect and manage data needed for effective participation in a VBR model. With the recent CMS renaming of the EHR Incentive Programs to “Promoting Interoperability”, the agency is emphasizing the focus on improving data exchange and patient data access. Parties involved in the care of the patient should be able to easily share data with each other as well as the payer. Reports should be generated that measures key VBR metrics to assess the effectiveness of treatment plans. Some healthcare providers and facilities do not have the IT infrastructure currently in place to sustain the VBR model. Health systems facing ever-shrinking margins with the shift in payment responsibility falling more heavily on the patient may find it challenging to invest in IT infrastructure development to compete in the new reimbursement environment.
  • Poor physician alignment: Providers are essential to the success of a VBR model. Often, changes must be made to the providers' practice style in order to meet the VBR requirements. Providers must be willing to accommodate changes to their style of practice to conform to the VBR standards. 

The challenges are real, but now in its third year, many participating healthcare facilities are reaping the benefits of VBR. These facilities are becoming more profitable and seeing positive returns on their investment. As VBR adoption increases, more changes are to be expected as the ultimate goal of reining in spiraling healthcare costs gets within reach.