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Value-Based Care Gains Favor as a Provider Reimbursement System

Health care experts believe value-based care could lower costs and improve patient outcomes. The United States spends much more on health care per capita than other wealthy countries — $10,384 versus an average of $5,169, show studies such as the Peterson-Kaiser Health System Tracker. Despite the high spending levels, though, health outcomes in the U.S. are worse than in other wealthy countries. What can be done to lower America’s high rates of medical error, disease and death?

Many health care experts believe value-based care is the answer — and that it can provide better and more affordable care. Other experts have concerns that this alternative to traditional care could be difficult to implement and may be unsustainable.

Value-based care pays health providers based on how much they improve a patient’s quality of health management. Quality of care is based on metrics including reducing hospital re-admissions; improving preventative care; and using health technology. Value-based models reward providers financially when they deliver better and more cost-effective services and often penalize them financially when they fail.

In comparison, traditional care — also referred to as fee-for-service-care — reimburses providers on the amount of services they provide. For instance, the more tests and procedures a provider orders, the more money they earn. The emphasis appears to be about quantity of care.

Supporters of the value-based model claim this approach offer better outcomes for patients because it focuses on quality preventative care, rather than expensive and sometimes unnecessary tests.

Another reason for the growth and interest in value-based care is the growth of technology in the health field. Digital health solutions such as telehealth and artificial intelligence wearables assist in monitoring outcomes.

The Centers for Medicare & Medicaid Services (CMS) have been actively pushing for value-based care and have introduced several value-based care models over the past 10 years.

For instance, the Hospital Readmissions Reduction Program allows CMS to evaluate participating hospitals based on immunization rates for certain diseases; Medicare spending per beneficiary; and patient feedback. Depending on how the hospital scores across these metrics as compared to established baselines, the CMS either rewards the hospital on top of their usual fee-for-service payments or reduces their Medicare revenue. Types of Value-Based Care Different types of value-based care models exist based on the required level of provider accountability. Providers are measured on outcomes such as post-hospitalization readmission rates; provider-to-patient ratios; and percentage of patients receiving preventative care such as immunizations.

Common value-based payment models include: Pay for Performance: Physicians receive financial bonuses by achieving specific quality and cost targets. Bundled Payments: Providers receive a fixed amount of money to treat a patient either for a specific condition or procedure or within a certain period. The provider can keep the surplus funds if they are able to treat the patient for less. Capitation: Members pay a fixed premium and those premiums are pooled to fund care for the entire group. This model enables providers to spend funds however they think best for their clients. Shared Savings: Providers are given a budget and when total costs fall below the budget they get a share of the savings. Shared Risk: Similar to Shared Savings, but providers also are expected to pay for any care costs exceeding the payer-set budget. Value-Based Care Challenges The two most important downsides cited by some health care experts are that value-based care has more regulations and that health care providers often face restrictions on the type of care they can give their patients.

Many providers also worry about the start-up costs when investing in the technology and tools necessary to improve and monitor outcomes. For now, switching to value-based care outcomes is more suited to providers who already spend high amounts on health care and/or have a high volume of admissions.

Other financial concerns revolve around bundled payments and shared savings programs. A bundled payment system sets a price for certain types of care. Providers then share in the losses or savings, including any additional costs related to complications and hospital readmissions. Shared savings programs, such as an Accountable Care Organization, encourage doctors, hospitals and other health care providers to come together to provide coordinated, high quality care. However, these programs don’t always reimburse providers for related services outside the direct care.

Lastly, value-based care is based on historical benchmarks. When those benchmarks tighten, because of declining health care costs, providers will have to maintain those levels or improve outcomes even more to save money.

Despite these concerns, experts expect value-based care to continue growing over the next five to 10 years.