Value-based payment: what is it?

Health care is a growing concern in the United States.

According to a RealClear Politics Opinion Research poll, 36 percent of Americans said health care was the most important policy to the future of the United States. 

39 percent of respondents said the system is not working well/we need to improve the system we have now; 29 percent said the system is good, but not perfect/we need to continually make improvements, and 28 percent said we need an entirely new system. 

“It transcends party, ideology and generation…Significant proportions of Democrats, Republicans, and Independents agree that the current system needs substantial reform,” John Della Volpe, polling director for RealClear Opinion Research, said. “The debate will be where to start, and how dramatic the correction.”

One way the health care industry is looking to improve is through value-based reimbursements.

Traditionally a fee-for-service reimbursement model was organized around compensating physicians based on the number of services and procedures ordered. 

“In the past, if a provider was achieving really high-quality outcomes and not doing a lot of services…their payments would actually be less than another provider who does not achieve quality outcomes and just provides more expensive services. [Value-based payments] helps to shift that incentive so that those who are providing quality and efficient care are actually rewarded,” Matthew Isiogu, assistant director for the Arizona Health Care Cost Containment System (AHCCCS) Division of Health Care Finance, said. 

Value-based care shifts the health care system to a model that emphasizes the importance of keeping people healthy by rewarding physicians for coordinating care, providing the appropriate care for each patient’s situation and actual health outcomes.

According to Isiogu, value-based payment can look like multiple things. 

AHCCCS has developed multiple VBP models including:

• Payment for Performance describes health care payment systems that offer financial rewards to providers who achieve, improve or exceed their performance on specified quantity and cost measures;
• PCMH or the patient-centered medical home emphasizes care coordination and communication to transform primary care into what patients want;
• Shared Savings has a baseline budget that is used to determine whether savings were received, savings are shared between the payer and provider;
• Bundled Payment or a single, “bundled” payment that covers services delivered by two or more providers during a single episode of care or over a specific period of time, usually including accompanying quality requirements.

“[Value-based payments] is the direction that we’re seeing health care go in general,” Jennifer Carusetta, Health System Alliance of Arizona executive director, said. “The way health care started moving is we need to start incentivizing outcomes and the best way to drive incentives in health care is payments because everything costs money.” 

46 percent of respondents to a 2018 Health Management Academy phone interview of health system executives described their organization’s pace of change from fee-for-service to value-based as quick or very quick. 

“Purchasers of health care and payers of health care are really invested in the value-based payment path,” Isiogu said. “It’s really the best way to get more efficient and cost-effective care while maintaining that quality of care.” 

Right now, fee-for-service payments account for 78 percent of care delivery but health system executives expect 25 percent of care to be delivered through value-based payments, according to the Health Management Academy 2018 phone interview of health system executives. 

According to Isiogu, shifting the status quo is the biggest challenge of value-based payments.

“Contractual relationships in health care reimbursement are really complicated, so it takes some time for all sorts of organizations to be able to move down this path…. Increasing that focus on quality over time,” Isiogu said.

In Dec. 2018, the Health Care Transformation Task Force (HCTTF) — a group of leading health care payers, providers, purchasers and patient organizations working to increase the number of value-based payment agreements in the U.S. — announced its provider and payer members had 47 percent of their business in value-based payment arrangements at the end of 2017.

“There is growing evidence that value-based care leads to better health, better care, and reduced total cost. That’s why our members remain focused on reaching the goal of 75 percent by 2020,” Fran Soistman, executive vice president and head of government services with Aetna and HCTTF chair, said. “This report demonstrates Task Force members’ commitment to accelerating the pace of transformation toward value-based care across the health care continuum.”

According to Isiogu, 50 percent of AHCCCS’ current contracts are in value-based payment and the organization plans on growing that by 10 percent each year.