An Employer’s Guide to Value-Based Care

For generations, health care has been offered on a fee-for-service basis – meaning for every MRI, blood test or flu shot, a doctor’s office is paid a set amount, based on a negotiated set of prices. Value-based care arrangements, on the other hand, mean the doctor or hospital has agreed that their income should be based on more than how many tests and visits they deliver. Instead, providers offering value-based care are paid based on their ability to deliver efficient, safe care that helps people get and stay healthy.

Leading health care experts say that value-based care is here to stay, and predict the industry will continue to migrate away from the payment models that have for so long dominated the health care industry.

What Is Value-Based Care?

Put simply, value-based care happens when providers get paid for the value they provide their patients rather than for the volume of patients they serve. That model can take the form of a range of different contracts: accountable care organizations (ACOs), bundled payments and even pay-for-performance.

Choosing a value-based care vs. fee-for-service model increases accountability on the part of doctors, hospitals and health systems. When providers get paid for helping patients get and stay healthy, and for delivering efficient, evidence-based care, everyone wins — including employers.

For businesses, not only can value-based care help employees get and stay healthier, but it may also keep costs down. A study of 6.25 million Blue Cross Blue Shield members found that value-related improvements and other efficiencies helped lead to a 35 percent decrease in aggregate costs.

Recent years have witnessed the rise of value-based plans across the entire health care industry. According to a Deloitte report, that’s thanks to a few key drivers:

  • Cost savings. Experts estimate that by 2021, U.S. spending on health care could reach nearly $5 trillion — 20 percent of the country’s gross domestic product. Because a higher volume of services is more profitable in the fee-for-service payment model, providers may feel encouraged to seek a greater number of tests, procedures and other interventions. However, the costs of those services can add up quickly. Value-based care, on the other hand, has the potential to reduce costs by weeding out unnecessary or ineffective services.
  • Federal support. Value-based care has also benefited from federal support. For example, the Centers for Medicare and Medicaid Innovation continues to sponsor several value-based payment programs that were created as part of an original batch of funding from 2011. More recently, federal officials have signaled that they want to see medical groups take on greater responsibility for managing costs
  • Changing sentiment. After seeing the way fee-for-service models didn’t really prioritize outcomes for patients — and how costs continued to rise — employers and government payers began demanding more value-based options. This has shifted emphasis away from quantity and toward the quality of outcomes achieved for patients.

Even still, some providers hesitate to move to value-based payment models. Fee-for-service models are an understood and predictable source of profit for hospitals and large health systems, and changing everything to a new financial model takes time and resources. That said, the transition may be gradual, but it’s certainly gaining momentum: Value-based care still piques employers’ interest and moves them toward insurers who can implement those contracts whenever possible.

Is Value-Based Care Right for You?

If you’re considering incorporating value-based models into your benefit strategies, ask yourself the following questions:

  • What’s the program’s track record for success? Though value-based care hasn’t been around forever, it’s been available long enough to have been tested for success. If you’re considering a specific value-based option, ask your broker about its past performance with value-based payment programs, using metrics like quality improvement rates and cost savings.
  • What kind of relationship exists between health plan and provider? For quality improvement that lasts, value-based plans and providers need to collaborate often and work in tandem to keep positive momentum going.
  • What kind of data is available? The more members a plan has — along with the more doctors a value-based provider network has — the more data that will be available to help steer health care delivery. And the more data everyone has, the better grip they’ll have on outcomes to improve care and keep costs down.

The right plan mix can vary widely based on those priorities, because what is most important to one employer might just be a nice-to-have for another. Talk to your broker to assess your own needs and help you identify an insurer that emphasizes value-based agreements.

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