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The Benefits of Value-Based Care — and How It Changes the Game

Do you ever wonder why you’ve been hearing so much about the benefits of value-based care lately?

It’s not really new; it was just a long time evolving. In the late 1990s and early 2000s, researchers started seeking reasons for the overuse of health care services — often unnecessary health care services. Their findings? Misaligned incentives discouraged coordination and collaboration and encouraged a piecemeal approach to care, reports the Center for Health Care Strategies.

Various organizations, including the Brookings Institution, the Institute for Healthcare Improvement (IHI) and the Patient-Centered Primary Care Collaborative, began looking for ways to align incentives to meet the Triple Aim, first articulated by IHI: “simultaneously improving the health of the population, enhancing the experience and outcomes of the patient, and reducing per capita cost of care.”

The idea caught on: Reward quality and efficiency and penalize — or at least stop incentivizing — fragmented, volume-based care.

The benefits of value-based care became clear, and so began the gradual transition away from the fee-for-service (FFS) model.

A Brief History of Value-Based Care

To understand the evolution of value-based care, it makes sense to start with the Centers for Medicare and Medicaid Services (CMS). CMS provides a useful chart documenting the history.

Notably, the move to value-based care didn’t begin with the Affordable Care Act (ACA) in 2010. If you need a starting point, it’s probably 2008, when CMS initiated the Medicare Improvements for Patients and Providers Act, better known as MIPPA. MIPPA instituted incentives for reporting quality data and e-prescribing. It set the stage for an array of other programs, all of which apply to physicians who accept Medicare, and the payments applied only to Medicare payments.

In 2012:

In 2014:

And in 2015:

  • Still being phased in, MACRA — Medicare Access and CHIP Reauthorization — created the Quality Payment Program, which further refines how Medicare rewards clinicians for quality, with a focus on outcomes.

The ACA and ACOs

The ACA accelerated value-based models; among its multitude of provisions was the Medicare Shared Savings Program, which created Accountable Care Organizations (ACOs).

ACOs make participants — typically, clinicians, practices and hospitals — accountable for the health of their patients. Providers in ACOs receive financial incentives to coordinate care, reduce errors and avoid unnecessary tests and procedures. They also benefit from economies of scale.

A successful ACO meets quality standards and yields savings, which are shared among payers and providers. In many models, an ACO shares risk, too: If it spends more than the targeted amount, it must repay some of the difference.

Private insurers shortly followed suit, recognizing the benefits of value-based care in general and ACOs in particular.

A Work in Progress

Despite all the progress with value-based care, FFS remains the dominant reimbursement model. It will likely remain so for several years, but value-based models continue to prove their value.

FFS focuses on sick care — caring for patients after they become ill. The value-based care model focuses on health care and pays providers for the value of the care they provide, not the volume. And that’s the key point when considering value-based care vs. fee-for-service. Here are the main distinctions between the two models.

1. Volume vs. Value, Quantity vs. Quality

Under FFS, clinicians, hospitals and medical practices are reimbursed based on the quantity of services delivered. More visits, tests and procedures mean more money. Spending more time with a patient or providing patient education hurts their income. Likewise, they aren’t paid to work with other providers to coordinate patient care. As a result, one provider doesn’t know what the other is doing, resulting in inefficient delivery and wasteful service duplication.

With value-based care, payment is determined by the quality, not quantity, of services. Appropriateness of care, efficient use of resources and clinical outcomes dictate reimbursement, not how many patients can be seen in an eight-hour day. Practices focus more on advancing the Triple Aim — better care for individuals, improving population health management strategies and controlling health care costs.

2. Proactive vs. Reactive

Value-based care supports proactive management of health: preventing illnesses and injuries or catching them at an earlier stage when they’re less expensive to treat. The point is to avert the use of services when possible. Providers are paid to keep patients out of the hospital and to ensure that each test is necessary.

By contrast, FFS is reactive. Clinicians, practices and hospitals get paid more when patients use more services. The focus is on treating the sickness rather than keeping the person healthy.

3. Inside vs. Outside the Clinic Walls

FFS focuses on what happens during the office visit or at the lab; it’s about the specific treatment or procedure.

Value-based care takes a more holistic approach, looking at the patient and the patient population beyond the clinic walls. It’s proactive, focusing on prevention and even “nonvisit” care, such as providing health coaches. For diabetes, the patient might be connected with a nutritionist or set up with remote glucose monitoring. But, as the National Institute of Diabetes and Digestive and Kidney Diseases puts it rather bluntly, “Providing that care requires that a practice knows exactly who is receiving diabetes care.” That’s where data comes in.

4. Data-Driven Coordination vs. Working in the Dark

In value-based care models, physicians have access not only to their own data, but also to patient data across the continuum of care (from labs to specialists, and so on). This gives them a better view of each patient and the patient population. With this data, they can identify all the patients who have a particular condition and those at risk for it. For example, that information can be used to determine which patients are at risk for diabetes. It can also be used to develop population-based interventions for every patient with diabetes.

In contrast, FFS providers often lack the technology and the incentives to coordinate patient care across the continuum. Physicians are siloed, often lacking robust data on their own patient populations. And because they can’t see the tests run by other providers, they often duplicate procedures, like having a patient take a blood test for a second or third time.

This coordinated vs. fragmented distinction may be the essence of value-based care vs. fee-for-service. It’s the efficient, data-supported, coordinated approach to care that delivers value by avoiding redundancy, leveraging economies of scale and working across the care continuum to keep your employees healthy. It’s health, not bean counting, that drives the savings.