Value-Based Reimbursement in 2019

Value-based reimbursement has healthcare providers striving to transform the way they deliver patient care by shifting from the rewarding volume, as associated with a fee-for-service model, to value. The Centers for Medicare and Medicaid Services (CMS) plans to encourage providers to continue redefining their way of thinking so that by the end of 2019, half of the traditional Medicare-based payments should be linked with a value-based reimbursement model. This transition works toward the goal of better care for individuals, improving population health outcomes, and reducing healthcare costs by coordinating care through the utilization of Alternative Payment Models (APMs) like Accountable Care Organizations (ACO) or bundled payments.

Value-based care rewards providers that successfully participate in clinical collaboration which emphasizes quality holistic care based on efficient and effective patient care. Previously more tests meant more payment, which often resulted in fragmented and redundant care. Financial incentives linked to value-based reimbursement aim to motivate providers to deliver care that focuses on high-quality outcomes, patient satisfaction, and the elimination of services that are redundant or of low-patient value.

Moving Toward Value-Based Reimbursement

Shifting toward value-based reimbursement can present challenges to providers to maximize revenue while maintaining high-quality patient care standards. The provider must strive to minimize potential losses through effective management during the transition to value-based reimbursement. Reimbursement is tied to penalties and incentives based on quality measures so to be successful it generally requires:

  • Data-analytic capabilities
  • Population health management programs
  • Electronic health records (EHR) for documentation and reporting of specific quality measures
  • An emphasis on patient satisfaction
  • Streamlining and eliminating unnecessary or redundant tests
  • An increase in patient volume

Value-based reimbursement rewards clinical integrations that coordinate care across providers through use of certified health information technology (IT) to provide efficient, patient-focused care. Generally, quality metrics are not standardized or aligned, which can present challenges for providers to track quality measures when data sharing for reporting.

Value-Based Purchasing (VBP) Strategies

Payment reform may be easier with providers that have become accustomed to APMs which share losses and gains. Financial risk provides the potential for increased financial gains, although provider experience with sophisticated budgetary management capabilities and the type of service that’s involved can contribute to success. Four common Value-Based Purchasing (VBP) Strategies include:

Pay-for-Performance (P4P)

P4P typically doesn’t require the use of as much technology as other APM models and there is not as much of financial risk. Although the provider is not liable to repay financial losses, it is still necessary to monitor clinical quality and cost data through methods such as quality improvement with public reporting. P4P uses a fee-for-service structure, but value-based incentives and penalties may be incurred for not meeting quality and cost performance measures.

Provider payments could be linked directly to specific indicators of quality, efficiency, or value. CMS would determine positive and negative payment adjustments based on assessment with various measures such as preventative screenings, patient satisfaction surveys, and Medicare spending for beneficiaries. P4P could benefit small and rural practices that require time and resources to implement necessary technology to successfully meet tracking requirements for value-based care.  

Clinical Episode/Bundled Payment

A bundled payment involves a designated fixed amount for services per episode of care such as a condition or a defined time frame regardless of how many providers are involved. This eliminates the need for individual billing and holds providers accountable to encourage collaboration and reduce duplications. If the cost is less than the designated amount, the providers keep a portion of the savings. If the cost is more, then some of the revenue of traditional payment is lost.

This model can be difficult to initiate and sustain because the provider may need to invest in IT resources to track spending and quality improvement measures. In addition, changes in staffing models may need to be considered to support Care Coordination efforts, which may not be reimbursed for related services to coordinate patient care.

Reimbursement is based on historical benchmarks, so sustaining these benchmarks can be difficult once they are low, for they must remain low for shared savings. This model is better suited for healthcare facilities with high rates of healthcare spending, admissions, and resource use to provide more opportunities for improvement to earn greater savings.

Shared Savings/Risk Model

The shared savings model provides a higher level of financial reward than P4P. It reimburses the same as fee-for-service, but providers are paid based on cost and quality performance. If the provider can reduce costs under the payer benchmark, they can share some of the savings.

Many providers enter a shared risk model through an ACO. The financial risk makes them accountable to ACO. A downside risk model generally provides greater opportunity for financial rewards than shared savings. The budget for predetermined quality performance thresholds must be met, or the provider must cover part or all the cost.

Capitation/Global Payments

Capitation models pay a fixed amount per patient, per unit of time, which is reimbursed to the provider for services. Most include value-based incentives and penalties based on quality and cost. If the provider produces healthcare savings they can retain it, but if they cannot provide services below the designated amount, then the provider is responsible for the loss in revenue.

A partial or blended capitation agreement pays providers a single monthly fee that covers set services such as laboratory services or primary care. Other care is reimbursed with a fee-for-service model. The benefit of prepaid reimbursements is that the provider can proactively utilize this money to implement methods for improving patient care.  

Global payments are a single fixed payment for all the patient’s healthcare services such as primary care, hospitalization, and specialist care, and involves full financial risk for quality care and healthcare spending. This is paid per member, per month, and can be invested in quality improvement to improve efficiency, but the provider bears full financial risk for any excess cost.

Progress Toward Maximizing Value

To set the pace for success, providers have to seek to determine which value-based reimbursement structure is appropriate for their organization. Considering IT data collection capabilities, and the resources they have available to effectively manage the transition can help the provider determine how to best gain additional financial benefits for providing quality patient care.     


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