Despite spending more money per person on healthcare than any country in the world, the United States has the worst patient outcomes overall of any high-income nation. Many factors influence this trend — including the lack of alignment between financial incentives and desired outcomes within the U.S. healthcare system.

“Fee-for-service” — the historically predominant healthcare reimbursement model in the U.S. — compensates clinicians for each service delivered and encourages greater volume rather than improved health outcomes. Interactions fundamental to comprehensive patient care, such as care coordination, patient follow-up, and preventative services, are often not directly reimbursed. Practices are forced to weigh bringing in more patients to maintain a viable business against dedicating time outside of visits to keeping their patients as healthy as possible. Clinicians can’t devote the desired time to each patient, and patients struggle to stay on top of their care — all while spending increases and outcomes suffer.

“Value-based” or “alternative” payment models aim to realign incentives, rewarding measurable health outcomes, cost-effective care, and improved patient access. While these models are not entirely new, adoption of them is accelerating.

Since 2016, total, annual fee-for-service spending has remained flat while total, annual value-based spending has grown 15% year-over-year.¹ The COVID-19 pandemic has further encouraged changing market dynamics. Practices heavily reliant on fee-for-service reimbursements faced financial hardship as patient volumes dropped. Specialists report patient volumes have yet to rebound to pre-COVID-19 levels and are as much as 19% lower than they were in 2019.

These factors, coupled with soaring inflation, have prompted practices to look beyond fee-for-service to more cost-effective alternatives. Value-based care models offer an intriguing opportunity to maintain or grow profit margins and realign care delivery models to better support the needs of clinicians and patients alike.

Making sense of value-based reimbursement models

Practices exploring new payment models often struggle with where to start. The value-based reimbursement landscape is constantly evolving. There are a wide variety of government-administered and commercial payer-administered programs that have different objectives, requirements, and payment structures. However, some common structures have emerged, and payment models generally fall into one of four categories:

1. Fee for value models pay practices under a fee-for-service-like model for services that are typically performed by clinical support staff outside of the traditional patient encounter. Examples include chronic care management (CCM) and remote patient monitoring (RPM).
2. Quality incentives models tie payment to quality of care, as defined by a set of measures in a quality program. Program performance can impact fee schedule levels and result in bonus payments. An example is Merit-based Incentive Payment System (MIPS).
3. Shared savings (or shared risk) models link a portion of payment to quality and financial outcomes for a patient population or episode of care. Base payments may occur in the form of fee schedules, with bonuses if spending and outcomes meet program requirements. An example is the Medicare Shared Savings Program (MSSP).
4. Global capitation models hold groups responsible for the total cost of care for a patient population which requires managing financial and quality outcomes over time. Clinicians are paid a set amount per member per month for each patient and keep the difference if spending comes in under target. An example is Medicare Advantage.

The challenge is that practices’ value-based care participation often does not fall neatly into a single payment model. A practice may, for example, participate in MIPS, run a chronic care management program, and see Medicare Advantage patients simultaneously. Practices likely also maintain a fee-for-service business because, while reimbursement rates have levelled, fee-for-service will continue to account for a sizable source of revenue in the near-term.

Practices face the daunting task of identifying, developing, and managing the skills and tools required to succeed under an ever-evolving mix of payment models. A common approach is to attempt to staff up or to explore supplementary technology and service partners. However, in the current economic climate, hiring can be challenging and expensive, and stringing together a collection of partners can create a new set of administrative challenges.

Developing the skills required for success  

A great first step is to make the most of the people and technologies in place today. While program payment mechanisms and requirements vary, practices do not need to approach each independently. If practices can effectively develop the following skills, they will be well-positioned to participate in an array of value-based care arrangements:

1. Predict and identify: The ability to define a population with a set of specific care gaps and/or relevant conditions and attribute patients to clinicians responsible for their care.
2. Coordinate care: The ability to build patient care plans, enroll patients in care management programs, and ensure patient adherence to care plans.
3. Deliver care: The ability to make care decisions based on a longitudinal view of the patient — incorporating relevant care datapoints, closing gaps in care, and managing transitions of care.
4. Engage patients: The ability to engage patients during care programs with multi-channel outreach and drive desired behavior change.
5. Measure performance: The ability to measure performance in value-based care contracts and programs and measure the success of efforts and interventions.

Care gap insights, care plan tools, patient engagement levers, quality performance reporting, and more should all be standard in a modern health IT platform. Between the skills and technologies already in place, many practices are further along the path to value-based care success than they might think.

Empowering care teams with timely, relevant data

To succeed in value-based care, practices also need to be able to access data from — and share data with — a wide variety of partners across the healthcare ecosystem. Building digital connections with key clinical trading partners has the power to change the course of treatment and, ultimately, patient outcomes. However, data often collects in clinical inboxes, web portals, or spreadsheets inaccessible to care teams during a patient visit or care coordination work.

Payers, hospitals, labs, registries, third-party technology platforms, and countless repositories house information critical to building a complete picture of a patient and determining appropriate care. Practices must place a premium on delivering timely, relevant data to care teams in their native workflows. An urgent care visit summary may result in an “a-ha moment” for a clinician. Payer data might offer insight into suspected diagnosis that could impact risk scoring.

The EHR vendor should be able to offer insight into digital connections available and how to incorporate data flowing from them into clinical workflows. Before practices look to third-party interoperability services, they should learn about and evaluate the capabilities already available.

Bringing it all together

Like with most things unfamiliar, value-based care can seem like a daunting model to adopt. Yet, it holds significant potential for correcting a fundamental flaw inherent to the U.S. healthcare system. Building on a foundation of transferrable skills, and timely and relevant EHR data sharing, providers can select from an array of payment options that will position them to deliver better outcomes than ever before while bolstering financial success. 

1. CMS; Healthcare expert interviews; athenahealth analysis; McKesson report on VBR; Expert survey of healthcare payers; VBP vendors and VBP consultants (N=41)