Value-based care (VBC) has affected the healthcare industry in both visible and subtle ways. It switches the attention from transactional-focused to outcome-focused. By doing so, VBC programs have already saved CMS billions of dollars in the time they have been active. In this series of articles, we will observe the different ways it has changed the industry, with today’s focus on reimbursement incentives.
VBC programs are changing healthcare reimbursement in multiple ways. There are innovations that use current reimbursement methods but with a twist, while others are completely reinventing how reimbursements happen. One method is to set up retrospective payment models with a bonus at the end. Claims reimbursed via this methodology are paid in the standard manner, but if the provider in the program achieves the goals set out for them, they receive a monetary bonus at the end.
Some VBC programs focus specifically on quality, with closing care gaps as their main priority. For example, if the provider involved closes enough care gaps, such as ensuring that a high percentage of their diabetes patients have an eye exam, foot exam, and A1C testing, then they can then earn a bonus. Typically, the bonus is a percentage of their reimbursement.
Value-Based Care Focuses on Quality and Cost
Other programs, such as shared savings, focus on both quality and cost. Shared savings programs may require providers to ensure certain types of care are performed or may necessitate that they avoid certain complications in qualified patients. Providers engaged in shared savings programs also have a set target regarding certain metrics, for example, number of procedures or diseases per state, or per member per year or month. If the spend of all providers involved in the patient’s care is below target, then the providers can get a percentage of that savings as a bonus. In some cases, if the provider goes over target, then they may take on risk.
These programs have been valuable in identifying the best methods to improve patient care and lower cost. They have also been a good tool for providers to get used to VBC, the new approach to care instead of fee-for-service, which has been the standard for so long. Value-based care programs have led to noticeable improvements in the quality of care, in addition to making a profound impact on the push to standardize approaches to care. Lastly, because VBC does not change how the patient’s care is processed for payment, it allows for current infrastructure to be utilized for the bulk of claims’ payments.
Prospective Payment Methodology
Another methodology, which is growing in popularity, is prospective payment. Prospective payment allows the responsible entity to receive payment upfront for the care they will provide. They then must budget for all aspects of care, including any downstream providers involved in the process. This payment methodology has been prevalent with episodes of care for several reasons; first and foremost, the cost is predictable, and the provider takes on risk for issues in the care. Aspects such as stop-loss can be included, but the focus is on keeping the episode under budget in a real way. Budgeting in this manner also opens up avenues of cost containment that are not normally available to payers, such as the ability for providers to negotiate new rates with downstream entities. For example, providers can work with an entity such as an Ambulatory Surgery Center (ASC) or hospital to set a rate for use of an operating room or offer to pay a set rate for an implant they intend on using. Negotiations such as these are often unavailable or difficult for payers to participate in; however, they are accessible for providers in this circumstance because the agreement guarantees that patients will be referred to the engaged location or downstream provider. The risk-bearing provider needs to have a clear understanding of costs associated with the agreement, along with ensuring open communication to allow for efficient and effective care delivery. Prospective payment is an attractive and successful methodology – not only because of the lowered costs associated with it but also because of the extraordinary improvement in quality. We have seen in our own client programs that members who receive care within a prospective payment model have fewer complications. And studies have shown that patient satisfaction rises as a result of clear pricing and a holistic care approach.
Providers in all areas of care are beginning to see the immense value in prospective payment methodologies. As chronic care, behavioral health, and even the new direct contract model by the Centers for Medicare and Medicaid Services (CMS) focus on prospective payment models, it is becoming clear this is the new way forward.
Prospective Payment Challenges
Despite mounting interest in prospective payments, it can be difficult to scale these solutions quickly. This methodology does not work well in the existing fee-for-service claims processing infrastructure. Some employers, frustrated with the slow growth in prospective models, have instead turned to direct-to-employer models to push payers towards faster adoption. However, it can be hard to ensure a full quality view of the member in the process, since it requires dependence on a vendor who will receive limited claims for just the contracted procedure and will miss any related complications.
Overall, value-based care impacts reimbursement tremendously. VBC programs have already saved CMS billions since they’ve been active, and these massive savings will only continue to grow. A complete shift to VBC will be a challenge given that quite often providers’ claims systems cannot support the new models, particularly prospective payments, in their current state. This is an area where innovation will be key, and we will see new creative approaches to solve this issue. Enlace Health’s expertise and combination of analytics, claims administration, and network services are providing the linkage needed to transition payers and providers into the benefits of value-based care.
Prospective Bundled Payments in a Changing Environment