Value-Based Care Payments May Reach 60% in Next Five Years

June 14, 2016 - Value-based care payments are quickly becoming a mainstay in today’s health insurance industry with more payers jumping on the bandwagon of bundles, alternative payment models, and accountable care organizations. A report commissioned by McKesson and conducted by ORC International showed that 58 percent of surveyed payers are moving toward complete adoption of value-based care payments, according to a McKesson press release.

This percentage has increased by 10 points since 2014, which means that even over the last two years, value-based care payments have grown in popularity. The survey found that payers predict a mix of quality-focused reimbursement strategies to encompass at least 60 percent of payment over the next five years. The reimbursement strategies include pay-for-performance, global payment or capitation, and bundled payments.

“Payers and providers are clearly beginning to scale VBR [value-based reimbursement],” Rod O’Reilly, President of McKesson Health Solutions, said in a public statement. “The swift pace of change, coupled with the daunting complexity of these payment models, is putting extreme pressure on the healthcare system. As we move beyond pilots, the ability for payers and providers to automate the complexity inherent in these models will be a deciding factor to success.”

The surveyed health payers project that bundled payments will experience a 6 percent boost over the next five years. When including hospitals and payers in the analysis, these entities predict that 17 percent of all healthcare reimbursement will be in the form of bundled payments by the year 2021.

However, only 40 percent of hospitals and half of payers stated in the survey that they are prepared to adopt bundled payment models today. This may mean that it could take more time than predicted to fully move into the new world of value-based care payments.

Part of the problem may be that traditional fee-for-service payment models are so ingrained in the healthcare industry. This includes the complexity of transitioning to new technologies meant for value-based care. Only 25 percent of those surveyed stated having the automation technology necessary to adopt the new alternative payment models.

Provider network management has also been changing quickly when the move to value-based care payments blossomed. More than 60 percent of all surveyed payers began using new network strategies since 2014. The report showed that 42 percent of insurers are using narrow networks while 53 percent have also implemented tiered networks in their health plan offerings.

Hospitals, however, find fault with these new provider network strategies, as they have led to more confusion for patients, payment denials, and referral management issues, according to the press release.

The focus on pay-for-performance has pushed forward the need among providers to meet quality performance measures. However, health plans are finding that only 22 percent of hospitals are meeting the goal of reducing administrative costs and 30 percent are reaching care coordination metrics.

Once again, this shows that it may take more time for providers and payers to truly move toward a world of value-based care payments in which both parties achieve the results they need to operate effectively.

If it wasn’t for the programs designed by the Centers for Medicare & Medicaid Services (CMS), it is possible that many payers may still be working through the traditional fee-for-service payment system for the entirety of their revenue. The Kaiser Family Foundation outlined in an executive summary how CMS has formed programs around operating accountable care organizations and bundled payment models.

Essentially, these reforms were aimed at moving reimbursement from fee-for-service to value-based care payments that depend upon patient outcomes and overall Medicare spending. CMS is also evaluating these programs to ensure spending can be reduced without negatively affecting the quality of care among Medicare beneficiaries.

“Questions about how beneficiaries are involved in these new payment approaches and the implications these models have on beneficiary care—particularly for those with multiple chronic conditions—are key issues, yet at this stage, the answers are not well understood,” the executive summary states.

“For the most part, Medicare beneficiaries in these models do not experience any changes in their Medicare benefits, as they are not required to see certain providers and do not experience differences in their levels of cost-sharing.  Accordingly, even though beneficiaries are notified of their providers’ participation in these models, it is not clear that beneficiaries are aware of their attribution to them, nor the inherent implications of the model’s payment incentives for less costly care.”

“Beneficiaries whose primary care provider is transforming their practice into a medical home may notice differences in the delivery of their care—for example, greater reliance on clinical teams and electronic health records—but for the ACO and bundled payment models, beneficiaries would not necessarily notice changes in care practices.”

As the healthcare industry continues to reform and implement pay-for-performance contracts aimed at improving the quality of patient care while reducing spending, it may take more time for hospitals and providers as well as payers to meet the goals of value-based care.

Dig Deeper:

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