The Defining Features of Current Value-Based Care Models

September 23, 2019 - The healthcare industry has seen a major shift in recent years from a focus on fee-for-service to a value-based payment with an emphasis on value rather than volume.

With the passage of the Affordable Care Act (ACA) in 2010, the federal government set value-based care in motion, creating the first value-based care model: accountable care organizations (ACOs), a group of health care providers who coordinate care for patients with a certain type of insurance. While Medicare ACOs are common, many commercial ACOs target coordinated care for their privately insured members as well.

ACOs have served as a springboard to other value-based care models. Today, there are over 40 different alternative payment models (APMs) that tie payment to quality performance rather than total billable services.

Other models include but are not limited to

• Accountable health communities
• Bundled payment for care improvement
• Comprehensive primary care plus
• Home health value-based purchasing
• Integrated care for kids
• Oncology care two-sided risk arrangements
• Patient-centered medical homes

Each of these innovative models embodies the definition of value-based care at the Centers of Medicare and Medicaid Services (CMS). They reward providers for the quality of care they deliver as a part of the quadruple aim: improved patient care, improved population health, lower healthcare costs, and increased provider satisfaction. Given the potential large risk providers take in these value-based reimbursement models and the administrative burden they may pose, provider satisfaction is often considered the fourth aim.

While each alternative payment model differs slightly, there are three key features nearly each payment model contains: financial risk, care coordination, and quality metrics. 

Financial Risk

Unlike fee-for-service models, alternative payment models require providers to assume some level of financial risk as a way to emphasize the need to deliver efficient quality care. Value-based models can include upside risk, downside risk, or both in a two-sided risk model.

Upside financial risk is best articulated in comprehensive care payment models. In these models, the provider receives one payment to cover all the services for a patient during a specific time period which in some cases may include services provided by other providers. Payment is established based on the patient’s initial health status and services required. Providers assume an upside risk, so if they are able to provide appropriate and necessary care for less than the contracted payment, shared savings are divided between payer and provider. However, if providers exceed the bundled payment allocation, payers are not financially penalized.

In a downside risk model, providers must refund the payer for the incurred losses if they exceed financial benchmarks. CMS’s bundled payment model for acute myocardial infarction episodes is a prime example. This care model is a retrospective episode-based payment, so aftercare for an acute myocardial infarction, the care costs are examined. If costs exceed the quality-adjusted targeted price, providers much repay the losses to CMS.

Two-sided risk combines both the upside and downside risk models. While upside risk structures are more popular for providers, CMS has begun implementing limitations on several of their value-based programs to encourage more downside risk. Commercial Payers are following suit.

CARE COORDINATION

A large part of high-quality care is reliant on well-coordinated care, which is why care coordination between and among different providers and parts of the healthcare system is a key component of many value-based payment models.

The medical home model and accountable care organizations are most representative of this aspect of value-based models. In an ACO, providers partner together to deliver coordinated care to all patients in their network while in patient-centered medical homes the primary care provider is the center of the care coordination efforts. Many payer organizations have population health management strategies that help support the efforts of these providers in an effort to improve the health of the community.

Success in these models is more likely when there is also an emphasis on health data exchange and technology.

QUALITY METRICS

An emphasis on quality is a staple of value-based payment. Some models use quality metrics as criteria for reimbursement. In other words, providers are only reimbursed if they meet specific quality indicators. In some total cost of care contracts, providers must meet or exceed certain quality metrics in order to move forward into cost of care savings calculations. This important “gate” is an important emphasis added to many contracts to ensure proper focus on quality.

A majority of these quality metrics focus on preventive care and patient-reported outcomes either at the facility or population level. For example, a hospital will be reimbursed based on the meeting a certain level of patient satisfaction ratings or a health system will be reimbursed if a certain proportion of its members undergo preventive care screenings.

Many value-based care models incorporate quality metrics into their reimbursement strategies but ensure these measures are not the only means of reimbursement given the relatively small impact a provider can have in shifting the metrics.

NOT ONE-SIZE FITS ALL

There are over 40 alternative payment models reported by CMS either currently or coming down the pipeline. Each model differs in the type of risk to be assumed by providers, the level of care coordination, and the emphasis on quality measures. Stakeholders from health systems to state agencies are adapting different models to fit their unique patient populations and system capabilities.

Individual states have taken and optimized these methods to encompass their entire state population. Maryland was the first to adopt a statewide all-payer model and their contract was expanded in 2019 to include entities outside of the hospital including mental health providers, long-term care, primary care, and community resources.

Vermont followed suit implementing the Vermont All-Payer Accountable Care Organization Model that combines Medicare, Medicaid, and commercial payers with a particular focus on health outcomes.

Given the high volume of value-based care models, those just entering the value-based care arena can select a model that best fits their unique patient population and those who have been in the space since its inception, can continue to hone the evidence for the model's effectiveness.

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