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Value-Based Payment Adoption Drives 5.6% Reduction in Care Costs

Value-based payment adoption reduced payers’ care costs by 5.6 percent and led to improvements in provider collaboration and member engagement.

Value based payment adoption helped payers reduce costs by 5.6 percent annually

Source: Thinkstock

By Thomas Beaton

- Payers that implemented value-based payment models reduced healthcare costs by an average of 5.6 percent, improved provider collaboration, and created more impactful member engagement, according to a new study from Change Healthcare.

The Finding the Value: The State of Value-Based Care in 2018 report, presented at the 2018 AHIP Expo, found that payers are effectively achieving the Triple Aim of healthcare while moving two-thirds of provider reimbursement into value-based payments over the last two years.

A quarter of payers experienced over 7.5 percent in medical cost savings when participating in value-based care agreements and by using innovative payment models.

“Payers are finding the positive impact of value-based care as they scale these models—particularly episodes of care—and that’s starting to bend the cost curve in a significant way,” said Carolyn Wukitch, senior vice president and general manager of Network and Financial Management at Change Healthcare.

A majority of payers also experienced gains in their ability to collaborate with providers and engage their members, the team found.

Almost 80 percent of payers reported improvements in care quality from providers receiving value-based reimbursement. In addition, 64 percent of payers reported improvements in provider relationships and 73 percent of payers said patient engagement with beneficiaries improved by using value-based care.

Commercial payers experienced higher rates of value-based reimbursement adoption than public and government sectors in the last few years, the survey found.

Change Healthcare noted this is the first time in the three years of the survey that commercial payers outpaced public payers in value-based care adoption.

As a result of this shift, payers and providers are seeing fewer of their relationships fall under the fee-for-service (FFS) category.  

FFS payments only accounted for 37.2 percent of provider reimbursement during the last two years. The use of FFS reimbursement is projected to fall below 26 percent by 2021.

Despite this progress, bundled payments and episode-of-care programs have proved challenging in recent years, according to the report. However, payers that have effectively overcome these challenges have reaped significant rewards.  

 The team found that bundled payments help save payers between 5 to 5.4 percent each year on care costs and can help payers reduce care costs by 7 percent or more once programs are fully developed.

About 21 percent of payers can roll out a bundled payment program within three to six months, says the survey. Over a third of payers need up to a year to launch a new program, 21 percent require 18 months, and 13 percent need two years or more to implement bundled payment programs.

However, payers faced challenges when generating interest from providers to participate in bundled payment programs, agreeing with providers on the definitions of an episode of care, and establishing budgeting and performance metric requirements.

Roughly 43 to 58 percent of payers reported that it is very or extremely difficult to engage providers in bundled payment programs. Over 66 percent of payers are trying to address bundled payment challenges by investing in administrative staff that can help grow bundled payment programs.

Overall, payers are reporting success with value-based payment models as they continue to mature.

Maturity of value-based payment models

Source: Change Healthcare

Pay-for-performance models are the most developed value-based payment models in the industry, followed by global payment, prospective bundled payment, population-based, and retrospective bundled payment models.

Value-based payment models are primed to create stronger opportunities for a cost-effective healthcare system, the team said.

The next step is for payers to promote greater investment in analytics tools and technologies. The team found that over half of payers are generally not satisfied with their analytics capabilities related to value-based care, and that they experienced issues with automation and data reporting.

“The demand to innovate at the pace of change is challenging payers. They lack satisfactory analytics and automation to better engage providers, operationalize their models, and assess effectiveness overall,” Wukitch said.

Payers that have the digital tools to improve value-based operations are positioned to spur even greater cost savings and better quality of care for beneficiaries than in recent years, the team concluded.

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