Why value-based care is on the rise in U.S.

In the evolving healthcare sector, the critical question remains: how will services be funded? Numerous complex answers exist, but value-based care offers pre-existing, adaptable payment solutions, allowing healthcare organizations to select or design an optimal model.

Value-based reimbursement prioritizes quality over quantity of services. There are four primary forms:

Performance-based Payments:

Beyond traditional Fee-For-Service (FFS) payments, providers receive additional compensation for achieving specific metrics or completing designated activities.

Bundled:

This approach consolidates services typically offered separately. Instead of individual payments for hospital, physician, and other services, a bundled plan incorporates these into a single payment for a specific condition, procedure, or service (e.g., a hospital stay). Providers save costs on certain care aspects and can retain these savings, promoting patient-customized care and cost-effective practices.

Shared Savings and Risk:

Both models use traditional FFS payments, but compensation hinges on meeting quality and spending benchmarks. Provider departments strive to reduce expenditures and adhere to budgets. Annually, spending is compared against a set target. Spending below the target allows providers to share the savings as bonuses. Conversely, exceeding the target incurs repayment penalties.

In shared savings, providers benefit from savings without risk. If spending is under the target, they share in the savings. In shared risk (downward risk model), providers are accountable for keeping spending within or below the target; excess costs are their responsibility. This model offers higher potential rewards but also increased risks.

Global Capitation:

Here, both short-term and long-term patients contribute to cost-sharing, with payments structured on a per-person, per-month basis. Providers receive a fixed payment to cover all care for individuals, regardless of the services used. This model aims to alleviate provider financial pressure while maintaining patient care quality.

No single healthcare reimbursement model is universally ideal. Each payer’s choice depends on their capabilities and objectives.

Various combinations of these methods exist alongside less common cost management techniques. Healthcare stakeholders encounter unique opportunities and challenges in implementing value-based healthcare reimbursement. Each system is customizable, enabling organizations to adapt these models to their strategic needs.

Fee-for-Service (FFS) Reimbursement Models: Characteristics and Challenges

Compensation Based on Quantity: FFS models primarily compensate healthcare providers based on the volume of services rendered. This approach often emphasizes quantity over quality, as providers are paid for each test, procedure, or visit, regardless of its necessity or outcome.

Lack of Outcome Consideration: In FFS models, the reimbursement amount is not linked to patient outcomes. Consequently, there is little direct financial incentive for providers to ensure the long-term effectiveness of treatment.

Potential for Unnecessary Procedures: Given that compensation is tied to the number of services provided, there’s a risk of unnecessary tests and treatments. This not only increases healthcare costs but may also expose patients to unnecessary risks, particularly when less invasive or less expensive options could be more effective.

These characteristics of FFS models have led to concerns about inefficiencies, escalating healthcare costs, and suboptimal patient outcomes.

Value-Based Care (VBC) Models: Focusing on Patient Outcomes

Linking Reimbursement to Outcomes: Unlike FFS, VBC models tie reimbursement to patient outcomes. Providers are incentivized to focus on delivering care that results in better health outcomes. This alignment of financial incentives with patient health can lead to more effective and efficient care.

Promoting Preventive and Holistic Care: VBC encourages a holistic approach to patient health, emphasizing preventive measures and the management of chronic conditions. This proactive stance aims to reduce the need for more intensive treatments and hospitalizations.

Encouraging Innovation in Care Delivery: Providers under VBC are motivated to innovate in healthcare delivery, exploring new methods and technologies that can improve patient outcomes and reduce costs. This includes the use of telehealth, personalized medicine, and integrated care models.

The Shift Toward Value-based Care

Implications for Healthcare

The ongoing shift from FFS to VBC is reshaping the healthcare sector. It promotes a more patient-centric approach, aligning financial incentives with the goal of achieving the best possible health outcomes. This transition supports the sustainability of healthcare systems by focusing on preventive care and reducing unnecessary procedures.