Healthcare industry is undergoing a fundamental shift from a traditional fee-for-service model to a more patient-centric approach known as value-based care (VBC). It not only brings focus to patients but also has the potential to reduce the total cost of care and improve overall population health. In this blog, we will delve into what value-based care is, why the shift from volume to value is necessary, how VBC model is different from the fee-for-service model, what are the key principles of value-based care, and what are the different existing value-based purchasing programs.
Value-based care is a healthcare delivery model that emphasizes on high-quality, efficient, and patient-focused care. Unlike the traditional fee-for-service model, where providers are reimbursed based on the volume of services they deliver, the VBC model rewards providers for delivering better patient outcomes and experiences.
Let’s take an example, John visits his physician multiple times for a persistent headache issue. His insurance claim summary shows that the provider was reimbursed for every service provided during each visit. On the contrary, Peter, John’s friend, visits a different provider. But his claims show that the provider was reimbursed on a one-time lump sum basis, based on how well provider managed his condition on quality metrics.
In John's scenario, the provider delivered volume (of services) with little or no strings attached to quality. But Peter's provider aimed to deliver value with the best care possible to meet quality metrics and this helped Peter get improved and proper care.
The introduction of the Affordable Care Act in 2010, has made provider organizations focus and shift from volume to value.
Today's State of Value-Based Care
Fig 1: The Current State of Value-Based Care (VBC)
Value-based care differs from fee-for-service in terms of incentives, payment structure, or risk to patients, providers, and payers. According to the 2021 stats from Health Care Payment Learning and Action Network (HCP LAN), Commercial (53.7%) and Medicare (52.3%) payers were responsible for over half of the payments in the fee-for-service model. The levels hold steady for VBC and FFS but the transition is happening to value as we talk. The FFS model isn’t going nowhere instead it will evolve as per the needs of value-driven healthcare industry. So, it is necessary to understand how value-based care vs fee-for-service battle goes on paper to implementation.
A few ways value-based payments differ from FFS:
What are the Key Principles of Value-Based Care (VBC)?
What are the Different Value-Based Payment Models?
All value-based reimbursement arrangements emphasize quality over the quantity of services provided. The terms ‘value-based care’ or ‘value-based payment’ include a variety of reimbursement arrangements, including APMs (Alternative Payment Models), advanced APMs, bundled payments for episodes of care, pay-for-performance, shared savings programs, and global capitated payments.
|Pay for Performance||Healthcare providers are only compensated if they meet certain metrics for quality and efficiency.|
|APMs and Advanced APMs||APMs can apply to a specific clinical condition, a care episode, or a population. Advanced APMs are a subset of APMs and allow clinics to earn more for taking on some risks related to their patient's outcomes.|
|Bundled Payment||Under this payment structure, different healthcare providers who are treating a patient for the same or related conditions are paid an overall sum for taking care of a condition rather than being paid for each treatment, test, or procedure. In doing so, providers are rewarded for coordinating care, preventing complications and errors, and reducing unnecessary or duplicative tests and treatments.|
|Shared Savings||The shared savings program facilitates coordination and cooperation among providers to improve the quality of care for Medicare Fee-for-Service (FFS) beneficiaries and reduce unnecessary costs. Eligible providers, hospitals, and suppliers can participate in the shared savings program by creating or participating in an Accountable Care Organization (ACO).|
|Global Capitation||The global capitation system operates on the basis of a network of hospitals and physicians receiving fixed payments on a per-member basis for enrolled health plan members. Generally, providers sign a single contract with a health plan to cover care for members and then determine a method of dividing up the capitated payment among the provider group.|
Value-based care holds great promise but it does not come without challenges. Transitioning from the fee-for-service model requires significant changes in healthcare IT infrastructure including data management protocols and payment models. Here are the biggest challenges that healthcare providers face while transitioning to value-based care:
Despite multiple challenges, the future of value-based care remains bright. As technology continues to advance, healthcare providers can harness the power of telemedicine, wearables, and artificial intelligence to better manage patient care and drive value. Moreover, as more healthcare organizations embrace value-based care, they will create a network effect, leading to a more cohesive and integrated healthcare system.
Value-based care represents a revolutionary shift in healthcare delivery that prioritizes patient well-being and quality of care. By focusing on outcomes, preventive measures, and patient engagement, it offers numerous benefits, including improved patient outcomes, cost containment, and enhanced patient experiences. As the healthcare industry continues to embrace this transformative model, the ultimate goal of value-based care is to create a healthier population while building a sustainable and efficient healthcare system for the future.