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The Changing tides of value based payment

December 15, 2016



The Changing tides of value based payment

The United States is struggling to define a 'how to pay for health care' system. The dominant model till date 'the fee-for-service' system is widely recognized as the biggest obstacle in improving the health care services since it rewards the quantity but not the quality of medical care.

Defining an alternate method to pay for health care, one that rewards providers for delivering better health outcomes at lower cost i.e. "value-based reimbursement" is accelerating and is led by Centers for Medicare & Medicaid Services (CMS) in United States.

What is value based payment?

In a broad sense, value based payments mean 'paying for the value'. Today, nearly for all types of products and services, a customer pays a single price for the complete package. For example, while purchasing a vehicle, a customer doesn't buy motor from one supplier, brakes from another and seats from a third vendor. They buy the complete product from a single entity. Similarly, it makes little sense for patients to buy their diagnostic tests from one provider, surgical services from another, and post-acute care from a third provider. These bundled up payments may sound complicated at the beginning, but to treat a patient's medical condition, it surely sets a single price required for all the care. That is, all the services - procedures, tests, drugs and devices used to treat a patient in case of a heart failure, an arthritic hip that requires a replacement or diabetes.

But does that mean health care is converging on a solution?

Value-based reimbursements usually cover two radically different payment approaches:

  • Capitation:
    In this, the health care organization receives a fixed payment per year per covered life. It must meet all the needs of a broad patient population.
  • Bundled:
    In this payment system, providers are paid for the care of a patient's medical condition across the entire care cycle.

A battle is raging between advocates of these two approaches. The risks are high but the outcome will define the shape of health care system for many years to come. While we know that capitation can achieve modest savings in the short run but it does threatens patient choice and competition and fundamentally is not the right solution. On the other hand, a bundled payment system will surely transform the way care and services are delivered and finally put health care on the right path.

A shift from Quantity to Quality:

CMS announced a goal of tying 30 percent of traditional Medicare payments to value based payment model by the end of 2016 and 50 percent of payments by the end of 2018. Starting in 2017, the CMS Value-based Modifier (VBM) will be required across all practices. The VBM will provide a differential payment to physicians based upon the quality of care furnished compared to cost.

The Flip side…

The long-term impact of value-based payment model is still uncertain. Though many believe that it will increase efficiency and reduce the cost of healthcare in US but the major changes such as implementing an EHR, transiting to ICD-10, attesting for meaningful use will take time, resources and often money.

Such big changes usually result in a dip in revenue, resulting in a dip in productivity of a practice. A temporary revenue loss of practice may result in loss of revenue of the billing company that serves that practice.

On the flip side, as payers change to reimbursement that is higher for value-based care, and practices get the right technology and processes in place, revenue may increase and so will the revenue at the billing company.

There will also be practices with a mix of value-based and fee-for-service payment models. These practices may need their billing company more so as to look into whether to add new services like coding or practice consulting into their payment programs.

Should you add coding/consulting to your roster of services?

There are a set of standard questions on the basis of which one can decide if adding any service makes sense, such as: Does the service add revenue?, Does it add risk to your practice or strengthens your current offerings? , Do you have the expertise? etc

Another option could be to partner with a consultant who has expertise in value-based payment programs and can help your practice customers take advantage of these programs effectively.

Remember, sooner the practice is able to get it right, the faster revenue and productivity are restored.

 

Category : EMR / EHR / Health IT