According to the American Academy of Family Physicians, value-based payment is defined as “…a concept by which purchasers of healthcare (government, employers, and consumers) and payers (public and private) hold the health care delivery system at large (physicians and other providers, hospitals, etc.) accountable for both quality and cost of care.” Another way to look at this healthcare payment model is “outcome-based payments.” Value is determined based on how the provided care affects the patient’s actual health outcome. This differs from the current legacy models by focusing on the result of care instead of simply following a predefined treatment pathway. Let’s explore what this really means and the potential impacts to how healthcare is provided and paid for.
Legacy payment models, which predominantly focus on predefined activities performed by the provider, have a number of inbuilt inefficiencies that impact care and health outcomes for patients. First, these models often fail to reward preventative care – care that prevents the development of diseases and/or medical conditions such as diabetes or heart disease – and instead waits until a patient becomes ill before valuing (and paying for) care. Second, these models tend to be very “pathway based” meaning that a specific set of activities are defined as the care steps for a condition, and those are what are favored by healthcare payments. Innovative or alternative care is excluded or discouraged, even when there are demonstrable benefits to patient healthcare outcomes. And even when new innovations are identified as an effective treatment, these systems are slow to catch up. Ultimately, this leads to favoring low-value care and exacerbates existing care gaps and inequalities.
The Benefits of Healthcare Value-Based Payments
Now that we understand some of the inefficiencies and pain points associated with legacy healthcare payment models, we can explore some of the key benefits offered by alternative healthcare payment models centered around value-based care.
Rewards care that provides measurable, tangible benefits to the patient
Instead of only covering a predefined list of activities for a particular condition, providers are able to focus on their patient’s actual needs and provide evidence-based treatments and approaches. The patient’s outcomes are measured and rewarded, instead of rewarding following checklist items.
Preventative care is recognized alongside treatment of sick patients
A major challenge with activity-based payments is the focus on treatment of existing conditions, forcing patients to need to become ill before receiving care. Value-based care allows providers to offer more preventative care steps that reduce incidence and development of common conditions and diseases such as diabetes and heart disease.
Fosters innovation and evidence-based care
By focusing on the actual patient outcomes, healthcare providers are better able to try new approaches based on the latest guidelines and research. Old models of care are too slow to update their recommendations. An outcome-based approach rewards what actually works instead of favoring low-value and/or ineffective treatment pathways.
The Impacts of Healthcare Value-Based Payments
While the benefits of value-based healthcare payments are clear, what are the impacts of implementing such a system over legacy models? Let’s explore the impacts on both the payment process as well as economic trends of the healthcare payment system.
Impact on health plans and healthcare organizations
In order to support a value-based payment system, health plans and healthcare organizations need effective data analyses that evaluate patient health outcomes. Payers all need to agree on the metrics to measure and develop a shared vision of value and accountability. This model isn’t entirely new, as it is already used for Medicare payments in the U.S. Expansion will have many ripple effects across healthcare markets, reorienting care around quality and value.
What emerges are cost-savings and efficiencies. Preventative care has many demonstrable benefits to patients, and prevents costly interventions down the line by providing routine, high-quality (but ultimately more affordable) care upfront. This helps prevent the onset of disease instead of waiting until a patient is sick to treat them. Providers are able to use evidence-based medicine to tackle patient health concerns instead of following a checklist of dated approaches. Overall risk across the patient population covered goes down, and overall costs are reduced while increasing the quality of care provided.
Impact on patients
Value-based care provides patients with the most valuable gain of all – improved health outcomes with fewer gaps and more equitable care. When receiving care, working with a provider stuck in an activity-based model often leaves patients feeling frustrated, unheard, and ultimately, causes a lack of trust and confidence in their provider. At worst, it can result in the development of conditions that are otherwise preventable or being prescribed ineffective treatments and low quality care. Turning the system around allows patients to receive far better care, and as the efficiencies of the system are born out, they receive that care at a far more affordable rate.
Legacy healthcare payments cannot adapt to modern needs. What’s needed now are forward-thinking, patient-focused models that are driven by real-world, real-time data that assess critical metrics like short- and long-term patient outcomes, provider performance, and quality of care. Payers need to evaluate and agree upon valuable, measurable metrics that give providers the ability to collaborate and provide high quality, equitable care to each and every patient. Contact Mitivate to learn more about healthcare value based payments and their potential impact.