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Laying the Foundations: The Goals of Value-Based Payment

By: Lucy Li & Jessica Sullivan

This post is part of a series of blog posts aimed at unpacking the value based payment for primary care practices looking to make the transition to value based care. Click here to read more about how Elation supports the transition to value based payment. 

In our previous two posts  we shared some sobering statistics about the U.S. healthcare system. It is clear that despite spending the most on healthcare compared to other developed countries, we have some of the worst healthcare outcomes in the world.

With fee-for-service, we catered to insurance companies and failed to institute a reimbursement scheme that balanced the interests of patients, providers, and payers. Because private insurance companies profit from this model, they have very little incentive to change the status quo. Thankfully, there were other innovative groups - let's call them our pioneers - who recognized the urgency of our predicament and were eager to institute change. 

So let’s understand how value-based care emerged as the hopeful solution and how its reimbursement goals and care delivery differ significantly from those of FFS. The Centers of Medicare and Medicaid Services (CMS) is a federal agency which provides healthcare coverage to Americans who are 65+, have certain qualifying conditions, or are low-income. In the early days, change around payment reform was mainly spearheaded by CMS. Fun fact: CMS is also the single largest healthcare payer in the U.S.

As the steward for health care services for so many individuals, many of whom are the nation’s most vulnerable residents, CMS has personally proclaimed that it has an obligation to ensure that these individuals have access to high quality care.  Due to a lack of cohesive payment reform policy, CMS's initiatives are currently the only way that U.S. healthcare can be regulated at scale. CMS has the interest and financial leverage as a payer to implement different rules and expectations that healthcare professionals need to follow if they want to get paid. 

The Quadruple Aim Framework 

The principles that formed the foundation of value-based care - the new care delivery framework that pioneers like CMS are betting on to change the trajectory of our healthcare system - are called the Quadruple Aim framework. The  four arms of the framework were developed by the  Institute of Healthcare Improvement (IHI) and collectively describe what’s needed to achieve success in healthcare.

The IHI picked these particular objectives because together, they promote a sustainable care delivery system that helps a society stay healthy. Its holistic approach addresses the needs of each stakeholder - patient, provider, and overall population - but not without regard for cost.The dual objectives of improving outcomes and decreasing costs are critical to understand. In value-based care, we define “value” as improving outcomes without increasing the cost of care. 

Value Based Payment as The Future of Healthcare 

Value-based care and its underlying value-based payment schemes are a complete paradigm shift that many believe will improve how the U.S. delivers and pays for care. Once value-based care was recognized as “the future,” our pioneers also had to reconsider new payment mechanisms that would make transitioning to this type of care delivery possible.

Value-based payment models (VBP for short) are reimbursement models that tie one’s payment to the quality of care provided. Unlike the fee-for-service model, value-based payment arrangements reward healthcare providers for delivering high-quality, efficient care and, in many cases, punish them for falling short of requirements. In other words, their payment is “performance-based,” not “volume-based.”

Despite the growth of VBP, FFS is still the dominant way providers get paid. In fact, 71% of primary care providers report that they are paid under FFS, compared to 46% of primary care providers who receive payment under VBP arrangements. (The sum of these percentages is more than 100% because many providers get paid under both arrangements.)

That means VBP is still a relatively nascent concept where the models and mechanisms are constantly being piloted - since the 2000s, we've been iterating and building upon prior successes and failures. We’re in an experimental stage where much is being learned about the efficacy of this new model of care and payment.

VBP and Its Opportunities for Providers

Even though VBP is a relatively new concept, it’s gaining traction. Since 2010, federal policymakers have invested billions of dollars in the CMMI, and new programs continue to be rolled out today. In other cases, providers are voluntarily seeking out VBP arrangements: 

  • VBP offers providers the opportunity to earn bonus payments if they do well in certain metrics. This benefit is especially attractive to providers who believe they’re already providing optimal care but were never financially rewarded under the traditional FFS model. For them, VBP is a chance to finally be recognized and paid for the work they’re already performing.

  • For primary care providers, VBP is directly aligned with the values and goals of this specialty. We saw how primary care was diminished and devalued under FFS. In contrast, the VBP model elevates the role of the PCP as the central figure who orchestrates patient care to ensure the best outcomes. It offers PCPs the clinical and financial freedom to become better providers to their patients.

Now that we’ve recapped what value-based care prioritizes (the well-being of the patient, the health of the population, the cost of providing care, and the experience of healthcare providers - a.k.a. The Quadruple Aim), in our next post, we’ll look more closely at how they achieve this.