The idea that health services should no longer be simply paid based on quantity, but rather should focus on outcomes, is logical and enticing.
“Perhaps the only health policy issue on which Republicans and Democrats agree is the need to move from volume-based to value-based payment for health care providers,” wrote health policy experts Drs. Robert Berenson (the Urban Institute) and Deborah Kaye (Johns Hopkins) in 2013.1
The issue is not everyone agrees on how to best achieve “value-based reimbursement,” which is a broad term that encompasses a number of different approaches. Payment reform is not an either/or proposition but instead represents different models across a continuum of financial risk. There are a spectrum of options, with FFS most at risk for incentivizing overuse while full capitation has the risk of incentivizing underuse. It is likely that no one solution will work for all settings and situations in health care.
One early attempt to shift toward paying for quality rather than quantity is known as pay-for-performance (P4P). Taken on the surface level, P4P seems like a no-brainer. P4P is built on the simple concept of providing clinicians or health systems more money for hitting specified targets, such as achieving a certain percentage of patients with diabetes in a practice that have good blood sugar control. Payers, including Medicare, have introduced numerous P4P approaches that aim to improve the quality and efficiency of health care delivery. However, the results of these types of programs have been disappointing, and there are concerns that not only do they not help, but they may do harm through worsening disparities in care and incentivizing health systems and physicians to “cherry pick” healthier patients.2
The Medicare hospital value-based purchasing (VBP) program is essentially a P4P program with incentives and penalties tied to hospital performance on given quality and efficiency metrics, such as readmission rates.
Part of the problem is that P4P relies on numerous measures, most of which are process measures and seem to have little actual clinical benefit. These results have led prominent health policy experts, Austin Frakt and Ashish Jha, to state in no uncertain terms that we should not use P4P as a method for creating value for patients:
“Part of making progress requires knowing what to stop doing. Although we still are learning the best ways to deliver health care to the American people, we know what does not work. The evidence on stand-alone P4P is clear and overwhelming, and it is high time to abandon this model. Plenty of alternative approaches are under way or waiting to be tried, and wasting time on strategies that do not work serves no one.”2
Face the Facts: We Need to Change the Way We Do Pay for Performance – NCBI
by AB Frakt and AK Jha, Annals of Internal Medicine, 2018
In the next sections, we will further explore two of the most prominent and promising payment models for enhancing value for patients – bundled payments and capitation models. Essentially, both of these models expand the scope and duration of care tied to payment. “By encouraging providers to innovate in care delivery within an episode (under bundled payments) or across populations (under accountable care organizations with capitation models), these programs provide more of the right incentives to improve efficiency.”2