7-Key VBHC Component 5: Clinicians are Reimbursed Based on Value of Care Provided Across a Full Care Cycle for Medical Conditions

MODULE 5 | Section 7 of 11

Key VBHC Component 5: Clinicians are Reimbursed Based on Value of Care Provided Across a Full Care Cycle for Medical Conditions

Medicine is a noble profession, built on the altruistic motivations of caretakers. However, it is hard to ignore the fact that perverse incentives that require clinicians to “do more” to get paid will predictably result in more medical care. It certainly does not discourage overuse of medical care, and these misaligned incentives make the delivery of high-value care challenging.

Moving from piece-meal fee-for-service payments to some form of prospective bundled or global payments can help encourage coordinated care, accountability for outcomes, and cost reduction.

Fee-For-Service versus Global Payments

Here is the Choosing Wisely list developed by the Society of General Internal Medicine (SGIM), which highlights 5 common areas of potential overuse in primary care:

Current Fee-for-Service Payment System

Care is fragmented instead of coordinated. Each provider is paid separately for work completed in isolation of other providers. No one is responsible for coordinating care. This results in little accountability to overall quality and cost.

Patient-Centered Global Payment System

Global payments made to a group of different types of providers for all types of care. This rewards providers for providing appropriate care instead of more care to meet the patients needs.

According to Porter and Kaplan, authors of “How to Solve the Cost Crisis in Health Care” in the Harvard Business Review, bundled payments must meet five conditions:

1- Payment covers the overall care required to treat a condition
2- Payment is contingent on delivering good outcomes
3- Payment is adjusted for risk (must account for differences in patients’ age and health status)
4- Payment provides a fair profit for effective and efficient care
5- Clinicians are not responsible for unrelated care or catastrophic cases (rare outlier cases should be excluded, so that clinicians do not build in these high costs into the standard price for every patient)

References: Porter and Kaplan. “How To Pay For Health Care.” Harvard Business Review, 2016; and “How to Solve the Cost Crisis on Health Care” Harvard Business Review, 2011

A future Discovering Value Based Health Care module will take a deep dive into shifting reimbursements from volume to value.

“In our current system, being inefficient means higher revenue. It’s hard to do the right thing in fee-for-service. But value-based payment reverses the incentives so they’re aligned with patient and societal goals. When you get the incentives right – when you reward high value instead of high volume – you see a burst of creativity among clinicians finding ways to do better.”

David Blumenthal MD, MPP, President of the Commonwealth Fund
New York Times, 2017.

ADDITIONAL RESOURCES

“HOW TO PAY FOR HEALTH CARE”

Harvard Business Review

“The United States is about to radically change how it pays for health care. Experts agree that the prevailing method—fee for service—fuels waste and does not promote high-quality care. The big question is: What should replace it?”

Harvard Business Review explores two leading models, bundled payments (Michael E. Porter and Robert S. Kaplan) and capitated payments (Brent C. James and Gregory P. Poulsen).

“THE CASE FOR BUNDLED PAYMENTS”

Michael E. Porter and Robert S. Kaplan

“Bundled payments will finally unleash the competition that patients want.”

“THE CASE FOR CAPITATION”

Brent C. James and Gregory P. Poulsen

“It’s the only way to cut waste while improving quality.”