In the face of rising healthcare costs and an aging and less healthy population, players across the healthcare and policy ecosystem are turning their focus to value-based care.
In early 2015, the U.S. Department of Health and Human Services (HHS) announced its value goals for Medicare, aiming to tie 50 percent of fee-for-service payments to quality or value by the end of 2018.
This shift means leaving behind a supply-driven system organized around providers, for a patient-driven system where creating value is the primary goal. Alternative payment models such as bundled payments, pay-for-performance, shared savings/accountable care organizations (ACOs) and Patient Centered Medical Homes (PCMHs) are being tested and will ultimately enable the shift to value.
A 2015 value-based payment study by the American Academy of Family Physicians found that 33 percent of family physicians are pursuing value-based alternative payment models, and 19 percent are in the process of developing them. HHS has seen cost savings with alternative payment models, with combined total savings of $417 million due to existing ACO programs.
Indeed, there are significant benefits for organizations to pursue value-based healthcare, according to research from the Boston Consulting Group. These include delivering superior outcomes that draw larger patient volumes, eliminating costs that don’t contribute to improved outcomes, and attracting, developing and retaining clinical staff who want to improve patient outcomes.
Outcomes matter most
“The alternative traditional fee-for-service model, where providers get paid for every service they provide regardless of benefit, motivates more services but not necessarily better care, and it’s resulted in the fragmented, high-cost system we have in this country today,” said Sara Singer, professor of health policy and management at Harvard Medical School.
“It makes enormous sense to pay providers based on outcomes, particularly when patients and family members have some say in which outcomes they value most,” Singer said.
“Instead of rewarding volume, value-based payment models reward better results in terms of cost, quality and outcome,” said Robert Salter, professor of strategic management in healthcare at Washington University in St. Louis. “The term ‘value’ does not imply cost, but the total benefit produced by an intervention to patients as well as providers,” Salter said.
Technology makes it possible
Value-based care delivery requires a technology-enabled infrastructure that connects providers, caregivers and patients—and disparate sources of data—in a coordinated way. However, simply collecting and connecting data is meaningless. Data holds the key to better understanding the health of individuals, populations, and hospital systems’ operational efficiency. Therefore, a technology platform must also support the analysis and integration of this data for improved outcomes at a lower cost.
“In the future, the white coats and the [business] suits will become one. Providers have to be able to straddle the diagnosis and treatment elements together with the financial risks they are bearing,” said Richard Kimball, a Stanford University fellow and health care industry expert.
Many industry players are developing solutions that directly align their product offerings with the value that the product provides, ultimately helping providers to justify the clinical and economic value of their spending.
For example, in 2015, Philips and Westchester Medical Center Health Network announced a $500 million, multi-year enterprise partnership to transform and improve healthcare for millions of patients across New York’s Hudson Valley. The partnership is based on a model through which Philips provides WMCHealth with a comprehensive range of clinical and business consulting services, as well as advanced health technologies such as imaging systems, patient monitoring, telehealth and clinical informatics solutions.
Even with all the technology and data discussions, a cultural change is needed for value-based care to take hold and prosper. “Very few providers today are oriented to collaborative, population-based management and proactive patient care,” Kimball said. “The challenge is for providers to change their behavior and adopt these practices. We can start to teach them about the intersection of clinical and value-based issues, including budgets.”
An integrated, value-based approach will facilitate communication between providers and patients, and support prevention and management of chronic care outside the hospital setting.
“For the patients who tax our healthcare system the most—those with multiple chronic conditions—the healthcare system needs to do a better job of integrating care,” Singer said. “The good news is that if the system can learn to do it for these patients, it would benefit all of us.”