Before we talk about value-based healthcare, let’s first get a basic understanding of the current provider-payer-patient relationship. Traditionally, providers (physicians, hospitals, and the like) are reimbursed via a fee-for-service model. It looks something like this:
Provider bills for services (an office visit, ordering a lab test, outpatient surgical procedure, admission to a hospital) they perform
Payer pays for these services
Patients pay a portion per their health plan
Simply put, you pay for what you use. The overwhelming sentiment of providers and payers is that fee-for-service no longer works and value-based care is going to fix the healthcare system.
UNDERSTANDING THE FLAWS IN FEE-FOR-SERVICE
The fee-for-service model isn’t without flaws. Because profit comes directly from the services performed, healthcare providers may be swayed to perform more and more services, some of which are unnecessary. Have a headache? Let’s get a CT scan. It’s rare a patient will reject a physician’s orders if they deem a service necessary. But this ends up in expensive procedures, most of which could have been avoided.
More services also means a need for sick patients. Providers are not incentivized to keep patients healthy but instead to have sick patients. The more sick patients, the more office visits, labs, and procedures. This doesn’t mean that physicians are practicing in a harmful way, but it may suggest that financial incentives are improperly aligned.
DEFINING VALUE-BASED HEALTHCARE
So, what is value-based care and how does it differ from fee-for-service? The core of value-based care is a changing reimbursement model that pays providers based on the quality of care that is provided. There are several variances of this model:
Pay for Performance. An extension of fee-for-service, the provider is still primarily paid based on services plus they receive bonuses or penalties based on the quality of care provided. This model was pioneered by Medicare with the Physician Quality Reporting System (PQRS; replaced by the MACRA/MIPS program). Through PQRS, providers received bonuses (or paid penalties) as a percentage of their Medicare billings based on quality measure results. This doesn’t eliminate fee-for-service, but it does hold providers accountable for the quality of care being delivered. Plus it monitors overuse or reduction of unnecessary services by penalizing providers when those actions are not clinically appropriate (such as unnecessary imaging or prescribing antibiotics)
Bundled Payments/Capitation. While there are differences between options, the concept of these models is that a payer will pay a provider/hospital/health system one lump sum for a group or bundle of services. It is then up to the health system to deliver the care for those services. The payment never changes based on the amount or type of services actually provided which incentivizes providers to be efficient in their care delivery as they will not be paid more for extra services. This model is common for episodes of care like a knee replacement surgery.
Shared Savings. In this model providers can receive an additional payment if actual costs incurred are lower than projected or benchmarked costs. The savings are split between the payer and the provider. Medicare and Medicaid have paved the way with their shared savings program at accountable care organizations (ACOs).
Quality of care is a major component for value-based care and payments to work. In a bundled payments or shared savings model it is critical to measure quality of care being delivered to ensure that necessary services are not bypassed simply to meet spending goals.
Measuring quality of care is nothing new, payers have long been measuring quality based on claims data. Through claims analysis, payers can easily assess when certain procedures have been performed. But claims data only goes so far in helping you measure quality.
For example, if payers are reimbursing for a large group of patients that have diabetes, a claim can tell the payer if a blood sugar A1c test was performed, but it won’t tell you if the patient’s blood sugar value is under control. To effectively measure quality you need clinical data from an EHR. With clinical data, you have access to data like lab results, blood pressure values (no claim is submitted when taking a blood pressure) and social history such as if a patient is a smoker and if they are were they given cessation counseling.
This is the differentiator when it comes to value-based care: combining clinical quality data with cost and utilization data.
To successfully combine all the cost and quality data, it’s important to enable multiple systems to talk to each other. Data from claims, practice management systems, EHRs, outside labs, and so on need to be integrated to paint a full picture of value. This remains one of the biggest challenges in healthcare today.
Great strides are being made with initiatives like the new Fast Healthcare Interoperability Resources (FHIR) standard developed by HL7. FHIR is an open and free standards framework designed to ease the burdens of interoperability. Built using standards like XML and JSON with a focus on ease of implementation, FHIR looks to be a key tool in building value-based care and payment systems for healthcare providers and payers.
At HealthLX, we are proud to support FHIR and HL7 initiatives. HealthLX is a Da Vinci stakeholder working with other industry leaders and health IT technical experts to accelerate the adoption of HL7 Fast Healthcare Interoperability Resources (HL7® FHIR®) as the standard to support and integrate value-based care (VBC) data exchange across communities.
Value-based care is a critical component to fixing our healthcare system. Bringing new payment models, combined with quality measurement and population health, using standards to promote interoperability will create great change in providing better patient care.