Fee-for-Service vs. Value-Based Reimbursement
Healthcare delivery is undergoing transformational change due to fiscal and legislative pressures…
Fee-for-service vs. value-based reimbursement is a somewhat controversial topic in health care at the moment. There have been tremendous reforms in healthcare that have the industry revisiting the issue of how health care providers are paid. The goal is to emphasize better quality at reasonable costs. This simply means improving value.
The fee-for-service model reimburses healthcare professionals for specific services provided to patients. The system works to reward providers for the actual volume of services rendered. Value-based reimbursement works toward a payment system compensating providers for quality of care outcomes rather than volume of services. In this model, providers can receive bonuses for offering beneficial and affordable healthcare services.
Most medical experts believe that value-based models improve service quality and overall value of the healthcare provided. The overall goal is to reduce the cost and minimize the time spent duplicating services. Those duplications do nothing but cause inefficient healthcare.
A Shift Toward Value-Based Reimbursement
It is difficult to stop the infrastructure momentum toward value-based reimbursement when you plan to educate stakeholders on new ways of working. The Affordable Care Act and government payers operate differently than do commercial payers but commercial payers drive most of the market momentum. It is abundantly clear that commercial payers are opting toward value-based reimbursement models.
A Payer Makes Progress
Over the last few years Blue Shield has developed various programs that emphasize primary care services. They have also designed wellness programs, including medication adherence and patient compliance for example. According to a recent survey, a value-based model saved BC/BS $500 million in 2012. They demonstrated how to reduce hospital readmissions, decrease ER visits and offered programs for chronic conditions such as diabetes, etc.
Transition to Value-Based Reimbursement
The transition from fee-for-service reimbursement to a value-based system is one of the greatest financial challenges in healthcare today.
Healthcare delivery is undergoing transformational change due to fiscal and legislative pressures. Most people don’t realize how far the evolution in healthcare reimbursement has already come. They also don’t understand how far behind the development of healthcare systems can actually be.
Most will remember the failed implementation of Healthcare Maintenance Organizations of the late 1990s. The attempt to create a wellness model of care to replace the fee-for-service model was certainly a noble cause. The pressure required to transform healthcare delivery in the US was simply not sufficient to allow that type of change.
One possibility is that financial pressures were not enough to force patients and doctors to move toward being held accountable for care. It’s quite possible that the information technology infrastructure was not sophisticated enough to integrate care across the compendium. No matter the cause, the 2000s are likely to be seen as a lost decade for the evolution of healthcare delivery in the US.
There were already significant market pressures toward value-based healthcare. Then, the ACA) put into law requirements that systems move toward pay for performance rather than fee-for-service reimbursement.
In two years, Accountable Care Organizations, formed by the ACA, covered an estimated 10% of patients in the US. How is it possible that a healthcare delivery model could change motivating factors for delivering care to 30 million American in two years? Keep in mind that these same organizations only covered 2.4 million Medicare members.
The answer, unknown by most, is that the quality metrics that drive ACOs, and their interactions with patients, did not only apply to Medicare patients. In reality, those metrics covered ALL patients seen by physicians that participated in an ACO.
Here’s how it works
A physician joins an ACO because they want to get involved in sharing the savings they generate by delivering better quality and lower cost care to patients. At the end of the year, the ACO receives a “report card” on how well they performed in delivering care to their patients. The “report card” is based on 33 quality measurements.
These measurements grade providers on items such as patient/ provider communication, success of preventive care, efficiency of care for patients with chronic diseases and how well providers coordinated patient care just to name a few.
If the providers get an “A” on their report card, they become eligible to get reimbursed as much as 60% of the decreased costs generated by caring for their Medicare patients. Shared savings are only based on the selected group of Medicare patients, but the report card grade is based on the provider’s performance on all of their patients.
Accountable Care Organizations function like HMOs because they offer an incentive to deliver healthcare to patients in a way that encourages wellness. At the same time, the ACO eschews the volume based fee-for-service mentality of traditional health care coverage.
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Contact Steve at (682) 593–3430 or email steven.krohn@att.net
