Transitioning from Fee-for-Service to a Value-Based Care Model

John has a history of frequent lung infections. With each visit to a facility for his discomfort, he goes through x-rays, CT scans, spirometry tests, and more. Ultimately, he was prescribed antibiotics and cough syrups to combat the infection. He does get some relief before the cycle resumes due to the superficial treatment. This constant sense of being unwell takes a heavy toll on his mental health and finances. John pays for all of these services without ever getting cured.

Tired of this vicious cycle, John decides to take a chance with another provider and details his problems. The new provider treats him as a new case and recognizes that the infection is a symptom and not the cause. She conducts various tests to identify the real cause of his ailments and begins the right course of treatment for John. He eventually gets cured of the long-prevailing discomfort and receives the true value of this treatment.

Fee-for-service vs. value-based care

John’s example illustrates the key distinction between fee-for-service and value-based care in the healthcare ecosystem. He was initially charged a fee for services, with no assurance that his condition would improve. However, when the attention shifted to John, his treatment became more valuable.

The fee-for-service approach is not altogether bad. However, this transaction has two outcomes: either the patient’s health improves entirely or temporarily, and the patient must return to the system for further treatment. Even after determining the actual causes and remedies, providers often continue to perform unnecessary tests and treatments to bill patients. Even if we overlook the financial load, patients lose confidence and feel worse in this exploitative environment.

A value-based care approach ensures that the healthcare ecosystem provides value to each patient. It is patient centric. Providers are compelled to look after each patient’s care to derive long-term value. In this approach, all unneeded tests, forced treatments, extra hospital days, and so forth have no place. The patient is certain that whatever is happening will lead to a positive outcome and that they will improve. As a result, their spirits remain high, allowing them to better absorb care and recuperate faster.

In 2018, UnitedHealthcare claimed lower costs and better outcomes in 87% of quality criteria. This demonstrates that the main healthcare payers consider value-based care the next chapter in the healthcare industry.

Factors accelerating the adoption of value-based care

After accounting for all the benefits, the fundamental question of value-based care is how it will pay for itself. This is the most significant barrier to the model’s adoption.

There are different value-based payment models listed below:

  • Shared risk: All departments share the risk in a provider facility and strive to stay within budget. The facility is liable for any losses or financial overruns and may be required to cover some of them.
  • Shared savings: Through this model, providers earn whatever cost savings they achieve. Various departments collaborate to share the financial load and redirect funds held in one department to another to meet budget goals.
  • Bundled payments: In this model, the patient is required to pay for all treatments in a lump sum. They can create a customized plan for themselves, in which the provider can eliminate some services that are not required. For example, a pregnant woman’s plan might include prenatal care and delivery, with the cost disclosed upfront.
  • Capitation: This is a high-risk payment model where the rates for services are capped. Providers take a risk on this model by calculating it for high and low-risk patients together. If the cost exceeds the capped budget, the provider must pay for overruns while they are rewarded for any savings.

With an understanding of the models, we can discuss how to make value-based care adoption easier:

  • The compliance requirements for penalties and rewards should be well defined so that the fear of penalties in adopting value-based care is eliminated.
  • Despite their limited resources, one must engage with safety net providers to persuade them to join the value-based model and ensure financial security.
  • All participating and prospective providers and facilities should be informed about aligned quality measurements and definitions, clearly defined outcome criteria, interoperability rules, and reimbursement reform adjustments.
  • It is important to monitor progress and provide guidelines for facilities participating in value-based care. The goal should be to improve patient health rather than penalize the provider.

Challenges to adopting value-based care

Value-based care is the future of health care, but it comes with its own set of obstacles and roadblocks. According to a 2019 survey by Xtelligent Healthcare Media, 70% of physician practices and 19% of hospitals and health systems still earn 75% of their revenue via fee-for-service models. To embrace this fee-for-performance model, we must overcome these obstacles.

Some of the challenges include:

  • Lack of data integration and modern workflows
    • Data from multiple sources is not integrated and accessible to all the entities in the healthcare ecosystem.
    • Only a few facilities continue to keep paper records. This creates a discrepancy in data integration.
  • Interoperability and integration of systems
    • There are different modalities involved in a patient’s care. All these modalities must communicate with one another so that there are no gaps in data transfer.
    • Different data systems must be integrated to enable seamless data transfer between modalities, facilities, entities, etc.
  • Limited workforce and technical resources
    • Leverage data integration and record management technologies to implement a value-based care model.
    • Facilities and staff must be skilled in these technologies for this purpose.
  • Care delivery shouldn’t happen in silos
    • Patients treated for a certain problem are likely to require care from other specialists.
    • Often, these specialties are not working in coordination or are not present in the same clinic. Therefore, the patient must go through repetitive procedures.
    • As a result, collaboration across different specialties is required to reduce lab testing, repetitive processes, paperwork, and so on. This will relieve the patient’s stress and enhance care.
  • Financial risk for providers
  • Value-based care ensures payment only when the patient receives value in terms of care.
  • Procedures may be required to rule out a few possible causes in a patient’s case to provide adequate care. Such a test is considered optional in this paradigm, and the facility is punished.
  • Providers may now avoid performing preventive tests or procedures affecting patient care to avoid this cost burden.

Due to these reasons, it is difficult to convince boards of directors to switch from volume-based to value-based care. For example, volume-based care accounted for more than 68% of overall physician remuneration and nearly 74% of total specialty compensation for 22 health institutions, according to RAND Corporation researchers who published their findings in the 2022 JAMA Health Forum Show. According to this data, providers are motivated to sell more services to earn more money.

These are real roadblocks to the value-based care model’s implementation. Some of these issues, such as technical gaps, can be addressed by investing in cutting-edge technologies.

Why value-based care?

The pandemic pushed healthcare systems across the world to their limits. As a result, patient populations experienced high service costs. On the other hand, the provider population was dealing with unsustainable systems that were unable to manage an aging population and population with chronic diseases, which multiplied due to the pandemic and population growth. As a result, health care is evolving quicker than the delivery of care and financial systems.

To make healthcare systems as robust as possible to provide optimum care to patients, we must move toward the value-based care model. This model will only work when we ensure that there are no losers in this payment model. Patient-centric, low-cost, efficient healthcare is the goal, and value-based care is the way forward.

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