Value-based reimbursement has reached its tipping point and is here to stay. Of the payers and providers surveyed in the latest McKesson report, just 3% was exclusively fee-for-service. Value-based reimbursement is a proven strategy that will continue to take market share away from fee-for-service operations. What remains, however, are a few questions. How soon is the transition expected to complete? What kind of value-based reimbursement models will dominate? And how ready are providers and their technology for this transition?
Planting the Flag for Value-Based Reimbursement
Just how fast is value-based reimbursement spreading throughout hospital systems? This is an important question to answer because it helps holdout providers gauge how much time they have before they should finish their value-based reimbursement rollout. Between 2014 and 2016, 63% of hospitals in the survey reported being part of an Accountable Care Organization (ACO), an 18% jump in just 2 years1. Being part of an ACO is one of the first steps toward value-based care and reimbursement models.
Payers have made more significant progress, with the group reporting themselves about 58% the way through a full transition to value-based reimbursement. This 10% increase since 2014 is expected to continue unabated as payers continue to adopt new reimbursement models at a faster rate than providers. In fact, payers are about 10% to 18% better prepared to implement VBR than providers.
Value-Based Reimbursement Models
The survey of the two groups showed that the five most popular value-based reimbursement models are global payments, pay for performance, bundled payments, shared savings, and upside/downside shared savings (see Table 1).
Table 1. VBR Payment Models, Provider/Payer Readiness (% reporting “Extremely/Very Ready”) and 5-Year Growth. Data from reference 1.
| Payment Model | Definition | Provider Readiness | Payer Readiness | 5-Year Breakdown (Provider) | 5-Year Breakdown (Payer) |
| Pay for
Performance (P4P) |
Incentivizes providers for meeting performance goals related to care quality and efficiency. | 48% | 66% | 15% | 19% |
| Global Payment | Providers are paid a specified amount per patient in exchange for health services over a set period of time. | 46% | 56% | 16% | 23% |
| Bundled Payment | A single payment to providers is rendered for all services to treat a clinically-defined “episode” (e.g., back pain). | 40% | 55% | 17% | 17% |
| Shared Savings | Providers share in savings for the total cost of care for a defined patient group. | 40% | 53% | 5% | 11% |
| Upside/Downside Shared Savings | Providers share in savings and budget overages (upside and downside risk) for the total cost of care for a defined patient group. | 36% | 52% | 6% | 14% |
Technological Obstacle to Change
While both hospitals and payers estimate bundled payment will account for 17% of medical payments in 5 years, only half of the surveyed payers and 40% of providers say they’re ready for implementation. And only a quarter have the tools in place to automate these complex models.
A lack of technological capability is a common theme across the board. Furthermore, 60% of providers are falling short on goals to improve patient outcomes, 78% are not meeting goals to reduce administrative care costs, 74% are failing to meet lower healthcare cost targets, and 70% are not meeting care coordination goals.
For each of these shortfalls, the McKesson survey fielded open-ended questions about why the failures were occurring. The most common answer was that providers were struggling with metrics, analytics, and data in addition to personnel, organizational, and financial factors.
Devising Administrative Solutions
Based on the 2016 survey of payers and providers, there is no doubt that value-based reimbursement models are here to stay. However, despite the rapid uptake, there are some roadblocks in the coming years.
One of the most significant challenges lies in provider preparedness in transitioning to these new payment models. Even those who take on new value-based reimbursement payment models, most are falling short of their expectations. The survey results revealed the root of the problem to be a distinct lack of technological capability.
Are you planning to adopt value-based reimbursement in the coming year? Consider putting your health IT infrastructure through a robust upgrade to support the tracking of outcome metrics, analytics, and data. Your system should provide administrative solutions to common issues associated with the new payment models, such as personnel management, organizational structure, and financial metrics.
Looking for an experienced team that can guide you through the process? Partner with Nalashaa, an experienced software development company capable of providing health IT expertise and a range of administrative solutions necessary to adopt value-based reimbursement.
Amit Manral