Value-Based Reimbursement in Healthcare – 2 minute introduction

Value Based Reimbursement scale

Value-based reimbursement in healthcare, or VBR, is the movement of care from fee-for-service-based models to care with incentives based on quality. The traditional fee-for-service model has incentivized quantity.  Value-based reimbursement in healthcare is moving the focus toward the patient and toward quality outcomes for patient groups. It supports the triple aim of providing better care for individuals, improving population health management strategies, and reducing healthcare costs. VBR models are in use by Medicare and are spreading to other payors as well.


Models of value-based reimbursement

There are many value-based models, and one of the most popular is accountable care organizations (ACOs).

  • ACOs. A group of providers (hospitals and physicians) comes together to provide higher quality of care for their patients.
    • These groups focus on prevention through screenings, labs, diet, activity, etc.
    • They require adequate data interoperability so information is available to all providers when they need it.
  • Bundled payments. Patients are cared for by doctors, nurses, pharmacists, anesthesiologists, surgeons, and many other providers when they are in the hospital for a surgery or other healthcare service. In this model, the services are reimbursed through one payment, which is then split between the providers.
    • If the providers can provide the care at less than the bundled payment, they can share in the savings.
    • Bundled payment systems also carry risk for the providers in cases where they cannot manage the care within the bundled payment amount.
  • Capitation. This model pays groups of providers a specific amount of money based on the number of patients assigned to the group. The group is then expected to provide all of the covered medical services to the population assigned to it. Individual Primary Care Physicians may receive capitation payments for their services to the patients assigned to their individual practice.
    • Global capitation includes payments for hospitals and certain institutional services, as well as payments for physicians and other outpatient services.
    • Partial capitation covers just the services by physicians and outpatient services.
  • MIPS and APMs. Individual physicians and other types of providers who participate in Medicare can earn incentives (and avoid disincentives) by participating in the Merit-based Incentive Payment System (MIPS), and Alternative Advanced Payment Models (APM).
    • Eligible providers who report quality data, improve the clinical care processes in a practice, and utilized certified electronic health records (EHR) technology can earn an increase in the payment rate for the professional services they bill to Medicare.
    • APMs enable participating providers to earn up to a 5% increase in payment rates for reporting quality data, utilizing certified EHR technology, and functioning as a Medical Home or taking a significant financial risk.

Each of these models comes with some sort of risk. The benefits and risks of value-based reimbursement in healthcare are still coming to light as CMS and other payors roll out the VBR models. However, the long-term benefits outweigh the risks in the short term.


Risks of value-based care

  • Lack of actionable and quality data for VBR methods. Data is one of the key components of our healthcare information systems. We need actionable, high-quality data to derive results and projections for the future. A lack of data will make it hard to prove that value-based reimbursement models you participate in will work.
  • Operational pressure on facilities. Providers are already stretched thin by attempting to see as many patients as they can on their schedules. Asking them to implement new strategies and procedures may increase their stress.
  • High-risk quotient in VBR models. Most VBR models come with an increased risk quotient. Providers must be willing to risk some financial downside in order to reap the rewards of improving the quality of care for their patients as well as the financial rewards of emphasizing quality over quantity.
  • Time to implement changes. Providers cannot implement VBR overnight. It takes time to change our focus, both as a healthcare system and as individual providers. Switching to quality and prevention is a long-term goal.


Benefits of value-based reimbursement in healthcare

  • Incentives for quality care over quantity served. Providers receive incentives for providing quality care to their patients. Instead of focusing on maximizing the number of visits, we can focus on the patient as a whole and look toward their long-term health.
  • Increased patient satisfaction. Patients will see the provider looking at their entire health status and not just addressing the latest issue or complaint. Looking to prevent health conditions with screenings and other preventive services before they become a problem leads to a better patient experience.
  • Effective cost controls. Value-based care leads to financial rewards based on the quality of service provided to the patient.
  • Reduced payer risks. The industry can reduce the risks for payers by focusing on long-term prevention. With fewer chronic diseases, we can see payers spending much less on quality care.

With value-based reimbursement in healthcare, we can effectively treat whole populations by utilizing best clinical practices and emphasizing prevention. Market Assessment and forecasting have proven that VBR is effectively growing. When dealing with the complexity of healthcare, you must have experts on your side. Contact us for more information on these models, and how you can participate.

When you need proven expertise and performance

Jim Hook, MPH

Mr. James D. Hook has over 30 years of healthcare executive management and consulting experience in medical groups, hospitals, IPA’s, MSO’s, and other healthcare organizations.