Column | Value-Based Payment

Value: The Way Forward

Column | Value-Based Payment

Value: The Way Forward

Value-based payment won’t bend the cost curve unless healthcare organizations commit to fundamental change. Not everyone will come out whole. 

New research finds that value-based payment models have yet to curb growth in the total cost of care. What, then, is the way forward?

A study to be published by HFMA in May found no correlation between population-based value-based payment (VBP) models and total cost of care. Furthermore, a higher level of VBP model penetration had no statistically significant impact on quality outcomes. In this study—which was conducted with support from the Commonwealth Fund—researchers from HFMA, Leavitt Partners, and McManis Consulting analyzed a variety of factors that may be influencing the total cost of care in healthcare markets across the nation. They found that a combination of factors can predict more than 80 percent of variations in baseline total cost of care across markets (with prevalence of chronic diseases having the most significant impact), but those factors explain only about 27 percent of variations in cost growth. Timing, misaligned incentives, and infrastructure investment requirements were identified as potential explanations for the lack of correlation between VBP penetration and cost and quality outcomes.

No doubt these factors come into play. But I suspect there is more to it. I believe that we, as an industry, have not fully come to terms with a sobering reality of the value era: Simply stated, we must change. Not just incremental change, or shifting cost from one level of care to another, or achieving cost savings that aren’t passed through to care purchasers, but real change—the kind that makes us uncomfortable.

If we truly want to reduce the rate of cost growth to the rate of inflation, change is needed on two levels. The first level is contractual. VBP contracts should be redesigned so that the parties involved have more “skin in the game.” VBP models that protect existing fee-for-service revenue streams, avoid downside risk, or don’t effectively address chronic conditions won’t get us where we need to go. VBP experimentation is not new anymore; the time for dipping our toes in the water is over if holding down healthcare inflation is truly important to us.

The second level of change is more fundamental. We must restructure provider and payer organizations in ways that allow organizations to operate at a margin in a value framework. No margin, no mission—it’s just as true in VBP as it is in fee for service. Here’s the part that’s hardest to accept: Not everyone will come out whole. The consolidation taking place in both the provider and payer sectors must ultimately reduce waste and duplication, rationalize service delivery, and integrate cost-saving technologies into the mainstream. Healthcare organizations will emerge from that process looking very different than they do today.

These will be among the greatest challenges most healthcare organizations have ever faced. But if we don’t take them on, the value transformation will stall as we continue to nibble around the edges of value. The window of opportunity for developing solutions as an industry, rather than having them imposed on us, is closing. The time to take ownership of the value challenge is now.


From the President's Desk


Joe Fifer expands on his ideas in his May column.

Follow Joe Fifer on Twitter: @HFMAFifer

About the Author

Joseph J. Fifer, FHFMA, CPA,

is President and CEO of HFMA.

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