Course | Advanced | Payment Trends
Next to national defense, the healthcare industry in the United States is one of the largest sectors of the economy. Currently making up almost 20 percent of the nation's gross domestic product, health care in the U.S. will be a significant...
News | Payment Trends

Is healthcare’s focus shifting from value to pricing?

News | Payment Trends

Is healthcare’s focus shifting from value to pricing?

  • Value-based payment has failed to slow healthcare spending growth like policy advisers hoped it would.
  • As part of a new approach, a range of provider payment cuts could come through Congress this year.
  • Value-based payment models are spreading to commercial plans, but some see that approach as too little, too late.

July 9—Although some policy advisers and policymakers continue to extoll value-based payment as the best way to address the U.S. healthcare system’s cost and quality challenges, others see policy shifting to a price and cost focus.

At an Altarum Institute briefing for congressional staff, policy advisers identified several measures that are expected to become law this year as evidence of the increasing focus on cost and prices. Those included bills to reduce surprise healthcare charges and Medicare payments for pharmaceuticals, as well as a range of provider payment cuts proposed by President Donald Trump.

Sabrina Corlette, JD, a research professor at Georgetown University, said the policy pendulum shifted toward value-based payment as part of the Affordable Care Act (ACA), in reaction to HMO-based provider payment cuts in the 1990s. But the public has become focused on costs in recent years, and employer efforts to shift those costs into high-deductible health plans are “maxed out.” And value-based payment models have not provided the needed brake on rising healthcare costs.

“If you’ve learned anything the last few years it’s that value is not going to get us where we need to go” on cost control, said Corlette, formerly a Democratic congressional staff member.

Len Nichols, PhD, a professor of health policy at George Mason University, said the ACA push on value-based payment — dominated by bonus-only models — aimed to provide a “win-win” for providers and policymakers by rewarding more cost-effective care.

“Now we all need to agree we’re all going to bear some pain,” Nichols said.

What sort of pain may be on the way?

Among cost-focused measures are bipartisan bills advancing in both chambers of Congress to curtail surprise billing. Corlette, noting surprise-bill legislation could become law this year, said a “lack of consensus” continues on how to resolve such bills. The two advancing pieces of legislation use a rate-setting approach, while hospital and physician advocates are lobbying hard for a negotiation-based approach. Corlette expects Congress ultimately to pass a compromise that starts the resolution process with a minimum payment while allowing either party to move to arbitration under certain circumstances.

Nial Brennan, president and CEO of the Health Care Cost Institute and a former Obama administration executive who was deeply involved in value-based payment, said in an interview that other federal moves focused on cost — and not on value-based payment — could come during the nearly-annual rush to push through a single, massive federal-funding bill before the end of the calendar year. That’s when he and others expect the administration to tack on a range of healthcare spending cuts proposed at the beginning of the year in Trump’s budget (and previously proposed in Obama administration budgets). Those cuts would affect:

  • Post-acute care payments ($110 billion over 10 years)
  • Bad-debt payments ($40 billion)
  • Location-based payments ($160 billion)
  • Graduate medical education payments ($50 billion)
  • Other provider payments, while extending the budget sequester ($120 billion)

The future of value-based payment

Value-based payment supporters such as Susan Dentzer, visiting fellow at the Margolis Center for Health Policy at Duke University, pushed back by saying such models continue to spread and may yet help curtail the growth of healthcare spending. Dentzer cited the promise of a North Carolina initiative involving five health systems and Blue Cross and Blue Shield of North Carolina, which launched the “Blue Premier” accountable care organization (ACO) requiring providers to take downside risk by the third year.

Brennan said he doubted such approaches can be “widely replicated across the country.” However, he believes that value-based payment still has a future in federal government programs such as Medicare and Medicaid.

“Doubling down on value-based care in a situation where it’s a more regulated system and you’re essentially a price setter may not be the worst thing in the world,” Brennan said.

The federal government has increasingly shifted toward two-sided risk within its payment models. For instance, Medicare’s primary ACO program was overhauled at the beginning of this year to require participating providers to take on risk within about a year, instead of the six years previously allowed. However, advisers have warned that rural hospitals will leave the program — and other value-based models — if forced to take on downside risk.

About the Author

Rich Daly, HFMA senior writer/editor,

is based in HFMA's Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare


Related Articles | Payment Trends

News | Healthcare Reform

For Biden’s potential HHS pick, priorities include public option, hospital M&A, cost control

A Biden administration would push a public option, negotiate hospital prices and target hospital M&A, an adviser says.

Blog | Contracting

Business Group on Health's Annual Survey: Large employers ready to take the reins on healthcare cost

Responses to the Business Group on Health's annual survey of its large employer members suggest employers are tired of waiting for providers and plans to figure out how to reduce healthcare cost.

News | Coronavirus

Critical access hospitals will avoid Medicare cuts stemming from Paycheck Protection Program loans, Verma says

CMS does not intend for PPP loans to factor into Medicare payments to rural providers, the agency’s administrator recently clarified.

News | Coronavirus

Coming coronavirus surges will hit hospitals harder than earlier spikes did, disease expert says

An infectious disease expert expects hospitals to have larger COVID-19 patient surges than they’ve had to date.