Health insurers and hospitals have talked a lot about their successful forays into value-based care. But the broader shift from volume to value needs to accelerate if we are to finally tame the increases in health care costs that threaten long-term economic growth in the United States.
Fee for service, the dominant payment model in health care today, relies on an elaborate fee schedule for every identifiable procedure. Unfortunately, it has created incentives for doing more tests and surgeries than may be necessary.
The concept of population health stands in contrast to the fee-for-service model. It focuses on managing the health of a population by providing the right interventions for patients at the least costly point in the care continuum — from preventive care programs to post-acute services. Population health management means paying providers or health systems on a per-patient, per-month basis rather than sticking with the fee-for-service system of paying for each service rendered. With quality reporting and guarantees built in, this change provides incentives to keep people healthy — not just treat them when they are injured or sick.
Many of today’s value-based care efforts aren’t transforming the way health care is paid for and delivered. They tend to make only minor modifications to the fee-for-service model, starting with existing fee schedules and adding incentive payments for reporting certain data, meeting cost benchmarks, and the like. But these efforts largely don’t make providers responsible for the total cost of caring for their patients or for the health outcomes achieved.
Broad implementation of population health would challenge providers to assume greater financial risk for their patients’ outcomes and so take a different approach to delivering and coordinating care. Since most organizations are entrenched in today’s fee-for-service model, it’s no surprise to find resistance to this shift.
That’s exactly what we saw in the second annual State of Population Health Survey, published by Numerof & Associates. It showed that fewer than 1 in 5 health care executives are confident that their institutions are ready to assume financial risk for cost and quality. The majority of providers surveyed said that under 10 percent of their revenue comes from risk-based reimbursements, which is virtually unchanged from the prior year.
Executives are also dialing back their expectations for how fast this percentage will grow. In this year’s survey, respondents projected that just 20 to 40 percent of their revenue will flow through alternative models within two years, down from 40 to 60 percent the year before. That’s worrisome, as changes in payment models are essential to achieving better health outcomes at a sustainable cost.
If left to choose between the new path of assuming accountability for the total cost of care and outcomes or the current one of being paid for every service performed, most providers will choose the status quo. Recent government pilots demonstrated that phenomenon. In the Medicare Shared Savings Program, for example, only 1 percent of participants chose the track that exposed them to shared losses, while 99 percent chose shared savings only, steering clear of downside financial risk.
But incentives can change behavior. As the largest purchaser of health care in the United States, the Centers for Medicare and Medicaid Services is in a unique position to influence delivery organizations. One provision in the embattled Affordable Care Act sought to promote progress toward changing how we pay for health care by directing CMS to test new payment mechanisms that hold providers accountable for costs and outcomes. Some of these mechanisms, like bundled payments, use financial risk to focus providers on the value of their care and lay the groundwork for population health.
While some of these pilots have shown promise in moderating the spiraling cost of care, they’re not moving the industry fast enough toward new models of care delivery and payment. And the progress they’ve made has been accompanied by reams of regulations for providers to navigate, encouraging consolidation to deal with burdensome administrative requirements and taking the focus off providing the best possible care.
President Trump and the Republican Party have been clear about their intention to replace the ACA with a more market-driven system. Less certain is the administration’s commitment to the idea of value-based care and the pace at which it will push for changes; the AHCA has little to say on the issue. It will be important to differentiate between the baby (payment reform and greater emphasis on prevention) and the bathwater (onerous regulations and reporting requirements) if we’re ever going to get to true value in health care.
If the transition from fee-for-service to value-based accountable care is allowed to happen at a pace that makes health care delivery organizations comfortable, it will be decades before we see meaningful change. By that time, the confluence of the boomer age wave and inflation that is almost certainly in the near future promises to swamp the federal budget in a torrent of health care costs.
To have any chance of success, real health care reform needs to dramatically change how we pay for what we get. Payers (public and private) need to rapidly increase provider participation in payment models with meaningful risk, while at the same time moving faster to put the old model and its perverse incentives to rest. We also need industry and policymakers to establish the transparency in cost and outcomes essential for enabling patient choice and keeping providers accountable for value.
Until we reward population health, we won’t get it.
Rita E. Numerof, PhD, is president of Numerof & Associates. David B. Nash, MD, is dean of the Jefferson College of Population Health.