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Expectations of Moving from Fee-for-Service to Value-Based Purchasing

Posted by Erick Cutler, CPA on Dec 5, 2014 1:00:33 PM

In light of the 2010 passage of the Patient Protection and Affordable Care Act (ACA), healthcare providers have been inundated with new reforms that will impact the way they practice medicine, how their reimbursements are calculated, and, ultimately, their bottom line.

It is no wonder that, according the Physicians Foundation’s survey, 46% of doctors gave the ACA a “D” or “F”; only 25% gave it an “A” or “B.” One of the most contentious provisions of the Act is the mandated Value-Based Purchasing (VBP) program, which links financial reimbursement to a providers’ performance.

The ACA mandated Value-Based Purchasing (VBP) program upends current physician compensation model. According to the American Academy of Family Physicians, “Value Based Purchasing is a concept by which ‘purchasers’ of health care (government, employers, and consumers) hold the health care system (physicians, hospitals, health plans, etc.) accountable for both quality and cost of care. VBP programs are based on health benefit plan models that promote health care quality improvement and should result in systemic cost containment or reduction. VBP programs are typically structured around a combination of incentives intended to encourage better health care decision making by both plan beneficiaries and clinical providers.”

Basically, this pay-for-performance program rewards or penalizes physicians based on how they compare to certain pre-established benchmarks measuring quality of care, cost savings, and efficiency. Proponents of VBP argue that healthcare cost are out of control: physicians have little financial incentive to improve the efficiency of care, and a greater financial incentive to plan more procedures, order more tests, and schedule more office visits.

There is little research to date which adequately supports or disputes the premise that VBP will actually increase the quality of care and cut healthcare costs. However, in 2014, the RAND Corporation conducted a study on Measuring Success in Health Care Value-Based Purchasing Programs.  It concluded that there were no significant improvements in patient care and cost savings, and that more research was needed to truly assess the impact of the new generation of VBPs, such as ACOs. With very little conclusive evidence to date, many physicians remain skeptical of the assertion that the VBP model will stem healthcare costs and waste, or provide patients with improved quality of care.

Another study, conducted by several researchers at Harvard Medical School, looked at a similar pay-for-performance program in the UK. While it only measured the effect on patients with hypertension, the results were telling and could be applied to the VBPs in the U.S. (The researchers asserted that physician behaviors are similar regardless of which industrialized nation they practice.) They concluded that after studying approximately one half of a million patient records, the program had no measurable effect on outcome.

According to Anthony Avery of the University of Nottingham Medical School, “Doctor performance is based on many factors besides money that were not addressed in this program: patient behavior, continuing MD training, shared responsibility and teamwork with pharmacists, nurses and other health professionals. These are factors that reach far beyond simple monetary incentives.”

In fact, there is some evidence to suggest that VBPs can actually have a negative impact on spending and quality of care. A report from the Center for Healthcare Quality and Payment Reform - Measuring and Assigning Accountability for Healthcare Spending - explains the potential adverse effects of implementing value-based purchasing programs:

  • Inappropriately assigning accountability to physicians and hospitals for services they did not deliver and cannot control, while at the same time failing to hold healthcare providers accountable for many of the services they do deliver.
  • Financially penalizing physicians and hospitals who care for patients with complex health problems and who deliver evidence-based services to their patients;
  • Failing to provide physicians, hospitals, and other providers with the kind of actionable information they need to identify opportunities to control healthcare spending without harming patients; and
  • Giving patients misleading information about which providers deliver lower-cost, higher quality care.

The report also spells out problems with the “attribution” methods Medicare and other payers are using to retrospectively assign accountability to a single physician, hospital, or other provider:

  • Most of the spending that is attributed to a physician usually results from services delivered by other providers.
  • Physicians are assigned responsibility for services new patients receive before the physician first met the patient.
  • Primary care physicians are assigned responsibility for services delivered by specialists to treat serious illnesses such as cancer; and
  • Specialists and hospitals are assigned responsibility for unrelated healthcare problems their patients experience in the future.

Despite these concerns, insurers and Medicare are moving full steam ahead toward a value-based payment system, and physicians need to start planning their financial future. An article written by Karen Ferguson, MS of T3JointMan, Inc., states that the key to insuring higher reimbursements under the VBP system is “clinical effectiveness research” and data which measures trends, predicts outcome, influences therapy choices, and improves care. Armed with this information, doctors have a greater ability to negotiate more favorable contracts with insurance companies. In addition, Ferguson listed five other ways doctors can gain leverage in preparation for negotiating rates:

  1. Prepare for Value-Bundled Payments
  2. Consider ACO Alignment
  3. Become Patient Centric
  4. Establish Consistent Quality and Safety
  5. Implement New Technology

Leonard Fromer, MD and Lewis Levy, MD suggested, in a white paper, that forming patient advisory groups could also be a helpful tool in moving toward VBP because the “…level of patient engagement is essential as practices move to value-based care models which reward positive patient outcomes.” The advisory group could be helpful in two ways: providing the doctor with information about what patients want to know about their conditions and how they prefer that information to be delivered; and collecting feedback on the patient’s experience with the practice.

Practices which get ahead of the curve and begin to align their reimbursements to the performance based model will fare better in the long run. Consider slowly incorporating incentives for quality of care, patient satisfaction and cost savings and then track those metrics.  In an article in Medical Economics, Deborah Walker Keegan, president of Medical Practice Dimensions, Inc. states, “Talking about productivity alone is inconsistent with the changes in the delivery system. It’s been inconsistent with value-based reimbursement and inconsistent with alignment with the fund-flow model. If you’re going to get paid on value, it’s time to think about compensation with some of those value components in it because you need to focus attention on physicians and clinicians meeting certain goals related to federal programs and payer changes.”

If you have any questions, contact Erick Cutler at 214-635-2541. 

Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.

Topics: Medical