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Supporting providers in the transition to VBC

As the industry increasingly moves away from the classic fee-for-service model, value-based care partnerships between payers and providers will become more important than ever. Here’s how to keep it strong and productive.

6-minute read

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For decades, health care’s fee-for-service model charged patients and plans for every CT scan, blood draw and surgery — an unsustainable approach that incentivizes volume, not value or health outcomes. While change has been slow, payers and providers alike have increasingly embraced a value-based care (VBC) model, which rewards providers for the outcomes they deliver rather than the services they provide.

This transition has gained notable momentum — 238.8 million Americans have care delivered via a VBC model — and these population health models are expected to continue growing significantly in the coming years. In fact, the number of patients treated within the VBC landscape could potentially double by 2027.1

As care models continue to transform, payers, providers and patients all stand to benefit greatly. In this paper, we explore the benefits of VBC, as well as specific ways payers can partner with providers to ease the transition while driving better care and lower costs.

How a value-based approach drives higher-quality care and better outcomes

As the evolution continues, VBC’s benefits are becoming more and more obvious. By placing a greater emphasis on evidence-based and preventive health, disease and illness prevention and management are prioritized over costly interventions. VBC also has the potential to reduce unnecessary medical procedures and other forms of overtreatment, which account for $210 billion in excess spending every year.2 For these reasons and more, McKinsey estimates that if current trends continue, VBC could create $1 trillion in potential enterprise value.1

But VBC isn’t just a potential economic benefit — it’s also a way for providers to deliver the right care at the right time in the right place, resulting in better health outcomes and quality of life for their patients.

This upside is clear from VBC successes to date, including capitated fees that pay primary care providers a specific amount of money for each person under their care, regardless of the volume of services provided. According to research published in the New England Journal of Medicine, medical claims for patients with primary care physicians who participated in a VBC model were lower than average, while quality measures were higher.3

Procedure-based specialists, meanwhile, may participate in VBC models through bundled payments that encourage improved efficiency and coordination of care by providing a single payment for all the services involved in an episode of care.

Take kidney transplant surgeries, for example. With a heightened focus on collaboration and process improvement, bundled payments have resulted in faster time from organ harvest to kidney transplantation, lower rates of a complication known as delayed graft function, shorter hospital stays and reduced costs.4 VBC also encourages earlier transplants in patients with chronic kidney disease, helping them avoid long-term dialysis.5 According to the National Kidney Foundation, early kidney transplants offer patients a far higher quality of life, require fewer dietary and lifestyle limitations, and result in fewer organ rejections.6 That’s a better way forward for both patient and payer.

VBC has also benefitted the oncology field, helping compensate both the payer and the member by reducing avoidable ER visits and inpatient admissions. Cancer care often requires the coordination of specialists from several disciplines (medical oncology, surgery, radiation therapy), making the collaboration required within VBC models a natural fit. And because oncology offers a variety of treatment options (chemotherapy, surgical solutions and radiation therapies), oncology providers are better supported to select from a variety of evidence-based treatment pathways. This helps ensure the most effective and appropriate approach throughout the continuum of cancer care.

Given the many ways that VBC can impact a provider’s practice, payers would do well to support providers as they transition away from fee-for-service models. By encouraging them to embrace this payment model, payers can help support better care and higher value for all stakeholders. Here are several strategies to help providers move toward delivering better outcomes for their patients, as well as for you and for their own practices.

Tie bonuses to provider performance

To engage providers in the VBC transition, it’s critical to ensure they are appropriately compensated for providing real value to their patients. There is some precedent for this approach — and evidence that it moves the needle. Since the passing of 2015’s Medicare Access and CHIP Reorganization Act, providers who participate in an alternative payment model have received a 5% bonus.7 Proponents say the amount has greatly helped providers shift to VBC, giving them adequate funds to start tracking necessary data and better engage patients.

Going forward, as more providers participate in VBC plans, incentives should be tied to the results they deliver rather than to mere participation. Asking providers to assume more risk will drive greater investment in care coordination, technology and other systems that enable improved population health management, which in turn will drive improved efficiency and better patient outcomes. However, this sort of transition requires a measured approach. Experts posit that it can be helpful to use a tiered structure (differing levels of incentives based on different standards met) and tie bonuses to a small number of targets to prevent providers from attempting to zero in on too many areas of focus at once.8

Adjust reimbursement policies to encourage and prioritize preventive care

One of the most profound changes a payer can make is to put a premium on preventive care and early screenings, even above and beyond the required coverage mandated by the Affordable Care Act (ACA). Research shows that even insured patients often skip their routine visits. One report revealed that a full 25% of respondents had not gone in for an annual physical that year.9

To solve this public health issue, primary care physicians and their teams should regularly nudge their patients. Those providers are far more likely to do so if they’re incentivized to offer more thorough preventive care. This approach is already proven: At one South Carolina health system, increased patient outreach along with extended screening hours resulted in a 39% increase in mammograms.10

Partner with providers around proactive data analysis

Health care data is incredibly powerful — and holds the key to better patient outcomes. Providers can’t manage what they can’t measure, so when payers can share meaningful data to help inform and improve provider performance and patient outcomes, successful VBC initiatives are created.

Data tracking improves providers’ understanding of patients at risk of poor outcomes, helps them assess the effectiveness of interventions and highlights areas of opportunities to lower costs and reduce barriers to care access. The power of data is so great that California law mandates that providers share patient data to a centralized location known as the Data Exchange Framework (DxF).11 The importance of data is also illustrated by the success of mobile tracking apps that have shown dramatic improvement in managing chronic conditions.12

When cultivated with a spirit of collaboration, this data-is-king principle can also help payers and providers come together to deliver a superior health care experience. Simply tabulating figures and sharing them isn’t enough — and it doesn’t send the right message of collaboration toward a mutual aim. Instead, payers should consider investing in jointly managed data analytics software tied to electronic health records (EHR) so that the data is at their fingertips at the point of care. These shared data and analytics tools will highlight not only which services are being offered and how often, but also how they’re being reimbursed, how they tie to VBC incentives and goals, and where providers should focus their efforts.

Offer programs that put the patient first

How can payers better position providers to meet and exceed those all-important VBC targets? By crafting programs that engage members with one-on-one interaction and education, increasing their health literacy, and spurring them to participate more meaningfully in their own health and wellness. And as research has shown time and again, a member’s greater involvement in their own care can lead to far better outcomes.13

While the road to wider adoption of VBC may not be perfectly straight, payers can do a great deal to ease the transition among the providers under their purview. By adopting a collaborative approach — one marked by the transparent sharing of data, appropriate and effective incentives and prevention-minded reimbursement policies — payers can drive this critical relationship toward better member outcomes and a smarter, more cost-effective model of payment.

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  1. McKinsey & Company. Investing in the new era of value-based care. Accessed February 23, 2023.
  2. Johns Hopkins Medicine. Unneeded medical care is common and driven by fear of malpractice, physician survey concludes. Accessed February 23, 2023.
  3. Health care spending, utilization, and quality 8 years into global payment. New England Journal of Medicine. Accessed February 23, 2023.
  4. Five lessons from 30 years of bundled payments. Health Affairs. Accessed February 23, 2023.
  5. Value-based care catalyzes transformation of kidney disease care. Healthcare Innovation. Accessed February 23, 2023.
  6. National Kidney Foundation. Preemptive transplant. Accessed February 23, 2023.
  7. National Partnership. Understanding the Medicare Access and CHIP Reorganization Act (MACRA). Accessed February 23, 2023.
  8. The Coker Group. Understanding value-based compensation models. Insider. Accessed February 23, 2023.
  9. 14 statistics you probably didn’t know about preventative healthcare in the United States. Accessed February 23, 2023.
  10. American Medical Association. How a population health campaign increased breast cancer screenings by 39%. Accessed February 23, 2023.
  11. California Department of Health and Human Services. Data exchange framework. Accessed February 23, 2023.
  12. Agnihothri S, Cui L, Delasay M, et al. The value of mHealth for managing chronic conditions. Health Care Management Science. 2020;23:185–202.
  13. Centers for Disease Control and Prevention. Patient engagement. Accessed February 23, 2023.