Defining Value in a Value-Based Healthcare Payment System

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Defining Value in Value Based Healthcare - MoghimMedicalConsultingThe transition from a Fee For Service (FFS) healthcare payment system to a Value-Based System (VBS) has been gathering steam for years as more payers incorporate reimbursement protocols based on patient outcomes. The Centers for Medicare and Medicaid Services (CMS) has for many years been introducing a variety of “Value Modifiers” that reward providers for superior patient outcomes, and this leadership by the largest payer in the nation has encouraged others to adopt similar payment models. In 2015, almost one-fifth of Medicare reimbursements were made through alternative payment mechanisms.

Last month, the value in value-based payments entered the spotlight once again as Amazon, JPMorgan Chase and Berkshire Hathaway announced a new health care partnership.  Although there were few specific details about what this new partnership intended to accomplish, there is little doubt the focus of this new initiative would be to lower health care costs while elevating the level of care for the million employees of these three organizations.

Any new advances in the health care delivery model generated by this partnership would likely spark revolutionary changes in the industry as a whole.  Wild speculation is rife in the panicked health care sector, but most experts agree that value per expenditure will be an integral part of any innovation.

Many analysts are eager for leadership in the VBS arena.  Despite many advances in recent years, there remain some systemic obstacles that continue to stymy a real reshaping of the industry.  First of all, there is little consensus on what “value” means. A recent survey of University of Utah Health found that patients, employers and providers have starkly divergent opinions of what value in health care means.

It will take some effort for all stakeholders to agree on what is valuable in health care.  In the current market, providers utilize many value metrics like Hospital Inpatient Quality Reporting, Hospital Outpatient Reporting or Physician Quality Reporting System, but many feel that new standards need to be developed.

However, it is difficult to reconcile what provider organizations expect from care teams and what patients want. While providers are more concerned with minimizing waste, optimizing efficiency and increasing patient volume, patients are seeking optimal outcomes even from problematic health situations. These divergent opinions of value undergird the primary conflict in health care evolution.

Almost 18 percent of the entire national gross domestic product is spent on health care, but only 3 percent of health care organizations deliver the majority of their care via value-based contracts.  So far, the industry is eager to adopt a VBS, but either no one is sure what that entails or the industry remains far too entrenched in the fee for service system.

If the new Amazon/JPMorgan/Berkshire Hathaway venture has any chance of success, it will need to establish some clearly defined goalposts.  Success will be contingent on inviting all stakeholders to the table, listening to their opinions, and engineering some easily digestible standards of value for the health care community—ones that everyone can support.  Even from the sidelines, this appears like a herculean task, but these leaders haven’t shied away from a challenge before.

Written by:

Dr. Robert Moghim, CEO Moghim Medical Consulting Inc.

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