A major factor that complicates healthcare in the United States is the system of payment. Reimbursement for medical billing services is an elaborate process that includes multiple steps to be done correctly. It might take some days or weeks if everything goes right. But mistakes in any of those steps could result in costly delays for providers. If or when this happens, the staff at the providers’ end would have to fill out the claims again and re-submit them.
The existing payment model for healthcare services is the Fee for Service model. In this model, payers have reimbursed healthcare providers based on the number of services or procedures they provide to their patients. The payers are billed for tests, scans, or treatment when a patient visits a doctor or is admitted to a hospital. While this may seem like the norm, it is important to note that this model benefits the providers irrespective of the medical outcomes for patients.
Although it might be more expensive, it allows greater flexibility for patients to choose doctors and hospitals. However, the last years have seen many subject matter experts and policymakers begin questioning the fee-for-service model. The major reason is the high cost of care which mainly stems from providers delivering unnecessary and excessive services since the model incentivizes them.
In response to the growing discontent over the existing Reimbursement model, a new one was conceived that would lower the costs for the patients and providers and ensure better clinical outcomes. The new model was called value-based Reimbursement.
2. What is Value-Based Reimbursement in Healthcare?
In response to the growing cost of the conventional fee-for-service model, experts came up with a model for Value-based Reimbursement in healthcare. This model pushes for better clinical outcomes for patients in addition to helping reduce costs. In this section, we will explore how that happens.
Value-based Reimbursement in healthcare has been touted as the best alternative to the conventional fee-for-service model. In this model, providers are reimbursed based on the outcome of the patients’ health. In other words, doctors won’t just be paid based on the number of services they provide, but on the patient’s overall health situation they engender. Consequently, this encourages and incentivizes providers to ensure that patients live healthier lives and manage their disease better.
Value-based Policymakers and researchers intend value-based Reimbursement in healthcare to be a silver bullet solution for improving the quality of care, promoting superior population health, and lowering the cost of care. That is an expected outcome since there is an emphasis on the quality or value of care given instead of care volume.
The fee-for-service model of Reimbursement would invariably result in more expenses for greater amounts of services like tests, scans, therapies, and other kinds of treatment recommended by the providers. Healthcare spending in the United States has been much higher than in other countries, and it has a serious impact on the economy. Surveys and research by various organizations have concluded that the cost of hip replacement surgery in the United States is comparable to putting down a down payment on a house in many other countries! Many view this as a gross violation of basic human needs since every person is bound to be sick or injured at least once in their lifetimes.
Healthcare spending in the country has crossed $3.5 trillion, and it is more than 15% of the country’s gross domestic product. Moreover, that’s more than the entire economies of all but four countries – The United States, China, Japan, and Germany. The US has the lowest life expectancy of all the high-income countries in the OECD and twice the average rate of obesity.
These eye-popping numbers show a system that doesn’t help patients, but it also shows a wide chasm between the hard-earned money spent on medical care and the relatively poor outcomes for patients. Whether the medical paid through government initiatives, insurance coverage, or the patients’ pockets, they would end up with the providers.
The cost of healthcare is one of the major expenditures for the average citizen of the United States, and it has been steadily growing over the last couple of decades. This has resulted in a staggering 30 million people with inadequate insurance. Research reports that such people might just be one illness or injury away from not being able to pay their rents or mortgages or would need to make sacrifices on other necessities of life. Moreover, about 29 million people are reported as not having had any insurance, and it would be life-changing for them if they were to need medical care.
These are why there has been a gradual shift toward a value-based Reimbursement in healthcare. Such a system would go a long way in ensuring that more people access affordable healthcare and ensure lasting health and wellness.
3. Value-Based care Vs. Fee-For-Service
To fully understand how the two models of Reimbursement are different, we must take a closer look at them and examine the pros and cons. This section provides a better understanding of how they’re both different.
1. Fee for Service model
The last few years have seen many people call for a better system of payments in healthcare. The complexity and lack of transparency have only led to increasing costs, which ultimately hit the people on the lower rungs of the economic ladder. The existing system encouraged quantity over quality, which invariably led to all the problems that plague healthcare.
The service fee is model has rendered the system highly fragmented and pushed greater spending by its very structure. It charges for every clinical visit, scan, test, and course of medication prescribed, and each of these is charged separately. Unsurprisingly, many patients wonder if they needed some of the tests or examinations administered.
Since it emphasizes quantity, disconnecting that factor from reimbursements is widely believed to help bring down the cost of healthcare. But it was easier said than done. Part of the costs was sucked up by the administrative aspects of running a healthcare organization. After every treatment or procedure, the non-medical staff at hospitals would have to fill out the claims for every procedure and submit them to the payers. Before that, they would have to verify if a patient’s health plan covers the treatments. Mistakes in the claims submissions (which aren’t uncommon) result in delays and rework for the staff, ultimately delaying payments to providers. Moreover, it doesn’t’ reward efficiency, quality of coordination amongst multiple providers. A disjointed web of payers and providers makes the workflows slower and more inefficient.
We hold restaurants, electronics manufacturers, car makers, and every company producing consumer goods accountable for quality. Then why spare the same for the healthcare industry? The goal of replacing the fee-for-service model is simple enough to hold healthcare organizations accountable for higher costs and quality. This sentiment among various stakeholders led to the inception of a value-based Reimbursement in healthcare.
2. Value-Based Reimbursement Model
As the model’s name indicates, there’s a greater emphasis on the value derived from the care received. This model of reimbursement rewards providers based on patient outcomes, pricing, access to care, and overall efficiency. Many experts agree that adopting such a method is the best solution to refine healthcare in the United States.
The Value-based system of Reimbursement for medical care would disregard the mere number of visits by patients and the number of diagnostic attempts. Rather, it would tie the bottom line for providers with the impact on patients’ overall health. In other words, it makes sure that there is value for the money that people spend on healthcare. This fundamental rule of serving customers was kind of lost on healthcare.
The importance of considering value was highlighted in a famous quote by legendary investor Warren Buffet – “Price is what you pay, and value is what you should get.”
The reasoning behind this is simple. As paying customers, it must be the right of patients to expect improved health in exchange for the money spent. It pushes doctors to deliver the best care possible and involves metrics to measure its quality and decide the Reimbursement based on it. However, it is to be noted that there needs to be a reliable system of acquiring the metrics about improving patients’ health for this method to work. Such a system must consider a person’s health before, during, and after the treatment and make provisions for various diseases.
Not every disease is curable, and some can only be managed, and there is only so much that doctors can do when it comes to terminal ones. In such cases, doctors mustn’t be punished for lack of Reimbursement for patients’ health conditions.
4. What is the Fee for Service Model? How Did It Come to Be, and Has it Outlived its Usefulness?
We have already seen how the existing and widespread fee-for-service model impacts the cost and quality of American healthcare. In this section, we try to dive deeper into what it is and if there are any benefits to this approach.
The fee-for-service model of Reimbursement in healthcare pays providers solely on the procedures they perform. After the procedures, claims are filled out and submitted to payers for Reimbursement. If everything checks out, then the insurance reimburses the provider. The procedures performed are considered individually and aren’t bundled into groups of relevant ones. But there is nothing stopping providers from slipping in some extra and unwanted procedures just to claim that additional payment from insurance companies or even the patients as out-of-pocket expenses.
This model might make sense during emergencies and circumstances where some diseases are difficult to detect. Some examples could include autoimmune diseases, early-stage cancer, and rare conditions. So, physicians are forced to perform a battery of tests or scans to make an accurate diagnosis. However, these are uncommon and require such a protocol since it would be important to recognize the problem before starting the treatment as quickly as possible.
But in most medical cases, the physicians often know which type of test to perform and zero in on the problem. But the fee-for-service model encourages slipping in a random test that might seem like anything to patients. It is important to know how this model came to be to understand better why it has remained entrenched and if it has any advantages.
There was a time when medical science was nowhere near as advanced as it is today. Moreover, medicine wasn’t a formalized industry as it is today.
If there were someone in need of medical attention, a doctor would be called for a house visit. He would then arrive with a bag of some instruments, make a diagnosis, perform what passed for treatment, and go on his way. Some families could pay doctors in cash, while others paid anything of value such as quantities of grain or even cattle. Most of the time, the doctors needed to be paid first since such was the urgency given the infancy of medical science at the time. So, the doctors would be paid for them all, whether it was patching up some injuries, treating the sick, or just telling the patients what they needed to do.
Later on, medical science improved somewhat as innovations were made. At the turn of the twentieth century and following the First World War, advancement in health sciences began to grow rapidly. Numerous governments began funding research through generous funding, and many breakthroughs were made in our understanding of the working of the human body and mind. Such advancement in medical knowledge that curriculam in medical education struggled to keep up.
Unsurprisingly, doctors at this time were being taken a lot more seriously than they had been just a couple of generations ago. This was the beginning of when the medical profession was looked at in high regard, and it became a standard of excellence that many people aspired to achieve. This was when the quality of care improved significantly, and the average life expectancy also began to increase. Fewer women died in childbirth, deaths from accidents or battle injuries dropped, diseases like typhoid, whooping cough, or cholera killed far fewer people than they did earlier.
With advances in medical research and discoveries of new drugs, cures, and treatments, the healthcare industry was a tightly woven fabric of pharmaceutical makers, doctors, hospitals, and pharmacists. Doctors began to charge as per their own perceived value. Care was no longer limited to simple house calls where doctors arrived carrying one bag. Quality medical care involved tests, scans, hospital rooms, admittance, and observation.
Greater clinical knowledge meant a more accurate diagnosis, which meant specialized tests. Although this eventually led to better healthcare outcomes, it also meant a sharp increase in costs compared to the early twentieth century. These costs were partly because of the sophistication of the testing methods and a market-driven race to produce better drugs by pharma companies. But the costs kept rising, and the fee-for-service model grew more unfeasible with each passing year. At the beginning of the third decade of the twenty-first century, most people have been calling for a better model that makes quality care within reach of all people.
It makes sense to do away with a model that charges for unbundled services individually. Medical science is advancing at a mind-boggling pace, and things considered impossible two decades ago are being accomplished in hospitals worldwide. This would only mean newer procedures and tests, novel treatments and therapies, and consequently, increasing costs. With increases in the general cost of living, it’s no doubt that the fee-for-service model of Reimbursement in healthcare would only push quality care out of reach for more people.
5. Additional Methods of Medical Reimbursement
So far, we’ve extensively talked about the widespread fee-for-service model of medical Reimbursement and why it’s becoming unsustainable. We’ve also talked about the potential of a value-based Reimbursement. But there are other models to consider, and in this section, we will explore what they are.
The shortcomings of the fee-for-service model are becoming clearer to the experts in the healthcare industry and the average patient. A value-based model of reimbursing providers is being touted as an innovative solution to tackle the rising costs of healthcare. But other models deserve due consideration. Let’s see what they might offer –
a. Bundled Payments
This is one of the promising models of medical payments that lead to reductions in cost. As per this model, more than one provider is paid to coordinate the total overall services for a single episode of pre-defined care and improve the continuum of care.
Usually, this works well for scheduled surgeries where the patient is admitted at a specified date for a pre-determined procedure. The entire spectrum of care, including the hospitalization, tests, scans, the procedure itself, and subsequent physiotherapy and follow-up, would all be included in a single payment. As mentioned earlier, this episode of pre-scheduled care would’ve been coordinated by multiple doctors. It would certainly involve multiple medical services such as X-rays, hospitalization, consultation, tests, surgery, medication, clinical observation, etc. A bundled form of payment pays for all of these at once.
It has been known to help shift towards a more outcome-based form of Reimbursement and eventually reduce the overall spending on healthcare.
b. Discount From Billed Charges
This type of Reimbursement poses the least amount of risk for the providers. In this model, the payers reimburse using the provider’s charge description master at a negotiated amount. A charge description master (CDM) is an exhaustive list of items billed to the patient or the patient’s health insurance provider, and it is used to track activity and medical billing.
Ideally, this should be the easiest amount to determine, but insurance payers are often known to hold up reimbursements and scrutinize the charges. As a result, there are higher chances of denial, leading to greater trouble for the providers. The providers then must employ denial management steps to get reimbursed.
c. Shared Savings
In a shard savings model of reimbursements, providers have reduced risk to engender greater care coordination and achieve better medical outcomes. Providers must be part of a patient-centered network, called an Accountable Care Organization (ACO), which shares medical and financial responsibilities to improve the quality of care and reign in unnecessary spending.
In other words, the shared savings model is an alternative method of payment in which eligible providers, hospitals, and suppliers are incentivized for better outcomes for individual patients and populations while keeping the expenditures lower.
6. How Does Value-Based Healthcare Work?
As the name indicates, this model of reimbursements for healthcare providers is based on the clinical outcomes for the patients. In other words, it depends upon the value of the medical care provided, as opposed to the number of medical services provided. So, it shouldn’t be a surprise that this model has met with excitement in the United States. Let’s look at how it works –
The functioning of a value-based system is best illustrated with a real-world example. Let’s imagine there is a person named Robert. He is in his late fifties and has a desk job, and his job provides him with a private health insurance claims plan. One day, Robert visits his primary care physician with complaints of tingling, numbness, and a persistent burning sensation that began in his toes and is now working its way upward. The physician is part of an accountable Care Organization (ACO), a network of doctors and hospital management sharing financial and clinical responsibilities for providing coordinated care.
Robert has been overweight for about a decade, smokes and drinks every week. In light of this family history, his primary care physician may suffer from nerve damage—the physician coordinates with a laboratory that conducts blood tests. When the results are out, it is revealed that Robert has serious Type 2 diabetes, which causes diabetic neuropathy (nerve damage). It is common for people who have unmanaged diabetes for many years.
Excessive sugar damages the walls of the capillaries that supply precious blood to the nerves. This holds especially true for the patient’s legs. If left unchecked, the nervous damage (neuropathy) will worsen and eventually lose sensation in the legs. The loss of sensation, tingling, or burning starts from the toes and advances upward.
Since Robert’s care team is a part of an ACO, he gets connected to a nurse care manager who educates him about his condition. Robert is told about the cause and impact of his disease and how to manage it better through a healthy diet, exercise, and giving up smoking and alcohol. He is also told which types of food to avoid and counselled about managing his stress better.
Additionally, Robert’s physician also prescribes appropriate medication to inhibit the worsening of his condition. Robert also consults with a nutritionist who creates a diet plan according to the severity of his disease. As a result. Robert makes serious changes to his diet and lifestyle. He begins going for long walks every day and nearly stops using the elevator. He consumes plenty of vegetables and follows a strict, balanced diet. Robert’s care team also helps him get into programs for stopping alcohol and cigarettes.
After months of following his care team’s advice to the letter, Robert feels healthier. His blood sugar levels have become manageable, the problems in his legs have reduced significantly, and he has lost weight. He feels ten years younger. He meets with his physician periodically and gets his vitals tested. Meanwhile, his nutritionist also tracks his diet and recommends changes to suit Robert’s improved health. He is told that he may indulge in fast food but strict moderation.
His care team has successfully coordinated to reduce the severity of his condition without increasing the costs or any invasive surgery. In doing so, they have achieved superior health outcomes for Robert and so qualify for value-based reimbursements.
This is just one example of how a value-based model of healthcare reimbursements works. They help reduce the overall cost of care and achieve better patient outcomes. Care happens only after a patient leaves a clinic after consultation and in-between clinical visits. By focusing on the patient after leaving the clinic and helping them manage their disease, physicians can help cut the growing number of chronic cases in the country.
Nearly 40% of American adults suffer from at least one chronic illness like diabetes or heart disease, and it is nothing less than a national health crisis. The type of value-based care mentioned above can go a long way in improving public health while keeping costs down.
7. Benefits of Value-Based Reimbursements in Healthcare
We have already seen how value-driven healthcare reimbursements differ from the conventional fee-for-service model. In addition to that, we have discussed a real example of how this model can help people with chronic conditions. Let’s examine some of the more systemic benefits of value-based Reimbursement in healthcare.
I. Improve Patient Experience
It’s evident that value-based care reimbursement in healthcare aims to improve the patient experience. Rising costs and technical errors also impacted the reimbursement process and patient experience, and patients were forced to pay for poor-quality service. But with value-based reimbursement implementation in hospital payment systems, patients’ experience improved and even emergency visits.
When speaking about the experience, most people tend to focus only on the clinical aspects of healthcare. These include tests, scans, treatments, procedures, and medication. However, the outcomes did not seem to consider when discussing the patient experience in the fee-for-service model. Physicians were incentivized to offer services under the old model.
But since the doctors will be incentivized to focus the medical outcomes in a value-based system, the patients can look forward to a better experience overall. A value-driven approach to care would aim to improve health and not just alleviate the disease for patients suffering from chronic diseases. As a result, the patient experience at the end of the treatment would be overwhelmingly positive.
II. Lower costs
Cost of the primary entity in value-based reimbursements in healthcare. Rising costs, delays in payments, medical claims denials, and errors affect the providers’ and insurers’ ROI. Moreover, patients are also highly impacted by high costs. So, value-based Reimbursement works to reduce costs by increasing the quality of care. And this benefits all the stakeholders.
This is perhaps one of the biggest takeaways from this model of medical reimbursements, at least from the patients’ perspective.
Healthcare spending in the United States has close to $4 trillion. This is more than the entire GDPs of all but 3 countries. What’s even worse is that healthcare costs in the US are only increasing. It is estimated that millions of Americans are a major illness away from being pushed into poverty.
This problem has grown so severe that policymakers and leading economists have begun pushing for reforms in the healthcare system. Affordable care directly impacts the quality of life for people, and that’s why the cost factor of value-based payments has garnered such popularity.
Streamlined Payment and Reimbursement – Unlike the traditional reimbursement process, value-based reimbursement tools and software streamline the whole practice. This makes payments and Reimbursement easier to get benefiting all the key players in this episode.
III. Minimized Delays and Denials
Delays and denials in payments often occur due to documentation errors or missing information. Or else it fails to get regulatory compliance. So, healthcare providers must ensure accurate patient information, HIPAA-compliant solutions for value-based reimbursements, and effective data storage. Besides, providers can leverage cloud computing for effective data storage.
In addition to providers, the payers stand to gain from a switch over to a value-driven reimbursement model. As mentioned before, the previous model paid physicians based on the number of services provided. Needless to point out, this model meant high expenditure on healthcare, which meant more money paid out by insurance companies.
Moreover, as it focuses on improving the patients’ health condition and encouraging them to stay healthy, the risks involved for payers will decrease in the long run. Since they would have to reimburse after the patients’ medical outcomes are favorable, a value-based model is a win-win for all stakeholders involved – the patients, providers, and the payers.
In addition to the medical and financial benefits of the value-based system, there is also an economic one.
The high cost of healthcare means that the spending on it accounts for about 20% of the entire country’s GDP. This is seen as a major strain on the economy. The high cost of care automatically translates into lower accessibility to it. As a result, the economic output of the people is bound to take a hit. As mentioned earlier, several million Americans are just a major disease away from not being able to pay their rents or mortgages. In other words, they’re living on the edge of poverty, and it would just take a medical bill to push them over.
Lack of access to timely care (caused by high costs) also takes a toll on the economic output of the population. This problem is especially big for people suffering from chronic diseases. To make matters worse, over 40% of American adults suffer from at least one type of chronic illness, and the economic toll is estimated to be in the hundreds of billions. In other words, fixing healthcare in the United States is bound to positively impact the country’s economy.
The legendary investor Warren Buffet once described healthcare as a “tapeworm in the American economy.”
A value-based reimbursement in healthcare will go a long way in addressing many problems that plague the system and help get rid of the proverbial “tapeworm” in the economy.
8. Why does it Matter to Improve value?
Value-based Reimbursement in healthcare has grown to become a buzzword. People associate it as a solution to the mounting inequities that plague the medical industry in the United States. We’ve seen its potential to solve problems and its numerous benefits. Now let’s talk about why value matters in the healthcare industry.
To quote Warren Buffet once again – “Price is what you pay. Value is what you should get.”
This rule applies in just about every industry that provides services to customers. Whether it is a hotel, an airline, or a real-estate development company, customers deserve value for their money. In the United States, were healthcare management is treated not as a basic human right and necessity but as a commercial service, it’s time it began to provide value for the enormous money it charges.
Healthcare in the United States is far and away from the most expensive. The spending on healthcare is more than the economies of all but three countries. A hip replacement in America is enough to buy you a home in many countries. However, despite such high costs, the patients seldom get any value for the money they pay. Moreover, the costs have steadily increased over the last few years, further burdening the average person.
But the, access to quality care has not kept up with the growing costs. The full extent of the care they need can be prohibitively expensive for many people. People with full-time jobs and insurance refrain from calling an ambulance even in emergencies, and they prefer to drive or call a cab. An ambulance ride for a few miles might cost over $1000.
Nearly 20 million Americans suffer from substance abuse, 50 million experience mental illness, and nearly half of the population suffers from chronic conditions. All of these are only getting worse, despite the highest healthcare cost in the world. Of the 38 member countries in the OECD (Organization for Economic Co-Operation and Development), many of which are the largest economies, the United States ranks shocking low among developing third-world nations regarding life expectancy and infant mortality.
In other words, the average American gets little to no value for the enormous sums of money spent on healthcare. The situation is unacceptable.
Healthcare providers are incentivized to provide as many services as possible, and they get paid for every test, scan, consultation, and medication. This is one of the main reasons for the high cost of care, as it focuses on the number of medical services, not quality. That is why a switch over to value-based care is long overdue.
There needs to be a system that values people’s health instead of profits. Almost every other country offers universal health coverage, and it means all citizens are entitled to free or affordable care. But America views healthcare as a commercial service and offers little customer satisfaction despite high costs. Customer satisfaction here means desirable health outcomes, which, as we have seen, is absent.
These serious problems can be solved if the healthcare industry becomes more value-driven. A switch over to a method that pays physicians based on the improvement in the health of the patients would not only help reduce the cost and benefit the people and the insurance payers. Value can mean nothing other than accessible, affordable, quality care in this context. Value-driven care can alleviate most of the ailing healthcare problems – racial and ethnic inequity, high cost, inaccessibility, poor outcomes, burgeoning cases of mental and chronic illnesses, opioid addiction, and so forth.
Only when medical care can offer value for the people can there be a positive impact on the quality of life.
9. Barriers to the Implementation of Value-Based Reimbursements
The benefits of value-based reimbursements are numerous. It would help lower the costs and, in doing so, help patients, providers, and payers. But switching over to this system is not that simple. In addition to several entrenched interests, other systemic barriers need to be addressed. Let’s talk about some of them –
1. Lack of actionable and quality data
Data is the actual wealth of today’s healthcare industry. From revenue to clinical research, everything depends on data. Data helps providers with preventive services and even keeps track of reimbursements. Medical billing and coding also involve data. So, healthcare providers must ensure accurate medical records management for a smooth transition of payments. Likewise, the lack of actionable and quality data becomes a roadblock when implementing a value-based reimbursement model.
Deriving value is rooted in achieving superior clinical outcomes for patients. In a value-based model, care provision doesn’t just end with prescribing medication. In the case of chronic diseases, care also includes educating the patients for empowering them to manage their illnesses better. This involves multiple sessions with the treating doctor, fitness experts, and nutritionists to inform patients about healthier lifestyles.
So, it is rather difficult to gather data about the contribution of the primary care physician and quantify how much of that qualifies for reimbursements. Without this information, it becomes impossible for payers to determine what was necessary, what wasn’t, and how much to reimburse. Furthermore, providers, too, would find it difficult to quantify their services for submitting claims to payers.
2. Operational Pressure
At times, physicians and providers get exhausted due to patient-centric plans. Consistent and long-term care becomes too much, especially for smaller centers. Some providers are sceptical of deploying value-care Reimbursement in healthcare due to staff and operations burnout.
As mentioned earlier, value-based care involves a lot more than mere tests and a course of medication. It is a continuity that involves educating patients about their condition and promoting an overall state of wellness; needless to point out, this entire process is easier said than done. The larger a healthcare organization gets, the more the volume of patients it would need to handle. As a result, following value-driven care becomes extremely difficult.
The sheer number of doctors, nurses, and other experts in fitness and nutrition, and therapy would put enormous strain on the hospital’s resources. Moreover, not all care centers might be able to offer comprehensive value-based care to patients. Places like small, single-physician centers or larger ambulatory care centers would not be able to offer end-to-end Value-based care for all patients.
3. Risk Quotient
Value-based care reimbursement models involve high-end risks, especially capitation and bundled payments. Moreover, all models have some level of risk. And no providers prefer high stakes involved in their revenues. So, the risk quotient is a significant barrier in value-based reimbursement systems.
Under the old fee-for-service model, providers would get paid for every medical service, ensuring a steady flow of revenue from payers and patients. However, under a value-based reimbursement model, providers’ revenues are tied to patient outcomes. While it sounds good, the practicality of implementing it poses lots of financial risk for providers.
Not every patient might respond well to treatments, and desirable medical outcomes might only appear after weeks or even months. Reimbursements to providers need to be based on something quantifiable. The medical outcomes might be difficult to quantify for all patients, depending on the disease or physical condition. So, providers would need to wait for weeks with bated breath and see if their patients have responded well to the care. If not, then the question of reimbursing the doctors hangs in the air.
Needless to point out, adopting a total value-based system of paying doctors needs a framework that ensures financial security for doctors. Doing so would require deliberation from providers, policymakers, and payers. As complex as the American healthcare system is, there won’t be any easy way of going about this problem.
4. Risk of Fragmented Delivery of Care
There is bound to be a risk of disjointed care delivery in trying to implement a value-based approach to healthcare. As mentioned earlier, there would be more than just a doctor who prescribes medication in the case of chronic conditions. There would be a whole team of experts who would need to coordinate to ensure desirable medical outcomes.
As the hospital or clinic grows, there’s bound to be a greater volume of patients’ needs. Furthermore, this volume is only going to keep growing. In light of this, delivering accurate, impactful value-based care will get extremely complicated as no two patients would have the same need. The continuum of care for patients with chronic conditions, cancer, or other serious illnesses would vary widely among those who have been in accidents or suffered a serious injury.
The planning, organization, and logistics needed to deliver care to so many patients with wide-ranging diseases would likely make value-driven care impractical. Disjointed care is a major concern for patients on the road to recovery.
E.g., A patient recovering from cancer surgery would need comprehensive advice on diet, lifestyle, medication, and physical therapy. The experts involved in each of these would need to coordinate regularly and vary their approach based on the progress made.
Achieving this level of coordination for every patient is bound to run into trouble. The possibility of errors in treatment would tend to grow with such an approach to care, and errors for patients recovering from serious illnesses might have dire consequences. This problem of fragmented care is a huge obstacle to the implementation of value-driven care.
5. Need to Adapt to New Workflows
The existing workflows around medical care cater to the prevailing fee-for-service model of reimbursements. Each of the services is documented and submitted to payers, who then pay for everything covered in the health plan. But this type of workflow might not be suitable for a value-based system. Hospitals’ technologies and digital systems are adopted to workflows under the fee-for-service model. Processes of medical documentation, medical coding, and medical billing, along with that of claims, are not suited for a switch over to value-driven Reimbursement.
A value-based system emphasizes patient outcomes. Moreover, achieving this would require extensive coordination from multiple experts in case of serious injury or major diseases. The outcomes might take weeks or even months. There needs to be a way of mapping this and establishing roadmaps for the care continuum. Moreover, digital healthcare solutions need to be abreast of these processes.
In the absence of appropriate clinical and digital workflows, implementing value-based reimbursements cannot happen on a systemic scale.
6. Interoperability Issues
Healthcare interoperability has been a major issue in the American medical industry, and this problem already plagues doctors and payers in the prevailing reimbursement model. But in a value-based model, it will become a serious obstacle that might affect the patient outcomes themselves, something which it vows to improve.
Health systems from different manufacturers aren’t compatible with each other. As a result, data silos in healthcare make it difficult to coordinate the care continuum. But when it comes to a value-based system, seamless coordination among physicians is paramount. It is especially important for patients suffering from chronic conditions, accident victims, gunshot injuries, cancer, and other debilitating illnesses.
But the difficulty in interoperability would directly impact the coordination among physicians, which is what a value-based model needs the most. Fixing the problem of seamless interoperability must be considered one of the cornerstones of value-driven care.
10. What Are the Models For Value-Based Care?
Value-based reimbursements are touted as a great replacement for the existing system in American healthcare. But value-driven care is a broader term encompassing multiple models, each of which can address certain problems in the fee-for-service model. In this section, let’s talk about the models in value-based care.
A. Accountable Care Organizations
The United States Center for Medicare and Medicaid Services (CMS) designed the Accountable Care Organization (ACO) program to ensure that people get the right care whenever necessary. The ACO is a network of hospitals, doctors, and other providers that offer quality care to Medicare beneficiaries. The best part is that ACOs also try to prevent unnecessary piling on medical services while ensuring desired medical outcomes and a positive patient experience.
Healthcare providers need to volunteer to be in an ACO such as the Pioneer ACO or Advance Payment ACO model. Subsequently, the network of volunteering providers shares the savings if the ACO can provide quality care without the high costs.
However, there is a financial risk for providers who are part of ACOs. Just as there is a possibility for shared savings, shared losses are also possible. Sometimes, the providers may even have to pay back Medicare if their medical services are not value-based.
B. Patient-Centered Medical Homes
The patient-centered medical homes (PCMH) model is formulated to provide patients with a facility that offers centralized care. This is done to establish a better way of managing the different medical needs of patients.
People who avail of this value-based care model may develop a lasting rapport with their physicians. The physicians themselves provide care based on environmental, medical, and even genetic factors associated with the patient. A certification of PCMH means that the doctors provide care centered around the patients and offer personal care management, population health management, and coordinated care services.
Studies have shown that this type of model for value-based reimbursements has resulted in a reduction in hospital admissions, emergency visits and increased the overall quality of care.
C. Global Capitation
This type of model of value-based reimbursements makes the providers take on all of the risks. It pays them a stipulated amount for every patient and allows them to have any of the savings. But the provider also must bear all the losses. But providers can also opt for the partial capitation model in which they can reduce the risk factor.
In the global capitation model, a single payment is made to cover all the services rendered to a patient. But a partial capitation model pays providers a single payment every month to cover certain medical services for patients. The services not included would come under the usual fee-for-service model. The services paid for in a partial capitation model generally include lab work and some observations.
11. Implementing Value-Based Reimbursement Software for Healthcare
We have seen the benefits of a value-based system and its potential to address many healthcare challenges. But a systemic switch over to that system will require ingenuity and appropriate technological support. In other words, healthcare software. Let’s talk about implementing software for value-driven Reimbursement in healthcare.
Understanding the barriers within your organization and using effective technology tools are essential to implementing value-based reimbursement models in healthcare. Opting for custom healthcare solutions in this model is prudent, as providers get to choose the features, they need the most. Here are a few significant ones –
I. Find authentic VBR models
Providers need to understand their requirements before choosing a healthcare reimbursement model. There are varied models, but opting for an accurate model will boost your revenue. So, providers must make sure that they do a little research before selecting any value-based reimbursement software.
II. Emphasize and Analyze Value-Based Care
Today’s healthcare reimbursement strategy focuses on patient-centric care. The value-based reimbursement system also ensures patient satisfaction and quality care as the basis of payments. So, providers must implement software aligned to value-based care.
Identify patients’ Population Data and Care Opportunities – Providers ensure preventive and cost-effective care in value-based reimbursement payment. And for this, they need patient population data to identify the care opportunities. Providers can employ data analytics solutions to ensure error and risk-free extraction of patient population data. This data will help providers ensure affordability and increase care quality.
III. Ensure Flexibility and Customization
As said before, the healthcare payment system is a complex process. Providers must ensure that their value-based reimbursement software offers flexibility. Opting for customized software is better, as it assures flexibility, multiple features, affordable and more. Moreover, providers can employ healthcare automation to enhance their software too.
In addition to the above parameters, it is also highly important for healthcare organizations to develop a workflow that matches value-based Reimbursement goals. These protocols must effectively streamline the clinical operations integrated into the software platform. The software solution for a value-based system must reflect the processes and workflows being followed at the healthcare facility to engender desirable patient outcomes.
Additionally, the software must also be scalable to accommodate the organization’s evolving needs. As mentioned earlier, a value-based approach to care does not have one set of rules for patients, and the workflows around this type of Reimbursement and care depend on the disease and the patients themselves. In other words, the software solution must suit the needs of patients who have mental illness and those suffering from chronic conditions, not to mention other serious illnesses and injuries. The protocols necessary for good patient outcomes would vary widely from disease to disease. That is why any software platform for value-based care needs to favour the protocols and help streamline the entire process.
This requirement might be more desirable for healthcare organizations like hospitals and ambulatory care centres to opt for customized software solutions. Scalable, customized solutions would be tailored to reflect the needs of the organizations and enable the staff to get acquainted faster. The effect would be an improvement in the quality of care and the overall patient experience.
12. Can Value-Based Reimbursements Transform Healthcare?
The buzz surrounding value-based reimbursements have been growing steadily over the years. The Covid-19 pandemic exacerbated existing problems in American healthcare and exposed some serious cracks that need to be looked at. In light of this, both regular people, activists, and policymakers have begun to push for a switch over to a value-based system. We’ll talk about its potential to change American Healthcare.
It’s no secret that the existing fee-for-service model of healthcare reimbursements leads to high costs, and it incentivizes providers to prescribe more and more tests and get paid for them. It’s no surprise that they would provide unnecessary medical services for the Reimbursement.
But a system that emphasizes the clinical outcomes over the mere number of services would go a long way in bringing down medical costs. Furthermore, there would be a greater focus on achieving what’s best for the patients instead of just prescribing tests and medication. Adopting a value-based system of reimbursements promotes better coordination among providers and ensures lower risk for the payers. In other words, this payment method is a win-win for the providers, patients, and healthcare payers.
The United States is said to be facing a health crisis. Over 40% of adults suffer from at least one chronic condition. More than 50 million Americans have experienced mental illness, and almost 30 million people claim not to have had health insurance. To make matters worse, the opioid epidemic claims the lives of tens of thousands each year. All of these factors show a healthcare system that doesn’t cater to the needs of the common people and leaves many without any care at all. Certain parameters like infant mortality rates, obesity, average life expectancy, access to care, and chronic conditions portray the effectiveness of a country’s healthcare system. The United States scores shockingly low on all these parameters, and it’s not even ranked among the top twenty nations, and it is ranked closer to some of the developing third-world countries.
Public health experts and leading economists decry this because the United States is nothing like any third-world developing country. Most of the important innovations and breakthroughs in almost every field of science and business have come from that country. It has the world’s most powerful military, and it’s got its biggest economy. It’s the birthplace of the computing revolution and home to Silicon Valley. Yet, despite these highlights, it scores abysmally when it comes to healthcare. Ironically, the United States is also a leader in medical research.
Over 50 million lack insurance coverage, most of whom probably work full-time. These people won’t receive care for any type of injury or disease. Furthermore, about 20 million people aren’t adequately insured, meaning they won’t receive the amount of care they need. In other words, the healthcare industry in the United States needs to be overhauled, and this is where a shift to value-based Reimbursement can help.
The cost of care in the country keeps many people from getting it or getting it to the necessary degree. Value-based care would help lower the cost, thereby addressing one of the fundamentally wrong things with healthcare. It won’t just pay the providers for the services they provide but for the outcomes, they bring about. This approach alone will ensure reasonable control over patients’ and payers’ prices.
Such an approach would reduce costs and ensure better long-term health for patients since they won’t be accountable for the pricing.
People from marginalized communities and some ethnic minorities often have a lower life expectancy than others. This inequity is one of the biggest gaping holes in the healthcare system. So much so that many experts have even called the need to overhaul the industry a racial issue.
To sum it up, high costs (which are steadily increasing), a lack of accessibility, racial inequity, coupled poor rankings in almost every metric are all the problems that a value-based model can address satisfactorily.
A value-based care system would make healthcare more accessible. Moreover, it would automatically reduce the number of people not insured or underinsured. Additionally, a value-based system also engenders patients who are more aware of their conditions, which helps them manage their disease better. Finally, it is known to have better outcomes from the care and result in a better experience for the patient.
In other words, a value-based system can address most of the problems that plague American healthcare and result in a more equitable system.
13. Strategy for Implementing Value-Based Care
The American healthcare industry is well entrenched, and bringing changes to such a vast and complex industry with vested interests is no small feat. But change is paramount if it is sustainable and continues to help people. So, there needs to be some kind of strategy to implement value-based care that is both feasible and sustainable for all stakeholders.
1. Establishing the Framework
The framework for implementing a value-based care system is a series of steps or protocols that help providers get started. It begins by identifying a group of patients with a related, consistent, compatible set of medical needs. Following this, a team of cross-disciplinary physicians and caregivers needs to develop a clinical strategy that is best suited for those needs. Subsequently, the team conducts a thorough assessment to glean useful insights from the strategy.
These insights include the health outcomes for each patient and the cost of the entire care continuum. This information helps them see where they can make improvements and reduce costs. This would be a continuing exercise as the process can be refined with more patients being treated over months and years.
2. Identifying Common Patient Needs
When it comes to healthcare, most services tend to be organized around physicians. Doctors of various specialties often practice and exchange information with doctors of the same specialization. But in the case of chronic diseases like diabetes, the patient needs coordinated care with multiple experts of varying specializations. It is up to the patient to seek out and coordinate their care continuum. This might include consultation with related experts like a diabetologist, nutritionist, and depending on the severity, an ophthalmologist (for glaucoma), a fitness trainer, and maybe even a general physician.
Needless to point out, this amount of coordinated care is best left to a team of doctors, who must themselves take the initiative on this. But with the existing form system of care, there is no such framework to provide cross-domain care for patients who need it long-term.
To overcome this barrier, it is necessary to organize care around specific diseases by gathering historical medical data from patients who have suffered or are suffering from each disease. In other words, multi-specialty care would be structured around specific patient groups. This approach would help with the long-term care continuum and help gather important insights about the clinical outcomes, efficiency, and cost of care. Based on these insights, the care process can be tuned to suit patient needs better. Structuring care around patient needs and obtaining data-driven insights goes a long way in developing the quality of care and empowers physicians to take a more tailored approach to treatments.
A structured care framework based on the varying medical needs of patients goes forward to build on top of itself to improve the medical outcomes for the patients. Moreover, it eliminates unnecessary clinical services and delivers only what the patients need. As a result, it lays the foundation for a well-rounded, multi-pronged care process without raising the cost.
14. Connection Between Nursing and Value-Based Care
In this section, we explore the role of nurses in a value-based care model. Nurses have been an integral part of healthcare since time immemorial, and we’ll explore how they can help with this transition.
A value-based approach to care invariably involves coordination among different specialists. As mentioned earlier, value-driven care is not just episodic, but it is continuity, especially in case of serious illnesses. In light of this, there is bound to be more to do for primary care physicians, where the nurses come into the picture.
Nurses have a major role in a value-based care model. They would participate in the continuum of care and help coordinate the activities of a team of multi-specialists. It would be impossible for doctors to participate in continuing care for every patient engagement solutions at a given hospital. After the primary care has been delivered, the post-acute observation and care can be taken over by a team of nurses who coordinate with doctors. In a value-driven model, post-acute care will be emphasized the most. As a result, the nurses are bound to have a central role in a value-based care structure modelled on patient needs.
The United States, for all its technological, industrial, scientific, and economic progress, has failed spectacularly when it comes to healthcare. This is not because the country lacks skilled doctors and researchers but because the complexity of the industry makes care extremely expensive for people. The existing model is well-entrenched and protected by vested interests. It’s is high time for a fundamental shift in the medical industry to ensure that Americans have a healthcare system that works for them.
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Written by Riken Shah
Riken's work motto is to help healthcare providers use technological advancements to make healthcare easily accessible to all stakeholders, from providers to patients. Under his leadership and guidance, OSP Labs has successfully developed over 600 customized software solutions for 200+ healthcare clients across continents.