New value-based contract models took shape in the early days of the Affordable Care Act (ACA). A value-based care (VBC) framework aimed to reduce costs while improving care quality and patient satisfaction. But the promise of those early models faded as data emerged showing inconsistent success, and some accountable care organizations (ACOs) weren’t delivering on cost savings and quality improvement.
Today, innovative new models are taking shape to continue the path toward a value-based system. For example, the Centers for Medicare and Medicaid Services (CMS) wants to tie 100% of reimbursements to value-based contracts by 2025. In 2020, only 20% of Medicare spending was value-based. By the end of 2021, it reached 40%—a substantial increase, though still below the target to transition away from fee-for-service reimbursement (FFS) models. As more reimbursements shift to value-based care models, providers and healthcare facilities must understand where payment models are headed and take the necessary steps to thrive as changes come.
How we got here: A brief history of value-based care
President Barack Obama signed the Patient Protection and Affordable Care Act into law on March 23, 2010.
It was the first serious effort—and the most far-reaching—to address a growing crisis in healthcare. The U.S. has significantly higher per-capita spending on healthcare yet lags well behind other similarly developed countries in many areas.
In a 2021 report from the Commonwealth Fund, the U.S. ranked last overall in healthcare outcomes compared to 11 high-income countries. In addition, America was last in nine of the ten metrics, including access to affordable, high-quality care and life expectancy.
Initially, VBC offered incentives to improve care with no downside risk. Then, CMS (and many commercial payers that followed) proposed to share any cost savings with healthcare providers who could lower total costs while meeting or exceeding quality metrics and patient satisfaction thresholds.
But it’s challenging to transition from an FFS model that reimburses high-volume care to a more nuanced value-based model. The next step must be aligning financial incentives with the activities to achieve quality outcomes and cost savings.
The quintuple aim of value-based care
Early value-based care discussions centered around the “triple aim,” a concept the Institute for Healthcare Improvement (IHI) introduced in 2008 to improve
- Cost: Reduce total cost of care for patients by eliminating unnecessary care, increasing price transparency, and focusing on preventive care.
- Quality: Measure and report on a standardized set of quality metrics shown to improve healthcare outcomes. In FFS models, physicians are reimbursed simply for providing care. In VBC models, reimbursement is tied to good outcomes.
- Patient satisfaction: Ensure a positive individual experience by shifting from a provider-centric to a patient-centric healthcare system.
Two new areas have turned the “triple aim” into a “quintuple aim.” These new aims address
- Provider satisfaction: Offer access to tools and resources to avoid physician burnout and reduce the administrative burdens of VBC on providers.
- Advancing health equity: Ensure every patient has access to the care they need to achieve their full health potential and remove barriers to getting high-quality care for marginalized or disadvantaged populations.
VBC pushes providers to find innovative ways to achieve what was previously seen as a contradiction: high-quality, low-cost care. As VBC moves forward, these five goals must be at the forefront of providers’ and healthcare systems’ efforts.
What the future of value-based contracts looks like
The early value-based care models offered incentives and upside for organizations to achieve savings. Medicare Shared Savings Plans (MSSPs) and ACO value-based contracts rewarded organizations by sharing any savings, with no financial penalty for not achieving savings goals. Unfortunately, this resulted in uneven results and only limited success at consistent cost reductions.
In 2018, 82% of the 561 ACOs were in “upside-only” programs. A new rule finalized in 2018 required those organizations to move to a two-sided risk (upside and downside) within two years. The Center for Medicare and Medicaid Innovation (CMMI) also recently released a “strategic refresh” to streamline payment models and increase equitable access to care. These healthcare delivery models will become the standard in VBC care over the next decade.
Alternative payment models (APMs)
CMS offers providers and healthcare organizations the opportunity to participate in APMs that incentivize high-quality, cost-efficient care. These options tie healthcare compensation to specific performance metrics for conditions, care episodes, or populations. They include a mix of incentives and financial risk to motivate clinicians improve quality and reduce costs. Organizations and providers can choose from multiple APMs.
Perhaps one of the most important shifts in value-based care is the transition to downside risk. The CMMI analysis of the first ten years of VBC showed that models with downside risk—where providers are financially penalized for not achieving cost, quality, and patient satisfaction goals—were more likely to succeed than those with only upside. It’s a difficult transition from FFS models and can add more stress for physicians trying to figure out VBC. However, a partner that understands downside risk models can help you design, implement, evaluate, and tweak the model over time to reduce stress and limit provider burnout risk.
Bundled payment models
A bundled payment model creates a single reimbursement for multiple healthcare services to treat a specific condition or episode of care. These programs aim to increase coordination among hospitals, acute or long-term care providers, physicians, and other healthcare practitioners. They encourage everyone to find the lowest-cost way to achieve the best patient outcomes. Bundled payment models also increase price transparency, limit confusing and fragmented care and billing, and improve patient satisfaction.
Care management solutions
Data show that a small number of patients account for a significant portion of total healthcare costs in the U.S. A discussion of healthcare costs often focuses on the average per capita, but 5% of the total population accounts for almost half of all spending. Care management models provide more resources and outreach to this population. The goal is to utilize effective preventive care and early interventions to decrease high-cost care touchpoints, such as emergency room visits. Patients get higher quality care, leading to increased patient satisfaction. Providers get help from a care management team to supervise highly complex patients. Care management also increases access to care for disadvantaged or marginalized populations to meet health equity goals.
Preparing for the future of VBC
These and other innovative models show promise in reducing costs and improving quality. But they come with risks and challenges to implement effectively. A partner who understands how to design, deploy, and optimize VBC solutions for clients can help. RTI Health Advance has been there from the beginning, with expertise in health policy, economics, medical care, quality measures, and risk adjustment to assist organizations at every step along a value-based care journey.