Healthcare expenditures are already at nearly $10,000 per person annually, accounting for 17.8% of the Gross Domestic Product, according to CMS. Costs are projected to grow another 1.2 percentage points each year, ballooning to 19.9% of the GDP by 2025.
It’s now clearer than ever that something’s got to give. The solution, however is less clear. Many in the industry point to value-based reimbursement models, which tie payment to quality of care. These include payer programs that reward hospitals for decreased readmissions and reduce payments for hospital-acquired infections or injuries. Other more formal arrangements include bundled payments and accountable care organizations (ACOs).
While these types of programs have been in place for several years, it can be difficult to gauge who is using them and how, and whether they are achieving their intended goal. Our experts weigh in.
Who is using value-based pay?
Andréa E. Caballero, program director at Catalyst for Payment Reform (CPR), an independent nonprofit working to improve payment models, says national results collected by the agency on payment reform for 2014 show that about 40% of commercial payments to physicians and hospitals included a quality component, compared to 11% in 2013 and just 1% to 3% back in 2010 when the organization conducted a more informal study.
“The increase from 2013 to 2014 suggests rapid growth in implementing payment reform. In 2016, the Health Care Payment Learning and Action Network (LAN) released a study announcing that 25% of payments to doctors and hospitals are in alternative payment models (APMs), which are more advanced, population-based methods,” Caballero says. “On its face, this seems lower than CPR’s national results, but it’s important to note that the methodology is different. Most notably, the LAN results do not include pay-for-performance. We are seeing a move toward methods that hold providers accountable for their population’s care and a transition away from traditional fee-for-service; however, it is important to note that many APMs are still built on a fee-for-service architecture or chassis.”
Caballero notes that LAN is expected to release updated results later this year, and says CPR expects national results to be upwards of 40% based on the growth rate in 2013 and 2014.
These figures are in line with data collected from physicians. According to the “2016 Survey of America’s Physicians: Practice Patterns and Perspectives” from The Physicians Foundation, 42% of the more than 17,000 physicians polled reported having their compensation tied to quality or value—but 12% weren’t even sure if they participate in a value-based model.
“The fact that over 12% of all respondents are unsure whether they receive value-based payments underscores the continued novelty of these payment models in the eyes of many physicians,” the report notes.
In terms of alternate payment models, 55% of the physicians polled participate in the Physician Quality Reporting System (PQRS), 36% participate in an ACO, and 75% participate in patient satisfaction surveys.
The survey found that physicians employed within a hospital system were more likely than independent physicians or practice owners to be involved with a value-based payment model, and primary care physicians were also more likely than specialists to receive value-based payments. Of those physicians who do participate in value-based programs, most have 20% or less of their income tied to these models, according to the report.
In 2016, the Health Care Transformation Task Force released similar results from its own study, reporting that 41% of its member providers and payers were involved in value-based contracts, up from 20% in 2014.
Physicians are also facing the Medicare Access and CHIP Reauthorization Act (MACRA), which replaces the beleaguered Sustainable Growth Rate (SGR) formula for determining physician reimbursement through Medicare. MACRA requires physicians billing Medicare to participate in either a Merit-Based Incentive Payment System (MIPS) or an Alternative Payment Model (APM). Both contain value-based components, and will likely be emulated by private payers. Still, The Physicians Foundation report found that physicians are largely unaware and unprepared for these changes—more than half of those polled were unfamiliar with MACRA.
The Physicians Foundation report also indicated that physicians have little confidence in or knowledge about many of the value-based programs and don’t believe ACOs will benefit the system in terms of quality or cost.
“The survey strongly indicates that considerably more physician support and participation will be required to achieve the goals of healthcare reform and to transform the healthcare system from one based on volume to one based on value,” the report notes.
Still, CMS champions the move to value-based payments, and celebrates the fact that the agency met its goal to tie 30% of reimbursements to alternative payment models by the end of 2016 nearly one year ahead of schedule—up from 20% in 2014. The agency hopes to increase this percentage to 50% by the close of 2018.
Medicare ACOs saved $411 for CMS in 2014 alone, hospital-acquired conditions dropped by 17% from 2010 to 2014 to the tune of $20 billion in savings, more than half a million readmissions were prevented between 2010 and 2015, and Medicare spending is starting to slow down, according to CMS.