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Value-Based Healthcare

Lower costs while guaranteeing the best quality of patient care

A Shift from Volume to Value

Healthcare is under extraordinary pressure to transform in the face of unsustainable costs, operational inefficiencies, and inequity in access to care. At the center of this change is a shift from volume to value, where healthcare suppliers, providers, systems, and payers look beyond their individual economics toward the outcomes they bring to the broader ecosystem.

Navigating a Complex Industry

The challenge is that change doesn’t come easy in an industry as complex and regulated as healthcare. It requires a thoughtful strategy and a graduated approach that navigates the challenges of data sharing and accrues benefits along the way.

MetaCX is leading the charge with a step-by-step strategy outlined in our white paper, A Stepwise Path Toward Value.


A Stepwise Path Toward Value

Download the white paper today to learn how healthcare suppliers, providers, systems, and payers can work together to prioritize the creation of value in a way that is collaborative, constructive, and controlled.

Download White Paper

Value-Based Healthcare

What is value-based healthcare?

Also known as value-based agreements (VBAs), this form of healthcare aims to lower costs, create working efficiencies, and guarantee equality in access to care and health no matter what a patient’s social status is.

Furthermore, the value-based healthcare meaning is to offer a payment model that rewards healthcare providers who offer quality care to patients. Under this approach, providers hope to supply better care for patients and better health for the population. 

While value-based healthcare is not a new concept in the industry, healthcare systems and providers, payers, pharma/medical device manufacturers, and other suppliers are steadily increasing their participation and the volume of Value-Based Agreements (VBAs).

If this type of agreement is new to you, VBAs reorient the economics of business relationships within healthcare based on mutually agreed on performance levels for upside and downside risk—or to put it simply, they revolve around the delivery of shared outcomes.

Interested in learning more about value-based healthcare? The following sections will break down elements of value-based care and strategies to implement value-based healthcare.

Benefits of Value-Based Care

A value-based approach to healthcare has many benefits to consider. At its core, the value-based healthcare framework is based on everyone in a healthcare ecosystem—suppliers, providers, systems, and payers—working together toward common goals and objectives.

Benefits include:

Increased Patient Satisfaction: Transitioning from fee-for-service to value-based reimbursement requires providers to prove that they’re meeting quality standards and benefitting patients while at the same time, cutting costs.

Efficiency: Analyzing value-based care metrics helps organizations identify cost drivers or value blockers that are exclusive to a provider or system and figure out how to remedy the situation.

Collaborative Care: In value-based healthcare, incentives to providers are based upon working with suppliers and payers to offer the best care to patients.

Payer Costs: In addition to lowering costs for individuals, businesses, and the government, one rationale for implementing value-based care in a healthcare organization is that insurance companies have to pay less for the services their subscribers use.

Value-Based Healthcare Vs Fee-for-Service

Fee-for-service healthcare is a traditional payment model where healthcare providers are paid for the services they perform.

With fee-for-service healthcare, reimbursements depend on the services a healthcare organization offers, regardless of patient outcomes. With value-based care, reimbursements depend on the quality of care provided and are tied to pre-established patient outcomes.

There is a trend in the industry that shows many healthcare entities moving away from a fee-for-service model. The evidence for this has been made apparent in many fee-for-service vs value-based care scholarly articles. According to an article from the Health Affairs journal, the National Commission of Physician Payment Reform recommended that payers “largely eliminate stand-alone fee-for-service payment to medical practices.”

Similarly, an article from the Research in Social and Administrative Pharmacy journal states that public and commercial health plans are transitioning from fee-for-service payments to value-based payments.

Fee-for-Service vs Pay-for-Performance

Another term used in place of value-based agreement in the healthcare industry is pay-for-performance. With fee-for-service healthcare, doctors are paid a fixed amount no matter what happens to the patients whereas, with pay-for-performance healthcare, clinicians receive financial incentives for achieving better health outcomes.

Fee-for-Service Pros and Cons

There are many fee-for-service advantages and disadvantages. The major advantage to fee-for-service healthcare is that patients always receive access to the care that they require. A few other benefits are that fee-for-service can encourage the maximum number of patient visits, patients get more of a choice in what kind of treatment they receive, and it is a flexible care structure that is easier to implement across most healthcare entities.

The disadvantage of fee-for-service healthcare, as you may have already picked up on, is that patient outcomes are not prioritized. This can lead to healthcare organizations focusing heavily on monetary drivers. In some cases, this can translate to the denial of care for certain subsets of individuals.

Barriers to Value-Based Care

Despite its benefits, the history of value-based care shows that the approach is not without its challenges. The disadvantages of value-based care all have to do with scaling and operationalizing such a complex solution.

A recent study from Definitive Healthcare underlines the main value-based healthcare challenges. The study reports on five barriers to value-based care including:

Difficulty Collecting and Reporting Patient Information: Approximately 14.8% of respondents said they had issues accessing patient data, even though it’s critical for successful care.

Shifting Policies and Regulations: 16.2% of respondents said the evolving policies and regulations, in part because the introduction of incentives from the Centers for Medicare and Medicaid Services (CMS) didn’t become mainstream until 2012, were a barrier to value-based care.

Financial Risk and Unpredictable Revenue Streams: 17% of respondents said they were afraid of unpredictable revenue stability and sustainability when transitioning to value-based care. They also had difficulties comprehending the financial risk of these programs.

Technology Interoperability Challenges: 19.7% of respondents said that what makes value-based care difficult is the data exchange, particularly since 2% of hospitals don’t have the electronic health record (EHR) systems critical for data management.

Lack of Resources: 25.3% of respondents said that their criticism of value-based healthcare was due to major resource deficits such as staffing shortages and insufficient healthcare software.

Value-Based Care Model

The main value-based healthcare equation consists of dividing the quality of care (patient outcomes, safety, and service) by the total cost of care. It is important that independent healthcare entities implement the best value-based healthcare model to ensure everyone in the healthcare ecosystem—suppliers, providers, systems, and payers—are working together to create and deliver value.

Types of value-based care models include:

Medical Homes

This value-based healthcare business model combines primary, specialty, and acute care in a patient-centered medical home (PCMH) delivery model. The home is not a physical location but rather a coordinated approach to patient care in which a patient’s primary physician leads a patient’s total clinical care team.

Accountable Care Organizations (ACOs)

CMS designed one of many value-based reimbursement models in healthcare to offer the best possible coordinated care to patients at the lowest possible costs.

Hospital Value-Based Purchasing

As one of several value-based care payment models, the Hospital Value-Based Purchasing Program (VBP) gives acute care hospitals adjusted payments based on the quality of care they deliver.

Some ways the program encourages hospitals to improve the quality and safety of acute inpatient care include eliminating or reducing adverse events, increasing care transparency for consumers, and recognizing hospitals that give excellent care at a lower cost to Medicare.

Value-Based Care in 2021

Value-based care in 2021 is different from value-based care in 2020 for many reasons, the main being it’s increased importance due to a global pandemic.

With the discovery of COVID-19, providers began to rely less on fee-for-service healthcare and instead turned to value-based care, the latter of which gave them a consistent source of revenue and helped them overcome the pandemic and economic downturn.

When looking at value-based care statistics 2021, a study from Phillips states that the percentage of total U.S. healthcare payments tied to value-based care has risen to 36%. Some of the previously discussed challenges, such as conflicting industry interests and IT challenges, made further adoption difficult.

Value-Based Care Trends 2021

Specific trends from 2021 related to value-based care include physician compensation continuing to emphasize volume, lagging availability of data-driven tools to support physicians, and existing care models that do not support value-based care.

Some initiatives to fight these trends incorporate reorienting physician compensation to value, giving physicians simple decision-making tools, and building management care capabilities.

Forbes believes that 2021 could become the “landmark year” for clinicians, health plan providers, and government agencies to adopt value-based care.

Top Value-Based Care Companies

More and more companies around the world are leveraging value-based healthcare.

The following countries list where each of the top value-based care companies are located and why they are so important:

Value-Based Care in the United States

Nextstep Solutions, Athena Health, NXGN Management, LLC., and McKesson Corporation are some value-based healthcare companies located in the U.S. Their efforts raised the global value-based care payment market from $1.52 billion in 2020 to $2.273 billion in 2021 at a compound annual growth rate (CAGR) of 49.5%.

Value-Based Healthcare Nederland

The Erasmus School of Health Policy & Management (ESHPM) created a project for Zorginstituut to implement value-based healthcare in the Netherlands between 2018 and 2022.

Value-Based Healthcare Wales

The Welsh government, Pfizer, Swansea University, and Life Sciences Hub Wales came together to sign a charter that would further value-based healthcare in Wales.

Value-Based Healthcare Porter

American academic Michael Porter created the Expectancy Theory, which states that many factors feed into an employee’s efforts to reach an organization’s goal, including the belief that performance yields positive rewards to match the effort.

Porter’s research on value-based healthcare suggests that it is the outline for restructuring health care systems around the world with the primary goal of value for patients.

Co-authored with Elizabeth Teisberg, the Value-Based Healthcare Porter Book is called Redefining Health Care Creating Value-Based Competition on Results and proposes several ways to achieve value for patients such as measuring the outcomes that matter to patients and establishing strategies to ensure achievement.

There are several value-based care peer-reviewed articles that discuss the book. An article from the Journal of the American College of Radiology used Porter’s research to suggest that payers, providers, governments, suppliers, and insurance companies all gain from the value-based competition.

Value is undoubtedly the future of healthcare. The question for healthcare ecosystem partners is how they will step into this change—and do it in a way that’s collaborative, constructive, and controlled.

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