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These 4 Steps Are Key to a Successful Value-Based Payment Strategy

Analysis  |  By Amanda Schiavo  
   September 08, 2022

'Value-based payment will only be successful if it is explicitly designed to support value-based care,' says Harold Miller, president, and CEO of the Center for Healthcare Quality and Payment Reform.

Value-based care is a hot topic in the healthcare industry, a payment strategy designed with patients' health and financial needs front and center. Consumers welcome it, but that doesn't mean hospitals and health systems have perfected this type of payment model.

Value-based payments, which offer healthcare providers financial incentives for the quality of care they give to people with Medicare, haven't resulted in lower healthcare costs, with some programs making it harder for patients with complex conditions to receive the right care, says Harold Miller, president, and CEO of the Center for Healthcare Quality and Payment Reform. 

"Most value-based payment programs have failed to significantly reduce healthcare spending or improve the quality of care for patients," Miller says in a report titled 4 Steps to Successful Value-Based Payment. "Many have resulted in higher healthcare spending, and some have made it harder for patients with complex conditions to receive adequate care."

Miller says that a value-based payment program can only be successful when it is designed to directly support value-based care.

"Providers deliver care, not payers, so value-based payments must be designed to ensure that providers are able to deliver high-value services to their patients," he says.

To that end, Miller has come up with four steps providers can utilize to implement a successful value-based care and payment system.

The four steps are:

1. Identify potentially avoidable spending, i.e., specific types of healthcare services or spending that could be reduced without harming patients.

This is meant for providers to address areas where they and their patients can avoid costly and unnecessary spending. Areas, where patients and providers can address available spending, include eliminating unnecessary tests, medications, or procedures, and using expensive tests and treatments when a cheaper and equally effective alternative exists.

"In some cases, the unnecessary services can be harmful to the patient as well as resulting in higher spending," Miller says in the report. "A number of studies have shown there is a large amount of avoidable spending in the healthcare system overall. However, the specific types and amounts of avoidable spending will differ for different patients, different health conditions, and different healthcare providers, and it will change over time as new treatments are developed."

2. Design an approach to delivering services that is expected to reduce avoidable spending.

This calls on physicians, hospitals, and other healthcare providers to redesign their approach to the services they are providing patients. This redesign will also help identify areas of avoidable spending as discussed in the first step, says Miller.

"In order for patients with chronic conditions to avoid the exacerbations that result in ED visits and hospitalizations, they may need to receive more assistance in managing their condition or they may need different medications or treatments," Miller writes in the report. "In order for a physician to avoid ordering an unnecessary or unnecessarily expensive test or procedure, they may need to spend more time with the patient to narrow the range of potential diagnoses for a symptom or to help the patient decide to pursue a different method of treatment. Moreover, a lower-cost treatment has to be available and affordable for the patient, otherwise, it is not realistic to expect it to be used."

3. Create payments that give providers the ability to implement and sustain the new approach to service delivery.

This calls on payers to update the way they currently incentivize providers, making the strategy established in step two more appealing. Current payment systems include fees for over 15,000 different services, Miller says, however, there are no payments at all for a variety of high-value services that could reduce avoidable spending. These services include time spent by nurses educating patients about how to manage their health problems, non-medical services such as transportation to outpatient sites, and palliative care services for patients with advanced illnesses. 

"In many cases, the simplest method for supporting the delivery of value-based care will be to create a fee for a new service or to increase the fee for an existing service," Miller writes. "In other cases, it may be desirable to replace existing fees with a 'bundled' payment that provides the flexibility to deliver services in different ways. The approach chosen should be one that is easy for both providers and payers to implement and that providers believe will enable them to deliver the services identified in step two."

4. Hold providers accountable for delivering appropriate, evidence-based services in return for the value-based payments.

This step asks providers receiving these new payments to take accountability for delivering services to their patients in a way that can reduce avoidable spending. 

"The most feasible and effective approach to accountability is for the physician, hospital, or other provider to agree that they will only bill the payer for the value-based payments if they have delivered the evidence-based services the payments were designed to support," Miller writes. "If the provider has to deviate from evidence-based guidelines for patient-specific reasons the provider would need to document those reasons in the patient's clinical record in order to be paid for the services that were delivered. In contrast to current pay-for-performance systems, this approach assures that each individual patient is receiving the most appropriate, high-quality care for their individual needs. It also eliminates the need for burdensome systems of attribution and measure reporting that significantly increase administrative costs for both providers and payers."

Amanda Schiavo is the Finance Editor for HealthLeaders.

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