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Value-Based Models Don't Reduce Costs at Market Level, HFMA Study Finds

Analysis  |  By Jack O'Brien  
   June 25, 2018

Citing 'incentive misalignment' and 'lack of downside risk' as factors, the study finds that value-based payment models are not effective enough to create savings for ACOs.

The introduction of value-based payment models failed to deliver lower total costs of care or improve quality outcomes at the market level, according to a new study released Monday by the Healthcare Financial Management Association (HFMA).

The study, entitled "What Is Driving Total Cost of Care?," was conducted with Leavitt Partners, and McManis Consulting, and received support from the Commonwealth Fund. It was released as part of the kick-off to HFMA's annual conference in Las Vegas.

Researchers analyzed the performance results of ACOs and other population-based value-based payment models in market-level impacts rather than model-level impacts. Ultimately, the HFMA study found no link between the rise in the total costs of care for Medicare and commercial payers from 2012 to 2014 and the implementation of value-based payment models.

Limited exposure of value-based payment models, the absence of financial incentives to manage total cost of care, as well as the preference for healthcare organizations to embrace a reluctant, incremental approach to risk, were among other factors listed by researchers.

"Many healthcare providers began making changes in how they provided care for patients during

the years of this study," David Muhlestein, chief research officer at Leavitt Partners, said in a statement. "But the penetration of value-based payments was generally quite low and appeared insufficient to drive market-level changes in cost growth for Medicare or commercial payers."

Below are additional findings from the study and comments from researchers on what healthcare leaders should take away from the effects of market consolidation:

  • Markets that were less consolidated and less vertically-aligned, were more likely to have higher costs.
  • However, costs were lower in markets with well-structured provider networks.
  • Consolidation in low-cost markets left two to four health systems with good geographic coverage as competitors within the market, on average.
  • "These findings suggest that the type of competition may be more important than how much competition is in a market," said HFMA President and CEO Joseph J. Fifer, FHFMA, CPA. "This research is a valuable addition to the debate about the impact of consolidation on total cost of care."
  • Physicians in lower-cost markets were typically employed by or closely aligned with the health systems, and the market usually included at least one integrated delivery system with a health plan, a hospital, and clinician capabilities.
  • Most healthcare organizations examined in the study were reluctant to alter benefit design or choose health plans that could limit the choice of providers for their employees.
  • Though some remained skeptical about the overall merits of population-based VBP models, most leaders agreed that changes to payment and care delivery models are inevitable, especially for federal programs, and will likely include value-based components.
  • The study recommended a move toward population-based by both government and commercial payers to incentivize providers to actively manage the total cost of care.
  • Other recommendations from the study included balancing the benefits of integration with the benefits of competition and increasing information transparency on costs and quality within markets.

"At this stage of development, the intent of healthcare leaders is a key factor," said Keith

Moore, CEO of McManis Consulting. "For example, leaders should ask themselves, 'Do I believe my organization can do well under value-based payment? If so, is it time to make financial and cultural changes so our organization can be a leader?'"

Jack O'Brien is the Content Team Lead and Finance Editor at HealthLeaders, an HCPro brand.

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