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Value-Based Reimbursement Set to Eclipse FFS

News  |  By HealthLeaders Media News  
   June 17, 2016

The adoption of value-based reimbursement models is fast-paced and expected to dwarf the fee-for-service model by 2020, survey data shows.

Value-based reimbursement models in healthcare have graduated from the wave of the future to the tsunami of the present.

Data from the second survey commissioned by McKesson to gauge the prevalence of value-based reimbursement models among hospitals and payers nationwide was released this week at the annual conference of America's Health Insurance Plans (AHIP).

"Overall, the fast pace of change in healthcare payment continues unabated since 2014, with payers reporting they are now 58% along the continuum toward full value-based reimbursement, a sharp 10% increase since 2014. Hospitals aren't far behind at 50% along the value continuum, up 4% in the past two years," McKesson's survey report says.  

Information was collected from 465 hospitals and payers.

The report shows that providers and payers are making fundamental changes to their business models to support value-based healthcare.

The vast majority of providers have either joined an accountable care organization or plan to join an ACO in the near term, the survey found. This year, 63% of hospitals are members of ACOs, which is an 18% increase over 2014, according to the survey. Among hospitals that are not participating in an ACO this year, 47% plan to join an ACO in the next five years, the survey says.

An equally large majority of payers have transformed their network management strategies to align them with value-based reimbursement, the survey found.

More than 60% of payers say they have changed their network strategies over the past two years, with 53% using tiered networks and 42% using narrow networks, the survey says.

The 2016 McKesson survey report includes several other significant trend insights:

  • Bundled payments are the fast-growing model of value-based reimbursement, with both hospitals and payers predicting that 17% of medical payments will be through the episode-of-care model within five years.
  • Readiness to adopt bundled payments is questionable at many hospitals and payers, with 40% of hospitals reporting they are ready to administer episodes of care and 52% of payers reporting they are ready.
  • Payers are more optimistic about the financial impact of value-based reimbursement models on their organizations. For payers, 61% of those surveyed forecast a positive financial impact. For hospitals, 41% forecast a positive financial impact.
  • The percentage of hospitals reporting that they are participating in tiered or narrow networks with payers increased 13% since 2014. This year, 60% of hospitals report they are in tiered or narrow networks with payers.
  • For hospitals and payers, improvement in patient outcomes is the most common metric to gauge the success of value-based reimbursement models. Among hospitals, 63% report tracking improvement in patient outcomes to assess the impact of value-based reimbursement models. For payers, 74% report tracking improvement in patient outcomes.
  • For both hospitals (77%) and payers (82%), care coordination was identified as the most important capability linked to value-based reimbursement models.
  • For both hospitals (56%) and payers (57%), establishing incentives for patients or health plan members were identified as the least important capability linked to value-based reimbursement models.
  • This year, providers say 55% of their payment models are based on fee-for-service, with the remainder of their payment models based on some form of value-based reimbursement. Providers say the share of their payment models tied to fee-for-service will decline to 39% within five years.

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