Skip to main content

Healthcare Execs Like Value-Based Contracts More Than They Used To

Analysis  |  By Philip Betbeze  
   July 09, 2018

A new poll of healthcare executives shows that healthcare organizations are considerably less worried about the financial impact of performance-based contracts than they were two years ago.

Healthcare organizations are considerably more bullish on value-based contracts than they were two years ago, even though nearly a quarter of them still don't currently participate in such contracts.

A new poll by professional services firm KPMG shows that healthcare organizations are less worried about the risk of negative impacts on operating income and profits that such contracts may impose on them should they perform poorly in terms of quality, safety and other important metrics that affect how much value-based contracts pay them.

  • In 2018, 13% of respondents saw risk of a modest (1-10%) drop in operating income from value-based contracts versus 25% in 2016.
  • In 2018, only 6% of respondents were worried about a significant (11%-50%) drop in operating income from such contracts, while 21% were worried about the same thing in 2016.
  • In contrast, 25% of 2018 respondents saw an opportunity for a modest improvement in operating income (1%-10%) by participating in value-based contracts, while only 13% saw the same opportunity in 2016.
  • And 13% saw an opportunity for significant (11%-50%) improvement in operating income in 2018 versus only 6% in 2016.

Both commercial payers and the Centers for Medicare and Medicaid Services have recently committed to increasing the percentage of payment that is based on value, although progress has been relatively slow.

Another interesting set of data points suggest that only a small percentage of the organizations' contracts include a value-based payment model even now, although comparison data from 2016 was not available. To wit:

  • 23% of respondents reported that none of their contracts include a value-based model.
  • 26% reported that less than 10% of their contracts included value models.
  • 24% said between 10% and 25% of their contracts included value.
  • 15% said between 26% and 50% of their contracts included value.
  • 10% reported that greater than 50% of their contracts included value-based payment models.

“We are beginning to see performance-based payment models replacing traditional fee-for-service models,” said Matt Snyder, a KPMG advisory principal who focuses on internal audit and enterprise risk at healthcare organizations, in a release. “The need to shift from volume to value is shared by payers, providers, and ultimately patients.”

The 2018 data covers responses from 221 healthcare finance professionals, while the 2016 data covers responses from 142 healthcare finance professionals taken during webcasts on the topic.

Philip Betbeze is the senior leadership editor at HealthLeaders.

Get the latest on healthcare leadership in your inbox.