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ResourcesInsight

The ABCs of value-based care

By Elizabeth Johnson, Contributing Writer at Arcadia
Posted:
Value-Based Care

Many people agree that today’s healthcare industry needs a new approach. At the moment, value-based care is a promising solution. Value-based care is a healthcare delivery model in which providers are paid based on patient health outcomes. It measures health outcomes against the cost of delivering the outcomes.

Experts say value-based care benefits patients with lower costs and better outcomes, providers with better patient experiences and increased efficiency, payers with stronger cost controls and lower risk, suppliers with alignment of costs with outcomes, and society with reduced healthcare spending and better health.

In order to reduce costs, value-based care focuses on preventative care to keep healthy people healthy, which is cheaper than caring for already sick people. It requires healthcare organizations to take on more risk from payers like Medicare, Medicare and private insurance companies than they have in past delivery models. If an insurance company expects someone with expensive conditions to cost hundreds of thousands of dollars a year, healthcare organizations can assume that risk, prevent those expensive issues from cropping up, and pocket the difference to reinvest in their programs. But they are also responsible for the costs of not achieving positive patient outcomes at a population level.

The difference between value-based care and fee-for-service

In value-based care models providers are incentivized by patient outcomes, while in fee-for-service models, providers are incentivized by their volume of services. Value-based care and fee-for-service models are not mutually exclusive. Healthcare organizations can create hybrid models that deliver providers upfront dollars, incentivize team-based care, and reduce fee-for-service payments. It is worth noting that there’s a wide spectrum of possible hybrid models when it comes to value-based care from taking on partial risk or full risk. Healthcare organizations can weigh the benefits and decide what suits them.

Major terms concepts in value-based care and their impact

Value-based care comes with a unique language. Understanding some of the key terms will provide clarity on how this delivery method works.

Medicare/Medicare Shared Savings Program

In 1965, the U.S. established Medicare, a government national health insurance program. It provides health insurance for Americans over 65 and some younger people with disability status. It is administered by the Centers for Medicare and Medicaid Services (CMS). The 2019 Medicare Trustees Report stated that Medicare provided health insurance for nearly 60 million people.

The Medicare Shared Savings Program was established by section 3022 of the Affordable Care Act. The Shared Savings Program is a new approach to the delivery of health care. It is designed to facilitate coordination and cooperation among providers to improve the quality of care for Medicare fee-for-service beneficiaries and reduce unnecessary costs. Eligible providers, hospitals, and suppliers participate in the Shared Savings Program by creating or participating in an Accountable Care Organization.

Accountable care organization / Coordinated care organization

Accountable care organizations, often referred to as “ACOs”, are groups of doctors, hospitals, and other health care providers, who collaborate to give coordinated care to patients. ACOs seek to ensure that patients get the right care at the right time, without unnecessary duplication of services and preventing medical errors. ACO providers share information with each other through Electronic Health Records.

ACOs contract with a payer such as Medicare, Medicaid, or a larger insurer. There are about 30 quality measures in four domains: patient experience, care coordination, safety, and preventative health in at-risk populations. ACOs take on more risk, but when it succeeds both in delivering high-quality care and spending health care dollars more wisely, the ACO will share in the savings it achieves for the Medicare program.

The National Association of Accountable Care Organizations said as of January 2022, there were “483 Medicare ACOs serving over 11 million beneficiaries. Since 2010, more than 1,200 organizations have held an ACO contract in Medicare, Medicaid, or the commercial sector serving millions of additional patients.”

Independent Physician Association

An Independent Physician Association (IPA) is a business entity organized and owned by a network of independent physician practices in order to reduce overhead or pursue contracts with employers, ACOs, or managed care organizations.

According to the American Academy of Family Physicians, IPAs follow several guiding principles:

  • Organize a health care delivery system which produces optimal health outcomes for patients.
  • Promote efficiency and effectiveness in the delivery of health care to patients that produces value.
  • Utilize their unique skills and expertise in care management, in management of the interface between specialists and hospitals, and in their focus on preventive health to create value.
  • Effectively manage relationships between primary care physicians, limited specialists, and hospitals.
  • Demonstrate their incremental value to obtain contracts with health plans and other payers for covered lives.
  • Have clinical autonomy and assume clinical accountability to optimize an IPAs value.
  • Preserve the unique partnership embodied in the doctor/patient relationship.

Complex Care Management

University of California, San Francisco defines Complex Care Management (CCM) as “a set of activities designed to more effectively assist patients and their caregivers in managing medical conditions and co-occurring psychosocial factors.” CCM is often provided to patients who have serious medical needs and experience a high number of hospitalizations or emergency room visits. In addition, patients with complex needs can face social barriers such as homelessness or lack of transportation as well as system inequities such as racism. CCM is designed to improve the patient’s health status and reduce the need for hospital care.

Risk Adjustment Factor

CMS’s Hierarchical Condition Category risk adjustment model assigns a risk score, or risk adjustment factor, to each patient based on health conditions, demographic information and where the person lives (a community or an institution.) This system is used to adjust plan payments to ensure fair payment for providing healthcare services and benefits for a population of patients.

Electronic Clinical Quality Measure

An electronic clinical quality measure (eCQM) is a measure of processes, experiences and/or outcomes of patient care, observations or treatment that relate to one or more quality aims for healthcare such as effective, safe, efficient, patient-centered, equitable, and timely care. These measures are a way to standardize measuring and comparing delivery of care.

Health care providers are required to electronically report eCQMs, which use data from EHRs and/or health information technology systems to measure health care quality to CMS. CMS makes annual changes to eCQMs based on changes to evidenced-based medicine, code sets, and measure logic.

Master Patient Index

A Master Patient Index identifies patients across separate clinical, financial, and administrative systems and consolidates their multiple unique identifiers (patient IDs and/or member IDs) into a single person ID.

A sustainable balance between operational efficiency and healthier lives

Healthcare is complicated under any model, but value-based care aims to find a sustainable balance between operational efficiency and healthier lives supported by preventive, holistic care. To learn more about the upsides and challenges of value-based care, watch this webinar featuring Arcadia’s Senior Account Executives Jessi Cardello and Jake Tinkham.