By now, you’ve heard about the transition from volume to value in healthcare, but what does it really mean? In this blog, I’ll attempt to explain it in layman’s terms.
Value-based Care and the Connection with Population Health
Simply put, “value” is defined as better quality for lower cost; an easy concept to grasp, but practically, very difficult to implement.
In healthcare, the concept of value connects closely with population health. Here’s an illustrative example: If we, as physicians, effectively manage the blood pressure rate of our patient panels, the likelihood of strokes and heart attacks goes down over time. This will, in turn, decrease the overall costs to the system. However, this is a long game and requires a large population to see the benefits.
In the interim, we must incentivize the behaviors of physicians and patients to keep the blood pressure rate low. If we are successful, patients will have a better quality of life with fewer high-cost complications. Better quality with less cost equals value.
If achieving this goal results in fewer interventions for patients and lower costs because we’ve successfully decreased the risks and complications in the population, we have caused our next conundrum: healthcare providers are less profitable because patients use fewer services. Some of the current models to help ease this transition include Shared Savings programs and “Pay for Reporting.”
The Ladder from FFS to VBC
If the spectrum from fee-for-service (a no-risk arrangement) to value-based care (full risk) were rungs on a ladder, the rungs would progress like so:
- Pay for Performance
- Shared Savings Programs (Performance-Based Reimbursement programs)
- Prepaid Care Management – (Providers charge fees for the providing measurable “quality” standards)
- Accountable Care Organizations with variable Shared Savings
- Global capitation – (The doctor or group is paid a defined amount of money for the provision of all of the care for the patient)
As we move up the metaphorical ladder, closer to “value,” physicians have to take on more “risk.” What does “risk” mean in this discussion? Risk is the willingness to take on a previously agreed to amount to provide care.
In the volume to value transition, change is gradual. Different payers are at various locations on the spectrum. Different doctors are at various places, depending on their contracts with each payer. In essence, we are a blended family and need to be aware of where our colleagues stand.
It should be noted that fee-for-service is not going away anytime soon. Indeed, it will likely be around at some level for the duration of most of our practices’ lifetimes. However, value propositions and alternatives will become more numerous and integral to our world over the next few years. If knowledge is power, our ability to understand and work with these options as they present themselves can only benefit us all.