Does your practice utilize the best model for longevity and profitability? Value-based care vs. fee-for-service has been a choice for providers within the last 12 years. Now, in addition to policy shifts deployed by the Centers for Medicare and Medicaid Services CMS, value-based care (VBC) is also being proactively adopted by an increasing number of private payers. This article illustrates the difference between these payment models.
In 2010, the Affordable Care Act (ACA) codified reimbursement for value, or quality, instead of fee-for-service (FFS), or quantity of care. VBC was already emphasized by CMS for the two years prior. Understanding the key differences and benefits of each model is essential for healthcare providers, patients, and policymakers navigating the future of healthcare delivery. But first, consider the benefits of VBC for your practices:
Simply put, the VBC Model rewards healthcare providers who achieve cost-saving objectives by focusing on the quality of care provided. Payment for services is based on those providers’ effectiveness in preventing illness and promoting optimal health outcomes.
Value-based care programs promote better healthcare for individuals, leading to healthier lives for communities, and lower costs over time. Notably, they have been increasingly prominent since the ACA redirected focus toward measuring patient outcomes in contrast to quantifying the care administered without accountability.
VBC is focused on providing care that is effective, applied judiciously and documented accurately. Advocates of value-based care vs. fee-for-service say it improves patients’ health and reduces healthcare costs. Because of the stark differences between these models, medical practices can transform for the better by adopting VBC principles.
The shift to the Value-Based Care Model is expected to continue as the CMS continues to hand down new policies that encourage and incentivize care quality over quantity of encounters.
Value-based care can be categorized into four models: bundles, shared savings, shared risk, and global capitation. For more details on the categories of VBC, read this article
The FFS model reimburses healthcare providers based on individual care services provided, without regard to the effectiveness of that care upon payment.
Despite the ascendant philosophy of value-based care vs. fee-for-service payment model and its continued support under the ACA, the latter remains dominant. A 2020 report by Deloitte Insights notes that 97% of physicians still rely on fee-for-service and/or salary for compensation.
Regarding value-based care: “Yeah, it’s about the evaluations showing that we’re getting better outcomes and lower costs. It’s really about building a better health system. That’s why we got into this in the first place.”
– Mark McClellan, MD, PhD, professor at Duke University and founding director of the Duke-Margolis Center for Health Policy
Fee-for-service remains deeply entrenched because legacy systems for claims payment are already set up for fee for-service healthcare. Similarly, provider support services, including coding and bill preparation, are aligned with legacy systems. In addition, legislative and reporting agencies require reports based on units of care that fee-for-service coding systems coincidentally support. Many argue there are both advantages and disadvantages to the traditional model:
Advantages:
Disadvantages:
Perhaps most importantly, the FFS model can inadvertently neglect preventive measures and coordinated care, which are essential for managing chronic conditions and maintaining overall health.
There are also practical reasons behind fee-for-service’s endurance. Two significant barriers are the demand on physicians’ and practices’ time that a shift to value-based care vs. fee-for-service would require that may not be compatible with the immediate need to provide patient care within the existing system.
Beth Hickerson, healthcare consulting expert at Medical Advantage, explains why many have not yet moved to value-based care: “When prioritizing between actual reimbursements now versus theoretical reimbursements at a later date, actual reimbursements will almost always win. This is not because providers are greedy, or even short-sighted. It is because the reimbursement for health care services has not increased to match the cost of inflation. The low reimbursement levels and increased pressure to see as many patients as possible can lead to reactive care patterns. The focus of care changes from what is the best care for each patient to what is the best care that we can provide for this patient in the next 15 minutes.”
Designing and implementing value-based payment models is inherently complex. These models require a thorough understanding of how to structure payments based on quality metrics and patient outcomes, which can vary widely across different healthcare settings. Additional challenges include:
Moving to a model that emphasizes population health management necessitates paradigm shift from focusing on individual patient encounters to prioritizing long-term health outcomes and preventive care. This can be a difficult adjustment as it involves re-training staff, altering clinical workflows, and re-aligning organizational goals and incentives.
Transitioning to VBC requires thorough planning and strategic execution. Providers should begin by evaluating their current capabilities and readiness for value-based care, including a comprehensive assessment of:
Understanding these factors helps identify gaps and areas that need improvement as to make way for value-based models.
Providers can enhance collaboration among healthcare teams through integrated care plans, regular interdisciplinary meetings, and utilizing care coordinators to manage patient transitions between settings. This approach ensures all team members are aligned in delivering consistent, high-quality care.
Providers should define clear, actionable metrics that align with value-based goals, such as patient satisfaction, readmission rates, and chronic disease management. Regularly reviewing these metrics helps in adjusting strategies and maintaining high standards of care.
Providers can mitigate risks by implementing robust financial management practices, diversifying revenue streams, and engaging in shared savings programs or risk-sharing agreements. These strategies help cushion the impact of potential financial fluctuations associated with meeting quality and cost targets.
Comprehensive education programs are essential to familiarizing staff with new protocols, performance metrics, and care coordination strategies. Empowered and knowledgeable staff are better equipped to deliver high-quality care within the value-based framework.
Providers can engage patients through educational initiatives, shared decision-making processes, and using technology such as patient portals. Encouraging patients to take an active role in their health management leads to better outcomes and higher satisfaction levels.
Supporting a dramatically different care model calls for advanced EHR systems, data analytics tools, and interoperability solutions that facilitate seamless information exchange. Efficient use of technology supports the fundamental aspects of VBC such as care coordination, outcome tracking, and overall efficiency.
Continuous feedback, regularly reviewing performance data, and remaining agile in adapting to emerging challenges and opportunities are instrumental in a successful transition to VBC. A commitment to continuous improvement ensures value-based initiatives remain effective and responsive to patient needs.