What is Value-Based Care? And Why it Matters to Employers. alemoine November 29, 2023

What is Value-Based Care? And Why it Matters to Employers.

Woman in her thirties visiting her female doctor during a value-based care office visit.

By Sarah Baker, MPH, Summus Sr. Director, Product Marketing

If you’ve heard the term “value-based care” but aren’t sure exactly what it means, you’re not alone. A recent survey found that 60% of employers were familiar with the term “value-based care” but only one-third could provide a definition

Most simply, value-based care aims to pay doctors for providing care that is both high-quality and cost-effective. It helps to position value-based care against the traditional way to reimburse doctors and hospitals, called “fee-for-service.” In a fee-for-service model, the doctor or hospital is paid for every service or procedure. This means they are paid solely for volume and not the quality of the patient’s outcome. Value-based care is often used interchangeably with the term “alternative payment model” (APM). Together, these terms encompass a variety of reimbursement models that are “alternatives” to the traditional fee-for-service model. 

So what does a value-based payment model look like? It can vary widely. Anything from fee-for-service with bonuses for quality to models that are considered “advanced,” such as bundled payments, accountable care organizations (ACOs), and global capitation. These models also vary in how much clinical and financial risk is put on the provider. Employers participate in value-based care either through their contracts with their health insurance carriers, or by contracting directly with doctors or health systems to provide care.

Employers and value-based care

In the US, 54.5% of individuals have employer-sponsored coverage. This makes employers the largest purchasers of healthcare coverage and a critical force in shaping the future of healthcare. With so much clout, employers are still behind on changing reimbursement. Only 16.5% of commercial payments are value-based, while 38.9% of Medicare Advantage payments are value-based.  Innovative employers are contracting directly with health systems or primary care providers to decrease costs and improve quality. For example, Boeing has been an innovator in this space and continues to evolve and expand their strategy. As more employers join the early adopters, health systems and primary care providers will grow their ability to contract with employers.

Value-based care shows promising results

Some changes, such as the Accountable Care Organizations (ACOs) have an uneven record regarding cost savings and quality improvement. But progress is rarely linear. As payers continue to iterate and work with their provider partners, we are seeing an acceleration of successes. This includes Medicare Advantage plans showing improved measures of chronic care and higher Star Ratings. One CMS program has reduced heart attacks and strokes, and the latest ACO model, ACO REACH, is showing cost savings.

There may be downsides

Not everyone is sold on the idea of value-based care. Some believe that the focus on preventive care and chronic care means that physicians in value-based models don’t have enough appointments for urgent or acute patient needs. The solution to this, smaller patient panels, seems impossible in today’s environment of primary care shortages. Others worry about primary care physicians denying referrals to specialists or other expensive, but necessary, treatments in order to improve their own revenue.

More on value-based care

Like any change, the shift to value-based care will certainly create new challenges and friction points for all stakeholders in healthcare. This should not be used to defend the status quo. We all need healthcare to work better. We can’t get better outcomes for less cost without changing the way we pay for care.

To learn more on this topic, check out these resources:

For more information about how Summus can help employers and health plans achieve their value-based goals of lowered costs and improved quality, contact us.

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