Value-based care is an overarching term for any healthcare delivery model in which payment is based on health outcomes, as opposed to the volume of services provided. The American healthcare system largely operates on a Fee-for-Service system. In this system, providers are paid based on the services they offer. Although this allows for a simpler billing process, and easier communication between providers and insurance organizations, it also has potentially problematic implications regarding the priorities of healthcare providers. Fee-for-Service reimbursement incentivizes billing for a large quantity of services, without taking into consideration the quality of the care or its associated health outcomes. The goal of value-based care is to reconcile the incentives provided by healthcare reimbursements with the overarching goals of healthcare promotion and disease prevention. As such, value-based care models often incentivize proven high-quality measures such as the use of preventive services, coordination of care, and an emphasis on patient satisfaction, with incentives linked to health outcomes rather than services rendered.
The Affordable Care Act, which was passed in 2010, opened the door for many mechanisms that promoted value-based care, and gave both payers and providers the necessary infrastructure to implement it. Some important mechanisms include the Medicare Access and CHIP Reauthorization Act (MACRA), Bundled Payments, and Accountable Care Organizations.
MACRA
The Medicare Access and CHIP Reauthorization Act (MACRA), which was passed in January 2015, laid the groundwork for much of the value-based care infrastructure that we see today. MACRA established quality payment programs, which incentivize payers and providers to implement value-based reimbursement models. There are two types of quality payment programs:
- An alternative payment model (APMs) is any payment approach that creates incentive for clinicians to deliver high-quality and value care. Advanced APMs are specific types of APMs where this incentive is created by allowing providers to take on more risk. This means that providers take on greater responsibility for their patients’ health outcomes, but they also get the opportunity to share in savings associated with maintaining patient health. In doing so, patient care becomes centered around maintaining patient health rather than just rendering potentially unnecessary services.
- Merit-based incentive payment system (MIPS) dictates how physicians receive reimbursements when treating Medicare patients. Incentives and penalties are built around a weighted average of performance measures, such as quality of care, clinical practice improvement practices, cost of delivery and resource use, and interoperability and meaningful use of electronic health records.
Bundled Payment
Bundled payments are an alternative payment model in which the total price for an episode of care is predetermined. An episode of care is the entire continuum of care associated with a specific condition’s treatment. For example, all of the services associated with a joint replacement, from the initial consultation to rehabilitation, would fall under one episode of care. In this model, providers assume additional risk, meaning that they incur a loss if patient care costs more than the initial price point, and make a profit if it costs less. The incentives of bundled payments are completely different from that of fee-for-service care, since providers must implement high-value clinical interventions to save money, rather than simply increase the volume of services they offer.
Bundled payment models first became prominent after the implementation of the Center for Medicare and Medicaid Services’ (CMS) Bundled Payment for Care Initiative (BCPI); this came after the passage of the ACA. This program offered bundled payments for Medicare patients that underwent Acute, Post-Acute, and Prospective Acute care episodes. These initiatives proved effective in reducing the cost of care and incentivizing high value practices, such as preventive care and coordination of care. For example, the cost of joint replacement episodes decreased by 20.8% under the BCPI post-acute care bundle. Seeing the early success of BCPI, CMS and private payers are beginning to implement more bundled payment models, with 17% of healthcare payments having been done under bundled payment in 2021.
Accountable Care Organizations
Accountable care organizations are networks of physicians, clinicians, and larger healthcare systems, in which all parties share responsibility for quality, cost, and coordination of care. Providers in this system must coordinate with government agencies and community-based organizations to promote population health in their catchment area. ACOs operate in a shared savings model. This means that spending on specific patients is assigned a total cost of care (TCoC) benchmark based on factors like their pre-existing health conditions and historical spending; members of the ACO share in any savings when the cost of successful care falls under the TCoC. In order for members of the ACO to share in the savings, they need to meet 30 quality measures. As a result, ACOs help ensure the administration of high quality care, while also incentivizing preventive care through their shared savings model.