Value-Based Payments Could Double By 2019

By Christine Kern, contributing writer

According to the AHIP Institute, pay-for-performance will be the most challenging model to implement.

A survey conducted by ORC International, commissioned by McKesson Health Solutions, and released at the American Health Insurance Plans’ Institute 2014 conference examined the state of value-based reimbursement. The survey revealed that, of the existing value-based models, payers and hospitals/health systems predict pay-for-performance will experience the most growth – increasing from 10 percent today to 18 percent in five years for payers and from 9 percent to 21 percent for hospitals/health systems.

But it also indicated that P4P will be the most challenging of the value-based reimbursement models to implement. Top obstacles to implementation include not having the technology or infrastructure needed in order to measure, analyze, and capture data, as well as not having clinician buy-in and engagement.

The survey was of high-level executives from 114 payers and 350 hospitals/health systems who were questioned about the value-based models they are using; where they are in the transition to value-based models; and how the financial impact of the models on their businesses.

The study clearly documents a transition from a volume-based model of reimbursement to models based on measures of value. Both payers and providers project that value-based reimbursement will overtake fee for service by the year 2020. But the study also reveals significant challenges, particularly in technology and physician buy-in, to fully implementing these models.

Some other findings include:

• Ninety percent of payers and 81 percent of health systems/hospitals are already using a mix of value-based reimbursement models combined with fee-for-service. Those respondents using the mixed models project that value-based reimbursement will make up two-thirds of the market by 2020 (up from one-third today).
• Accountable care organizations are closer to value-based reimbursement adoption than non-ACOs, and larger organizations are further along in the transition to value-based reimbursement than smaller organizations.
• Of those payers using value-based reimbursement, P4P is used the most (65 percent), followed by capitation, global payment and total cost of care (64 percent).
• Sixty percent of payers believe that moving to value-based reimbursement will have a positive financial impact; only 35 percent of health systems/hospitals feel the same way. Of the health systems/hospitals, 29 percent of small facilities said value-based reimbursement will have a positive financial impact compared to 40 percent of large facilities.

McKesson’s Medical Director, David Nace, M.D., says the results point to a sea change in healthcare reimbursements, a change in attitude, and a call for action. “For stakeholders, it really is a matter of taking action now or risk being left behind, as dollars increasingly flow towards value-based models,” Nace says.

But the study also reveals that healthcare transformation is painstaking work. Existing systems are being pushed to the breaking point, and administration of these new models requires next-generation healthcare IT to make them automated, scalable, and cost-efficient.

The study reveals these and other challenges, as well as a wealth of data that can have a significant impact on strategic planning for payers and providers. In addition, Nace advises stakeholders on the seven steps payers, providers, and clinicians can take today to start aligning towards value-based reimbursement models.