April 18, 2024
Over the past decade, the healthcare industry has undergone significant change. From the implementation of the Affordable Care Act to the widespread adoption of electronic health records, primary care physicians have had to keep pace with a series of major alterations to the way they practice medicine.
These changes have presented challenges for physicians, for providers, yet they have all been building toward the ultimate goal of improving the value that patients receive every time they interact with the healthcare system.
This idea of “value-based care” includes a number of clinical and financial changes designed to help providers achieve the Triple Aim of healthcare: producing better patient experiences, improving the health of populations as a whole, and reducing the nation’s high healthcare costs.
But what is value-based care, exactly? What does it involve, and what does it mean for primary care providers interested in taking advantage of its opportunities?
What is value-based care?
Value-based care is the concept that healthcare providers should be reimbursed based on patient outcomes instead of the volume of services provided. The goal is to help individuals maintain their highest possible level of wellness rather than waiting to provide care until patients get sick, which is often a more complex and expensive task.
In value-based care arrangements, healthcare providers contract with payers, such as Medicare, Medicaid, and commercial insurance companies, to care for a defined set of attributed patients.
In order to earn financial rewards or avoid negative payment adjustments, providers must meet specific performance and quality measures that are tied to better long-term outcomes for patients.
These measures may include the delivery of routine and preventive care services, such as delivering vaccines or conducting regular screenings for common cancers, and chronic disease management services, like ensuring a diabetic patient’s blood sugar remains under control.
By prioritizing quality over quantity, value-based care can help to make healthcare more efficient and effective for patients, providers, payers, and the nation at large.
Explore the ABCs of value-based care in our glossary.
How does value-based care work?
Value-based care impacts every piece of the healthcare process, from the back office and the waiting area to the exam room and even the patient’s own home.
In order to implement the necessary changes in a coordinated and sustainable manner, healthcare providers can work together within accountable care organizations (ACOs), which are groups of physicians, hospitals, and other clinicians jointly responsible for managing an attributed population.
ACOs create a structured framework for tackling the two major components of value-based care: accepting financial risk and improving care management.
Shouldering financial risk
The biggest difference between value-based care and fee-for-service healthcare is the idea of incorporating financial risk into care delivery.
While financial risk itself is not a new idea – capitation and managed care have been part of the landscape for many years – ACOs now offer a flexible and innovative way to incentivize providers and improve quality in partnership with commercial or government payers.
If an ACO successfully meets its quality goals and spending benchmarks, it could receive a portion of the savings, or the difference between what the payer expected to spend on care for the attributed population and the actual spending for the performance period.
Many ACOs choose to participate in upside-only risk models, meaning that they receive shared savings if they succeed in managing costs, but are not financially liable to return any money to the payer if they spend more than the target amount.
But ACOs can also take on downside risk or two-sided risk. Downside risk models typically offer a higher percentage of the shared savings if the ACO successfully manages costs. However, if the ACO spends more than expected, it will be responsible for repaying a portion of the overages back to the payer.
Not surprisingly, upside risk models are the most popular starting point for providers entering the value-based care environment. In 2020, not even 40 percent of ACOs participating in the Medicare Shared Savings Program (MSSP) were participating in downside risk models, according to industry data.
However, the number of ACOs in downside risk arrangements is on the rise as regulators and payers encourage more adoption of higher risk, higher reward models that may help to bring even greater reductions in spending.
Expanding care management responsibilities
Because reimbursement is tied directly to performance and outcomes, providers need to ensure that attributed patients are getting all of the care they need. Many patients need coaching, support, and education to develop the skills that will allow them to manage their own health.
As a result, providers must take on the responsibility of reaching out to patients proactively to ensure they are receiving recommended preventive services and appropriate care for existing conditions.
Managing patients in this manner can be one of the biggest challenges of value-based care. Providers must develop new strategies for patient outreach, engagement, and follow-up while maintaining high standards of quality, service, access, and availability.
They must also gain access to information about the patient’s entire utilization profile, including specialist visits, hospital events, and emergency department use. This visibility is important for accurately identifying an individual’s clinical risks, reconciling any medication changes, and spotting opportunities for better care coordination or closer management of specific conditions.
Electronic data plays an extremely important role in supporting providers as they work toward these objectives.
At the administrative level, providers conduct their quality reporting electronically, which means they need to be proficient at collecting complete and accurate data on patients’ clinical risks and the services delivered to each individual.
Data analytics are also crucial for managing populations effectively while keeping the practice running smoothly.
With the right health IT tools, primary care providers can maximize their time and resources by identifying high-risk, high-need patients and prioritizing these patients for key preventive services and chronic disease management programming.
The need to rely on data to understand larger patterns in individual and population health is new for many types of providers, and so are the workflows required to translate this knowledge into better outcomes for patients.
These models can be especially appealing to primary care physicians because they align financial incentives with the comprehensive care and preventive services that already form the core of their mission, reinforcing their ability to cultivate strong patient relationships and empowering them to truly coordinate care. In many instances, these models provide the financial structure sufficient to shore up traditional practice business models.
How are healthcare payers and providers putting value-based care into action?
Both commercial and government payers are promoting participation in value-based care with a wide range of programs and options.
The Centers for Medicare and Medicaid Services (CMS) is one of the strongest influences on the development of value-based care. CMS started the MSSP in 2013 to jumpstart the movement to value-based reimbursement models. The MSSP has been highly effective in moving providers into these arrangements.
In 2022, the 482 ACOs participating in the MSSP provided care to more than 10.4 million Medicare beneficiaries and saved more than $1.8 billion, CMS recently announced.
And the program is continuing to evolve in pursuit of even greater success. Starting in January of 2025, CMS will launch the ACO Primary Care Flex Model, a new model where practices will participate jointly in MSSP and Flex, and will test how prospective payments and increased funding for primary care in Accountable Care Organizations (ACOs) impact health outcomes, quality, and costs of care.
ACOs that take on risk are eligible for greater rewards within Pathways to Success. In addition, risk-bearing ACOs can take advantage of certain bonuses and exemptions within the Merit-Based Incentive Payment System (MIPS), adding extra encouragement to get involved.
Commercial insurers have also been quick to move providers and patients into value-based arrangements.
While the number of providers participating in private contracts is a little more difficult to track, a benchmarking survey from the American Medical Association (AMA) recently stated that 45 percent of physicians work in a practice that belongs to a commercial ACO.
Almost 60 percent of physicians said that their practice belonged to at least one type of ACO in 2022, compared to 44 percent in 2016.
Primary care providers are leading the way in both adoption and success.
Practices with primary care physicians are 12-22 percentage points more likely to be part of an ACO the AMA found, highlighting the importance of primary care to the success of these models.
CMS adds that physician-led ACOs, or ACOs that do not include a hospital system, produce significantly more savings for Medicare. Low-revenue ACOs, which tend to be physician-led, reduced spending by an average of $228 per beneficiary compared to $140 per beneficiary for higher-revenue, hospital-led ACOs.
Primary care providers who want to take advantage of this growing trend can start by identifying which value-based care options best fit the practice’s clinical and financial goals.
They may also wish to explore the advantages of ACO enablers that can provide the tools and practice transformation advice to help practices achieve those objectives and see success with shared savings and patient outcomes.
As the value-based care ecosystem continues to evolve, government and commercial payers will keep ramping up their investments in ACOs and other pay-for-performance methodologies. Practices will need to make their own investments in comprehensive patient management strategies that can improve outcomes – and, as a result, control spending for the nation’s healthcare system.
This combination of quality care and financial incentives will ensure that individuals receive the right care in the right setting at an affordable cost, producing true value for patients, providers, and society as a whole.