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Value-based Payment | Shifting from Volume to Value

Value-based payment vs fee-for-service

Fee-for-service is a model where health care providers are reimbursed for services rendered to the patient. This traditional payment model reimburses the provider for each treatment or test provided to the patient. This method has been criticized as rewarding providers for quantity of care versus focusing on quality of care. Providers are incentivized to order more tests and provide more procedures.

Value-based payment is a newer approach aimed at controlling the rising cost of health care and focusing on the quality of care provided to the patient. Where fee-for-service reimburses provides for each health care service provided, value-based care zeros in on the positive outcome of the patient’s treatment. Increased coordination between different providers reduced costly duplication of service and ensures that patient receive the highest quality of care.

The transition to value-based-payment

Currently, the majority of payments to a provider occur in a fee-for-service environment—only a small portion of reimbursements are value-based. The shift to value-based payment is needed to address the unsustainable increase in health care costs. This strategy is being adopted by public and private payers alike and will continue to become the approach of choice. Hospitals will need to think outside of the traditional walls of inpatient care and focus on the entire continuum of care for a population.

Forging the path from volume to value

HAP continues to ensure that the move to a value-based payment approach improves patient care in a sustainable and efficient manner. In 2015, HAP hosted the first annual Payment Reform Summit. This forum brought together hospital leaders from across the state in addition to government officials and industry experts. During the summit, three reoccurring themes were identified as priorities in the shift to value-based care:

  1. Promote changes to existing regulations and policies that prohibit hospitals and providers from taking steps to implement value-based purchasing and otherwise innovate in ways that will allow providers to implement novel programs and assume risk
  2. Promote timely access and transparency to information
  3. Work with the state and federal governments and commercial payers to develop a common platform of metrics, as well as consistency in reporting requirements, areas of clinical focus and value-based program design

Value-based care delivery models

As hospitals and other health care providers begin the shift to value-based care, there are several delivery models that have been developed.

Bundled Payment/Episode of Care is a strategy where hospitals and care providers are reimbursed a predetermined amount based on the procedure performed on the condition diagnosed. This approach provides financial incentives to hospitals to improve efficiency in treatments and reducing unnecessary episodes of care. Bundled payments promotes price transparency, allowing the patient to know how much a procedure may cost upfront instead of waiting until after the produce is complete.



Pennsylvania's Use of Value-Based Payment 2017
HAP’s first value-based payment (VBP) survey report provides insight into how hospitals and health systems in Pennsylvania are transforming to VBP models.


Related News

National Survey Results Align with HAP Findings about Growth in Value-based Payments, Key Challenges by Rmoore@haponline.org

Two new reports based on surveys of health care leaders nationwide align with findings from HAP’s recent survey about the use of value-based payments in Pennsylvania.

Changes to MIPS in New Budget Deal by admin

Late last week, the U.S. Congress passed the Bipartisan Budget Act of 2018 that ended a brief federal government shutdown. Included in the legislation are modifications to the Merit-Based Incentive Payment System (MIPS) that will affect physician payments.

Report Says Out-of-Pocket Costs for Medicare Beneficiaries Will Keep Growing by jkissinger@haponline.org

At a time when the aging population is on the rise in Pennsylvania, a Kaiser Family Foundation report estimates that out-of-pocket costs for Medicare beneficiaries are expected to keep rising over the next decade.

11 new Medicare ACOs in Pennsylvania in 2018 by admin

The Centers for Medicare & Medicaid Services (CMS) recently released the 2018 list of accountable care organizations (ACOs) approved for the Medicare Shared Savings Program (MSSP). Among the 561 approved ACOs, 39 provide care to Medicare beneficiaries in Pennsylvania—a jump of 11 ACOs, up from 29 during 2017. 

CMS Launches New Voluntary Bundled-payment Model by admin

The Center for Medicare and Medicaid Innovation, part of The Centers for Medicare & Medicaid Services (CMS), announced the first advanced alternative payment model under the Trump administration.

New Data Submission System for Clinicians in the Quality Payment Program by jshellenberger@haponline.org

Yesterday, the Centers for Medicare & Medicaid Services (CMS) announced a new data submission system for clinicians in the Quality Payment Program (QPP) aimed at easing the reporting burden of the program. HAP is supportive of efforts to streamline reporting.

New Physician Quality Information Available at Physician Compare; HAP’s Care in PA also Helpful by jkissinger@haponline.org

The Centers for Medicare & Medicaid Services (CMS) has added new quality information to its Physician Compare website to help consumers make better health care decisions.

CMS Cancels Two Mandatory Bundled Payment Models by admin

The Centers for Medicare & Medicaid Services (CMS) finalized its decision to cancel two mandatory bundled-payment models and reduce the number of providers required to participate in a third model.

Report Finds Drop in Uncompensated Care, Outpatient Growth for PA’s Non-Acute and Specialty Hospitals by JCOLLINS@HAPONLINE.ORG

Today, the Pennsylvania Health Care Cost Containment Council (PHC4) released its Annual Report on the Financial Health of Pennsylvania Non-General Acute Care Hospitals, finding that uncompensated care saw a decrease of 17 percent or $3.3 million in fiscal year 2016. Specialty hospitals saw the largest percent point decrease, followed by psychiatric and long-term acute care

U.S. Senate Approves Bipartisan Plan to Improve Care for Seniors with Chronic Conditions by jkissinger@haponline.org

The U.S. Senate unanimously approved bipartisan legislation that will improve health outcomes for Medicare beneficiaries living with chronic conditions and also will lower costs.

Related Blogs

Patient and Family Engagement: Nice to Have—or Strategic Necessity? by jbisbee@haponline.org

For some time now, Medicare has been financially rewarding hospitals for good patient experiences as measured by the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAPHS). Next year, about 2 percent of Pennsylvania hospitals’ Medicare fee-for-service payments will be affected by how well they do on the Centers for Medicare & Medicaid Services’ value-based purchasing calculations.

Congress and New President Must Approach ACA Repeal and Replace Carefully; Moving Too Quickly Could Be a Disaster by acarter@haponline.org
Health Care Quality Measures––Drinking from a Fire Hose of Data by acarter@haponline.org


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