What Does Value Based Reimbursement Mean For Providers?


I received an interesting email recently from CMS, titled “CMS announces Value Based Insurance Design Model to improve care and reduce costs in Medicare Advantage Plans.” Evidently, their new Medicare Advantage Value-Based Insurance Design Model will test the premise that “giving Medicare Advantage plans flexibility to offer targeted extra supplemental benefits or reduced cost sharing to enrollees who have specified chronic conditions can lead to higher-quality and more cost-efficient care, helping health plans and consumers have the tools they need to improve costs and spend dollars more wisely.”

Value based reimbursement payment systems are still considered to be in the infancy phase and are mostly structured according to this type of shared savings model. Shared savings arrangements differ, but generally, they encourage providers to cutoff spending for certain patients by offering them a percentage of any net savings that is realized. The Medicare Shared Savings Program is the most well-known and standardized example of the value based model.

What does the shift in value based reimbursement vs. volume based reimbursement mean for providers?

Switching to value based healthcare will change the traditional model of healthcare reimbursement, pushing providers to alter the way they bill for care. Instead of healthcare providers being paid by the number of visits and tests they order (fee for service), they would be paid based on their delivery of quality healthcare (value based healthcare).

The current fee for service (FFS), or volume based reimbursement model has met with a lot of criticism over the idea that physicians may be over-treating patients as a means of generating additional income or to counteract shrinking reimbursements. In the minds of many physicians who need to sustain enough revenue in their private practice to merely stay afloat this can truly create a financial and ethical dilemma - the need to see a manageable number of patients without inadvertently over-treating them.

As the emphasis of health care shifts to improving quality and decreasing the cost of care, these are just few of the significant issues we should take note of:

  1. Tracking multiple reimbursement systems: A great challenge in such an arrangement is performance because it involves keeping track of two very different payment systems at the same time. Medicare continues to reimburse health systems on a fee for service basis and at year-end, shared savings bonuses are computed. Each provider is benchmarked by Medicare against the rate of increase for the overall FFS population. In order to successfully track shared savings reimbursements that come at the end of the year, health systems are expected to be highly sophisticated in their accounting capabilities compared to others. Accounting for all payers and all patients in the same way simply will not work out. Records need to show every service each patient received, along with the cost.
  2. Tracking a greater range of quality measures: Most value-based incentives and penalties rely on quality measures. Over the years, providers have been submitting quality measures for top programs like Meaningful Use (MU) and Physician Quality Reporting System (PQRS). However, the idea of using these measures to calculate incentives and penalties is still relatively new for many physicians. In value based healthcare, providers are expected to prove that they are complying with quality standards and are helping patients in cutting costs, which may require high-tech analytics. It would be very discouraging for a provider to realize that their reimbursement is going to be poor when it is too late to do anything to rectify it. Providers need to know their performance within the first three months so they may improve their performance before the end of the year. For this to be possible, they need to have the ability to continuously measure performance through software provided by a healthcare practice management company, like Health Prime International. If they are not on point to receive an incentive (or avoid a penalty), they will be given precise instructions on how they can remedy the situation. It might sound easy to handle this level of performance analysis for a single patient population, but imagine how quickly the number of measures a health system must track is increasing.
  3. Difficulty being autonomous and sustaining a small private practice: It may be more difficult to run a small private practice in a value-based system due to increased reporting and documentation requirements. Some physicians may be forced out of private practice or incentivized to join with hospitals, health systems, or larger practices because of an inability to generate sufficient income due to lowered reimbursements.
  4. Making internal adjustments as revenue initially decreases: Switching from FFS to value based reimbursement will take quite some time. Bear in mind that this transition may initially have a downside, as utilization will have to be reduced in order to meet value based goals, reducing overall procedure volume and revenue.

While the move from a volume based to a value based reimbursement model is considered to be a step up in the evolution of health care, the more viable solution may be to come up with a hybrid reimbursement model. A value based shared shavings model that includes some elements of fee for service would incentivize the provider to give the exact care while saving money at the same time. Time will tell which model work best. What I can surely tell you right now is that Health Prime International has the knowledge and a unique set of tools to help you remain strong in your practice. Please contact us if we can help you with any of these services:

Revenue Cycle Management
Care Management Services
Electronic Health Records
Practice Quality Assurance
Medical Transcription
Patient Communication
Practice Management Consultation
Remote Electronic Charge Capture
Healthcare Marketing

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