Category Archives: Value Chain

Value-based care isn’t yielding much “value.”

Posted on by • Posted in Accountable Care Organization (ACO), Financial Incentives, Health Policy, High Drug Prices, High Premiums, High Prices, Ill-Defined Goals, Quality Measures, Value Chain, Value Creation, Value-Based Healthcare • Leave a comment

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Despite the hype, accountable care organizations (ACOs) and other Medicare-driven payment reform programs intended to improve quality and lower healthcare spending haven’t bent the cost curve to the extent many had hoped.

A recent and provocative opinion piece in STAT News, from health policy researcher Kip Sullivan and two single-payer healthcare advocates, calls for pressing pause on value-based payment experimentation. The authors argue that current attempts to pay for value have ill-defined goals and hard-to-measure quality metrics that incentivize reducing care and upcoding, rather than improving outcomes. 

The Gist: We agree with the authors that current value-based care experiments have been disappointing.

The intention is good, but the execution has been bogged down by entrenched industry dynamics and slow-to-move incumbents. One fair criticism: ACOs and other “total cost management” reforms largely focus on the wrong problem. They address utilization, rather than excessive price. 

But we’re having a price problem in the US, not a utilization problem. Europeans, for example, have more physician visits each year than Americans, yet spend less per-person on healthcare. It’s our high prices—for everything from physician visits to hospital stays to prescription drugs—that drive high healthcare spending. 

The root cause: our third-party payer structure actively discourages real efforts to lower price—every player in the value chain, including providers, brokers, and insurers, does better economically as prices increase. That’s why price control measures like reference pricing or price caps have been nonstarters among industry participants. 

Recent reforms that increase price transparency, while not the entire solution, at least shine a light on the real challenges our healthcare system faces.

Payer contracts, physician pay still anchored in fee-for-service

Posted on by • Posted in Fee for Service Reimbursement, Healthcare Reform, Payment Models, Payor Contracting, Performance Metrics, Performance-Based Incentives, Physician, Physician Compensation, Quality Incentives, Quality Measures, Quality Reporting, Risk-Based Compensation, Value Chain, Value Creation, Value-Based Contracting, Value-Based Healthcare • Leave a comment
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The healthcare industry has made some strides in the “journey to value” across the last decade, but in reality, most health systems and physician groups are still very much entrenched in fee-for-service incentives.

While many health plans report that significant portions of their contract dollars are tied to cost and quality performance, what plans refer to as “value” isn’t necessarily “risk-based.” 

The left-hand side of the graphic below shows that, although a majority of payer contracts now include some link to quality or cost, over two-thirds of those lack any real downside risk for providers. 

Data on the right show a similar parallel in physician compensation. While the majority of physician groups have some quality incentives in their compensation models, less than a tenth of individual physician compensation is actually tied to quality performance. 

Though myriad stakeholders, from the federal government to individual health systems and physician groups, have collectively invested billions of dollars in migrating to value-based payment over the last decade, we are still far from seeing true, performance-based incentives translate into transformation up and down the healthcare value chain.