Value-based care: Payment models and provider perspectives

With a move toward value-based care, understanding payment mechanisms and their impact on providers is particularly important for adherence.
Value-based care

The drivers behind the movement towards a medical payment model contingent on the value of care – as defined by the quality and outcomes of that care – are chiefly important in the healthcare sector. But how the payment models and mechanisms for value-based care actually work is also critical to the overall success of value-based care (VBC) initiatives. To understand these programs requires a discussion about three topics:

  1. The adoption of VBC models, with a comparison between plans administered by the Centers for Medicare & Medicaid (CMS) and commercial Medicare Advantage (MA) plans
  2. The objectives and proposed solutions of the CMS Innovation Center (CMMI) strategy refresh
  3. How Accountable Care Organizations (ACOs) and other stakeholders can be successful in achieving VBC goals

How widespread is value-based care?

In 2019 and 2020, about 40% of total healthcare payments to providers and healthcare organizations in the US were made through a value-based care arrangement, according to the Health Care Payment Learning & Action Network. These payers include both commercial plans and plans through CMS.

Commercial plans can be employer or employee based; contracted to CMS or states to serve Medicaid and Medicare beneficiaries; or provide coverage to enrollees in Affordable Care Act (ACA) Marketplace plans. CMS directly administers VBC for traditional Medicare beneficiaries; dually eligible Medicaid beneficiaries; and some MA beneficiaries enrolled in multi-payer programs. CMS-administered VBC plans are a mix of established models and a portfolio of innovation models managed by CMMI.

Value-based care adoption: Comparing MA to CMS VBC

Overall, more beneficiaries receive Medicare coverage from commercial MA plans than CMS-administered Medicare plans. And MA plans surpass traditional CMS-administered plans for provider and organizational engagement in VBC.

Percent of payer and payment made in value-based care programs for each payer20192020
Medicare Advantage: MA value-based care50%58%
28.6%29.3%
Traditional Medicare: CMS value-based care41.9%42.8%
20.2%24.2%

VBC is not the dominant payment structure for healthcare. Fee-for-service remains in that role. However, the differences between commercial MA plans and CMS-administered plans in enrollee market share – as well as greater engagement in VBC for MA plans – indicate that commercial MA plans may be managing VBC programs more effectively.

Without delving deeply into the contract terms between commercial plans; providers; and healthcare organizations, we know that beneficiary enrollment in VBC is associated with availability of resources that can support such care. This includes networks of clinicians and healthcare organizations suited to becoming ACOs, along with the physical location of those networks. Often, networks of resources needed to support Alternative Payment Models (APMs) are not adequate in rural areas.

Another consideration is the impact of racial, ethnic, and socioeconomic disparities on Medicare beneficiary populations, with MA plan enrollees often in a higher socioeconomic status (SES) than CMS administered Medicare beneficiaries. A June 2021 JAMA Health Forum article found an association between MA plan star ratings and disparities in care for racial and ethnic minorities and enrollees with lower income and educational attainment. The study concluded that enrollees with lower SES reported poor performance on 22 measures of quality and satisfaction.

CMS Innovation Center (CMMI) strategy refresh

With most Medicare beneficiaries enrolled in MA and more of those enrollees participating in value-based care than CMS VBC, CMS began to rethink their approach. In October 2021, CMMI released the strategy refresh, a plan to further increase engagement in VBC. The primary focus of the plan is on addressing inequities that lead to poor health outcomes through high-quality, person-centered affordable care. CMMI identified five objectives for the redesign of current models and for development of new models:

  1. Increase the number of people in a care relationship with accountability for quality and total cost of care
  2. Embed health equity in every aspect of CMMI models and increase focus on underserved populations
  3. Leverage a range of supports that enable integrated, person-centered care – such as actionable, practice-specific data; technology; dissemination of best practices; peer-to-peer learning collaboratives; and payment flexibilities
  4. Pursue strategies to address healthcare prices and affordability while reducing unnecessary or duplicative care
  5. Align priorities and policies across CMS and aggressively engage payers, purchasers, providers, states, and beneficiaries to improve quality; achieve equitable outcomes; and reduce health care costs

To achieve these objectives by 2030, CMS intends to have the majority of beneficiaries in a care relationship with accountability for quality and total cost of care. Other initiatives include:

  • Measuring patient outcomes as a component of clinician performance
  • Improving the affordability of high-value care for beneficiaries by lowering out of pocket costs and increasing access
  • Accelerating data sharing between providers in VBC arrangements and providing access to resource management tools such as historic beneficiary claims data
  • Increasing the number of multi-payer models to better integrate Medicaid dual-eligibles (those who qualify for both Medicare and Medicaid benefits) who are also enrolled in MA

Also notable is CMMI’s objective to advance health equity by embedding it in every aspect of CMS’ VBC programs. CMMI’s intention is to have providers and healthcare organizations collect demographic information and data on social determinants of health (SDOH) and use that information in both model design and payment structure. New models, such as ACO REACH are designed to serve patients from underserved populations and support safety net providers and community health centers. Providers will be incentivized to reduce health disparities through performance monitoring and quality measurement inclusive of screening for SDOH.

Increasing provider engagement in VBC

While overall participation in VBC increased slightly between 2019 and 2020, participation in CMS’ largest APM, the Medicare Shared Savings Program (MSSP), declined from 561 ACOs in 2018 to 477 in 2021. CMS’ 2022 redesign of the Global and Professional Direct Contracting Model (GPDC), introduced in 2019, and decision to end the Geographic Direct Contracting Model (GEO) are indicative of wariness on the part of providers and healthcare organizations to participate in VBC. Participants felt that both the MSSP and the GPDC pushed them into higher risk arrangements too soon; that the programs were not ready to operate with partial or full capitation payments; and that beneficiary attribution for financial and quality performance was poorly managed.

Core to these concerns is the need to better equip providers and healthcare organizations to support VBC initiatives. While financial levers such as provider compensation; risk adjustment and appropriate beneficiary assignment; and gradual transition to higher-risk arrangements are helpful to providers and healthcare organizations, financial levers must be combined with other initiatives to ensure success in value-based care.

Probably the most controversial way to ensure engagement in VBC is to simply stop allowing FFS payment arrangements when value-based care is accessible and when patients have a choice. However, many providers will not accept Medicare unless payment is made via fee-for-service, meaning that eliminating the program could ultimately be harmful to beneficiaries. Instead, focusing on care models that incorporate better financial levers; support both chronic disease treatment and primary care needs; encourage patient education and choice; and facilitate care coordination, are more likely to engage providers.

Yet, the real key to provider success in VBC, combined with financial levers and model design, is data. Providers and healthcare organizations need access to high-quality, complete, and precise data about the populations they care for. This data must be interoperable and follow the patient throughout their healthcare journey, informing a complete picture of health concerns, social needs, and resource use. Providers and healthcare organizations need access to tools to manipulate this data, to manage care, and to inform care coordination. When data can be accessed and used to support VBC with ease, providers will be successful, and patients will benefit.

To learn more about the current state of value-based care initiatives, be sure to read parts one and two in this blog series.

Ideas are meant for sharing.

Sign up today and have Ideas delivered straight to your inbox.

Related Ideas