Certain shifts in business strategy seem so shockingly obvious in retrospect that you have to wonder why they weren’t common practice all along.
Take the notion of “value-based” healthcare. It’s a form of reimbursement to healthcare providers that’s tied to the quality of care and patient outcomes. In other words, it rewards providers for efficiency and effectiveness.
Contrast that with the old healthcare model of fee for service — essentially, setting the level of reimbursement in line with the amount of services delivered. Never mind how effective (or ineffective) they might have been.
Proponents of value-based healthcare tout numerous benefits (beyond the obvious one of focusing on the well-being of the patient). They point to cost savings arising from strategies geared toward prevention and wellness, rather than the treatment of chronic diseases once they appear.
According to one national research study, commissioned by Change Healthcare in conjunction with ORC International, payers engaged in value-based healthcare report medical cost savings averaging 5.6 percent. At the same time, they’ve seen marked improvements in the quality of care and patient engagement.
For all its ungainly size and bureaucracy, the system has been quick to catch on. Pure fee-for-service already accounts for just 37.2 percent of reimbursements, and is expected to drop below 26 percent by 2021.
The soaring cost of healthcare is the most obvious factor driving the value-based approach. Another is the consolidation of providers, particularly the formation by hospitals of group purchasing organizations, whose goal is to bring down the cost of supplies while preserving or even boosting the quality of care.
Then there’s the basic motivation of individuals who enter the healthcare field. “Providers, physicians and nurses want to do the right thing,” says Jim Schafer, population health strategist and practice administrator with Hatfield Medical Group, an Arizona-based primary care provider.
Of course, the mere desire to adopt a new approach to care doesn’t ensure success. For one thing, there’s the question of what constitutes a desired outcome arising from a given patient treatment. Depending on differences in age and geography, one could choose from well over 300 metrics, Schafer notes.
One good resource is the five-star quality rating system devised by the Centers for Medicare and Medicaid Services (CMS). Using that guide, payers can tie reimbursements to the meeting of certain quality metrics set by the National Committee on Quality Assurance. While CMS’s system was created to assess the level of care at nursing homes, it can also be deployed to measure outcomes from such procedures as screening for breast cancer, colorectal cancer and diabetes.
In the process, Schafer says, patients can avoid unnecessary invasive surgeries and consequent exposure to infections and other medical complications.
So how is value-based healthcare working in the real world? Schafer says Hatfield has seen significant success over the past two years. Its quality rating for procedures such as retinal eye exams has climbed from one to five stars over that period. Early detection helps to avert blindness caused by advanced diabetes.
To make the right calls on treatment, healthcare providers must have access to data. That means sharing information from disparate sources, then aggregating it to enable the correct decision at the point of care. It’s a challenge shared by supply chains in every industry, although not all suppliers face the same consequences from failure.
With the right tools at hand, providers can realize immediate benefits. If detected early enough, colorectal cancer has a survival rate of 95 percent, Schafer notes. Additionally, a focus on outcomes can lead to greater use of generic medication, fewer out-of-network referrals, and less duplication of services.
While value-based healthcare can’t replace emergency care in all cases, it can greatly reduce dependency on it. Each visit to the emergency room can cost $20,000 or more; that’s hardly a viable option for patients unable to see their doctors in a timely fashion. The value-based approach serves as an incentive to doctors to make room for more patients and reduce the cost of care, Schafer says.
For all the benefits that value-based healthcare offers, it’s has a ways to go before achieving full acceptance. Schafer puts the current rate of adoption at 10-20 percent.
“There’s been a lot of resistance,” he says. Progress began to accelerate in 2015, with passage of the Medicare Access and CHIP Reauthorization Act. Addressing the payment system for doctors treating Medicare patients, it mandated that CMS begin decreasing the per-capita cost of care. Beginning in 2020, CMS will reduce payments to providers deemed to be insufficiently engaged in providing quality care.
Expect value-based healthcare to catch on further as providers change their view of just who the “customer” is. In the past, that was likely to be the hospital, clinic or physician making use of supplies. Now, increasingly, it’s the actual patient, with a greater number of products bypassing hospitals and clinics and going straight to homes.
“Everything is consumer-driven,” says Schafer. “You’re going to have better outcomes if patients can heal in their own homes.”
In any event, the case for value-based healthcare, and the supply-chain transformation needed to achieve it, is too compelling to ignore. “The path to value is here,” says Schafer, “and it’s not going away.”