Value-based payment remains a dream.
Today’s fee-for-service payment system, which pays healthcare providers on a per-service basis, is widely blamed for rising healthcare costs as well as physician burnout. But are the so-called value-based payment systems any better? Not the way they’re set up today, according to many experts.
While policymakers tinker with solutions, your physician practice customers are left with one foot in the fee-for-service (FFS) world and the other in some type of value-based payment (VBP) plan, each with its own set of objectives, measurement tools and payment methodologies. It’s tricky for just about everybody.
Though much lip service is paid to value-based payment, a 2022 survey of primary care physicians by The Commonwealth Fund showed that more primary care practitioners still receive more FFS payments than VBP. Seventy-one percent reported that their practice was receiving some FFS payments, while fewer than half (46%) reported receiving any VBP.
Take a step back
Is fee-for-service as bad as many policy experts think?
“It’s not a great way to set up a payment system,” says Jeffrey Davis, health policy director for McDermott+Consulting. One reason FFS gets blamed for overutilization is the lack of transparency in pricing, he says. “You can shop for the best price for a cup of coffee, but it’s difficult to find the best price for a procedure. Instead, people routinely go to doctors who are in their network or whom they’ve seen before. Fee-for-service with no price transparency becomes fee-for-service gone wild.”
Fee-for-service encourages providers to deliver more services and see more patients, say Corinne Lewis, program officer, and Celli Horstman, senior research associate, Delivery System Reform, The Commonwealth Fund. “It can be like working on an assembly line, with less time – and less attention – for each patient. It is not only wasteful but leads to less optimal results for patients because it prevents providers from addressing their comprehensive needs.”
There is another problem with FFS, according to the authors of a 2021 report from the National Academies of Medicine: It discourages other team members who may not be able to bill for their services from providing care. It also disincentivizes the primary care team from focusing on non-billable services, outside of a brief office visit, which may have beneficial effects, such as identifying and educating people with chronic diseases.
How about value-based payment?
Millions of patients benefit from value-based care, including more than 30 million who receive care from accountable care organizations, according to the National Survey of ACOs from The Dartmouth Institute. (Accountable care organizations are groups of doctors, hospitals, and other healthcare providers who come together voluntarily to give coordinated care to the Medicare patients they serve.) According to the survey, value-based care models have been shown to mitigate growth in healthcare costs. ACOs have generated more than $17 billion in gross savings.
But VBP has its share of skeptics.
“A decade of empirical evidence on the effects of pay-for-performance is not encouraging. Less charitably, it is damning,” writes J. Michael McWilliams, M.D., PhD, from Harvard Medical School in a December 2022 editorial in JAMA Network. “There have been some scattered gains, but studies of major programs have consistently found little to no improvement – even on targeted measures – and revealed plenty of cause for concern.
“Pay-for-performance incentives at the organization level routinely devolve into score-boosting tasks that distract and demoralize clinicians, and organizations can leverage scale to engage in more sophisticated gaming of the system. At some point, the slogans overtook the science, derailing a national conversation about quality improvement that will need to get back on track for progress to be made.”
How about MIPS?
The Merit-based Incentive Payment System, or MIPS, was created under the Medicare Access and CHIP Reauthorization Act (MACRA) and is the main quality performance program for physicians and other clinicians in Medicare. It is also the program with the most strident detractors. In fact, in 2018, the Medicare Payment Advisory Council, or MedPAC – an independent agency that advises the U.S. Congress on issues affecting the Medicare program – went so far as to recommend that Congress scrap MIPS and find an alternative approach.
MIPS includes four performance categories: Quality, Promoting Interoperability, Improvement Activities (e.g., enhanced care processes) and Cost. Performance on these four categories (which are weighted) rolls up into an overall score of 100 points. Depending on how they score, clinicians receive an upward, downward or neutral payment adjustment two years after the reporting period.
Though a supporter in theory of value-based payment, the American Medical Association has criticized MIPS, saying it is “divorced from achieving meaningful clinical outcomes.” AMA believes the program is administratively burdensome, exacerbates health inequities and hurts smaller, independent practices, which may lack the resources to invest in the move to value-based care.
According to Corinne Lewis and Celli Horstman at The Commonwealth Fund, “MACRA was a well-intentioned effort to push providers towards value-based care, but in reality, it had many flaws in its design and as a result fell short of its potential. It has been incredibly complex, confusing, and burdensome for providers to navigate given the multiple pathways, changing requirements and onerous reporting requirements. And the incentives in MACRA for providers to improve quality and to move providers to alternative-payment models were weak and poorly designed.”
Jeffrey Davis points to shortcomings in the Quality and Cost categories of MIPS to demonstrate why MIPS needs improving. For example, the program allows providers to select a handful of quality measures on which their points for quality will be calculated. Not surprisingly, most practices select those measures in which they perform best to maximize their Medicare payments and avoid penalties, even if those measures may not necessarily be associated with the greatest quality improvements in their practice.
Davis also questions the Cost category. “Practices don’t know what cost measures they will be assigned to, as CMS uses claims data on the back end. It’s a black box.” CMS is trying to make improvements in this category by creating more episode-based cost measures, which are targeted to individual practices’ specialties.
“Add to all this the fact that MIPS is for traditional Medicare only,” he says. “Today, more people are in a Medicare Advantage plan than regular Medicare, so you’re only talking about a certain population.” On top of that, each Medicare Advantage plan may have its own value-based payment program in place. Then add commercial players to the mix, each with its own quality program.
“We need to work toward a global payment system, with aligned incentives,” he says. That means getting all payers – commercial, Medicare, Medicare Advantage, Medicaid and others – into one system, all applying the same incentives in their quality programs. “In order to move away from fee-for-service, everybody has to be on board, there has to be a unified approach.”
So what’s next?
Amidst the fits and starts of today’s value-based payment programs, there are some silver linings.
“The good news is that MACRA produced a lot of lessons around the challenges to designing and implementing value-based care, which can be applied going forward,” say Lewis and Horstman. “First and foremost, we need to make VBP models less complex and less difficult for clinicians to navigate, for instance by streamlining the quality measures providers are held accountable for and ensuring alignment across payers.
“We’ve also learned that for VBP to work and to engage more providers, it’s important to offer upfront financial support, particularly for smaller and independent practices, to help them get started and be successful. We also have to make sure these models advance health equity and tackle disparities by being intentional in their design, engaging patients and carefully evaluating the impact of models for underserved patients.”
A new program from CMS – MIPS value pathways, or MVPs – could mark a few steps toward greater simplicity, says Davis. MVPs offer a much more limited set of measures that are intended to be more meaningful than those in traditional MIPS, which offered “too many choices, too many options, too many variations year to year. However, MVPs still have to abide by the overarching MIPS requirements, so even they aren’t a perfect solution.”
Are hybrids the end game?
All payment methods have inherent incentives, both good and bad, that cannot be eliminated even with optimal design, concluded the authors of the 2021 report from the National Academies of Medicine. “Their perverse effects can be attenuated to some extent through design, but even the most sophisticated mechanisms merely diminish the incentives for overtreatment, undertreatment, and other undesirable behaviors.
Blending the best attributes of fee-for-service and capitation may be the best approach, they say. (Capitation refers to payment models that provide a fixed amount of money per patient per unit of time paid in advance to the physician for the delivery of healthcare services.)
According to Lewis and Horstman, “all signs point to value-based care being the future of health care payment, in part because it has to be. That said, experts increasingly agree that fee-for-service should continue to apply for those services that we want to incentivize greater volume of – those that are clinically essential but often underprovided, like immunizations. ‘Hybrid’ approaches that mix fee-for-service with value-based payment will also likely be important to help smooth the transition to full-fledged value-based payment.”