Value-Based Payment: Look Before You Leap

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Second in a series

The shift is on as healthcare providers are increasingly being incentivized to provide high-quality care at a lower cost.

Ultimately, the goal is delivery of healthcare that provides patients with:

– the best outcomes,
– from the most appropriate treatment, 
– by the right kind of provider, 
– at the right time, and
– in the most appropriate setting.

Under a value-based payment model, physicians are rewarded for good work — not just good workloads. Current value-based payment models include:

Bundled Payments — One payment is made for the entire range of services provided around a particular episode of care. Payment is typically paid to one entity (e.g., a hospital), which then pays the participating physicians from that bundle.

Shared Savings Arrangements — A physician is rewarded if patients have better-than-average quality/cost outcomes, and is penalized for excessive costs and poor outcomes.

Value-Based Payment Modifier — The Value Modifier provides for differential payment to a physician or group of physicians under the Medicare Physician Fee Schedule (PFS) based upon the quality of care furnished compared to the cost of care during a particular performance period. 

7 Things to Consider

As providers consider entering into value-based and/or risk-sharing arrangements, they will certainly need to focus on the details. In particular, physicians are well advised to evaluate these critical factors: 

  1. Risk — What is your financial risk exposure? Does the payment model offer protection by limiting your total risk exposure? Just as important, does the plan penalize you for factors outside of your control? 
  2. Reward — Does the contract include appropriate rewards for achievement of performance goals? Will you be given credit for quality achievements outside of stated performance goals?
  3. Distribution — How will bonuses from any shared savings be distributed? Are the shared savings distributed equitably between all of the stakeholders? Any agreement should spell out how allocations will be made to each provider (e.g., through utilization and outcome measurement).
  4. Performance Goals — Are performance goals set at reasonable levels — and can they be achieved within the current care setting? Just as important, will you have the ability to help establish the goals and measurement criteria?  Does the contract allow for innovation in care approaches?
  5. Measurement — Are required tools and processes already in place to accurately measure outcomes, identify at-risk patients and successfully report and monitor quality and cost data? How is that data communicated to the payer? 
  6. Providers — Shared savings and bundled payment arrangements typically cover the entire continuum of care — primary care, acute care and post-acute care services. Are the right providers in place for success? 
  7. Liability — Traditionally, physicians have been able to accept or refuse to treat a patient or a group of patients, as well as choose physicians or other healthcare professionals with which to collaborate. Is there any additional risk associated when participating with other organizations or physicians? Does the contract limit your ability to do what is right for the patient?

The Payment Train Has Left the Station

It is estimated that in the next 10 years, 50 percent of physician compensation will come from value-based care payment models. Physicians who  think through the issues and opportunities now will be better prepared for success in the value-based world. 

Value-based care is a complex issue requiring careful analysis of its potential impact on physician practices. Please look for our continuing blog articles on this topic.

SKR+CO Expert
Judy Kaltenbacher, CPA, Tax Partner
Judy has been in public accounting since 1985, with significant experience serving medical practices, real estate partnerships, S-Corporations, financial institutions, nonprofit organizations and small business clients.