Summary
Summary Module 6: Value-based payment reform
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Summary of the lecture and the corresponding mandatory literature.
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Video michael porterThe fundamental goal for any healthcare organization is value for the patient.
Lecture 6A
Great potential to enhance value:
● Deficiencies and variation in quality of care exist
● The delivery system is fragmented
● Incentives for prevention are lacking
● The level of spending growth on healthcare is unsustainable
● The interest in value-based healthcare is growing rapidly
Why focusing on provider payment reform in the quest to VBHC?
1. Providers respond to financial incentives and can influence demand
2. Predominant provider payment methods contribute to deficiencies
3. New opportunities for linking payment to value
→ Alternative payment models are developed to steer from volume to value.
The central focus of provider payment reform must be on increasing value, but what exactly
is value?
Value as a multidimensional concept → 4 key dimensions
1. High quality care → clinical quality and patient experiences
2. Well-coordinated care → providers from different disciplines communicate
and cooperate well in order to realise integrated care across the
continuum of care.
3. Prevention → (detoriations of) health problems are prevented
4. Cost-conscious behaviour → scarce resources are efficiently used
Value based payment:
● Pay-for-performance
● Bundled payment
● Theoretically optimal VBP design
Video Advisory Board
ACO → group of healthcare providers who are collectively responsible for the
care delivered for a patiënt. The ACO that delivers most of the care to one
patiënt is responsible for the care for that patiënt, also if it is treated by a
physician part of another ACO.
The ACO can deserve a bonus based on the costs and quality of the care delivered to the
patiënt.
When an ACO signs up for the Medicare Shared Savings program, medicare looks for the
historical costs for patients treated by the ACO, and then sets a savings target based on that
cost. Each year medicare will look at all their data and adjust that target based on national
trends. The idea is to get the ACO to focus on controlling cost growth over time.
, At the end of the year, Medicare looks at how much it spent on patients assigned to the ACO
and compares the actual spending against the target. If the ACO was above the target there
will be no bonus, and if they missed the target by too much, medicare could demand they
give back some of the money they’d already paid out. But if the ACO meets or exceeds the
target, then they qualify for a bonus.
To determine the size of the bonus, Medicare looks at the quality of the care the ACO
delivered. The combination of savings and quality ultimately determines if this bonus is big or
small.
Video Pay-for-performance
Pay-for-performance:
● Explicit financial incentives to score well on indicators.
● ‘Performance’ operationalized as good quality of care.
○ Reliance on process rather than outcomes.
● Typically applied as add-on to base payment
Limitations of pay for performance:
● Design and implementation complex
● Performance hard to measure
○ Unmeasured aspects may be neglected
■ Multitasking problem!
● Leaves incentives in base payments intact
Effectiveness of pay-for-performance is unproven. It may be associated with improved
processes of care, but consistently positive associations with improved health outcomes
have not been demonstrated in any setting.
Payment reform efforts have been shifting their focus to redesigning base
payments, while retaining strong properties of P4P. → Focus on incentives in
entire payment system.
Video Bundled payment
A group of providers receives a single payment for a bundle of care services related to a
certain condition or treatment. As a result, the performance risk is transferred to providers.
This stimulates providers to minimize costs and coordinate care well. It may also improve
quality of care by reducing overuse that could harm patients' health.
Payments may be aggregated along 2 dimensions:
● In time
● Across providers
Many design options:
● Payments mechanism
● Conditions/treatment
● Content of bundle
● P4P quality incentives
● Risk adjustment
Potential dangers:
● Increase in number of bundles
● Underuse of appropriate services
● Risk selection
● Upcoding and unbundling
● Compartmentalization
Lecture 6B
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