Value-Based Payment to Overtake Fee-For-Service by 2020

Tony Berberabe, MPH @OncBiz_Wiz
Published: Tuesday, Jul 01, 2014

A new survey by McKesson Health Solutions and released at America’s Health Insurance Plan’s Institute 2014 conference examined the state of value-based reimbursement, and found that of the existing value-based models, payers and hospitals/health systems predict pay-for-performance (P4P) will experience the most growth – increasing from 10% today to 18% in 5 years for payers and from 9% to 21% for hospitals/health systems.

The survey, “The State of Value-Based Reimbursement and the Transition from Volume to Value in 2014,” reports that most payers and providers expect value-based reimbursement to overtake fee-for-service (FFS) by the year 2020. However, they face daunting complexity in integrating complex reimbursement models. Providers and clinicians report they have an urgent need for next-generation healthcare IT to successfully transition to value-based models.

Overall, the survey identified these major trends:
  • Rapid adoption of VBR. The reimbursement landscape is changing faster than many had anticipated, with payers and providers decidedly aligned on embracing payment with value measures. Remarkably, 90% of payers and 81% of providers are already using some mix of value-based reimbursement (VBR) combined with fee-for-service (FFS). Providers using mixed models expect FFS to decrease from about 56% today to 34% five years from now.
  • Collaborative regions, where one or two payers and provider stand out, are more aligned with VBR. Fragmented regions, where there are multiple payers and providers and no clear market leaders, are more aligned with FFS. Moreover, the larger the institution, the further along the continuum towards VBR it falls.
  • Existing healthcare IT systems are not aligned with VBR. Though both payers and providers predict that P4P will be a critical part of their reimbursement model, 15% of payers and 22% of providers characterize P4P as “very difficult” or “extremely difficult” to implement. They also rated episode of care/bundled payment and others (eg, shared savings) as very or extremely difficult. There are a lack of standards, analytical tools, and the need for better business IT infrastructure and systems that support these models—all while taking action to reduce administrative burdens and costs to remain financially sound.
  • Technology to catalyze clinician engagement will be crucial to VBR’s success. The largest proportion of payers and providers pointed to a lack of clinician buy-in and engagement with VBR as the number one challenge to its success (20% of payers and 17% of providers). This underscores a broader need within the industry for tools that enable clinician engagement with value-based models.
McKesson surveyed high-level executives from 114 payers and 350 hospitals/health systems about the VBR models they are using; where they are in the transition to value-based models; and how the financial impact of the models on their businesses.

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