Taking a Closer Look at Value Based Reimbursements

Value Based Reimbursements (VBR) are health care industry buzzwords used to define new payment models to care for patients in a cost effective, high quality, and accessible manner. These new models are rapidly changing how care is provided, from volume based payment to value based ones.

The transition to VBR has significant implications on how care is delivered, how providers are organized, how diseases are treated, and whether, based on the changing demographic in the U.S., we can afford health care.

Can consumers keep up with the speed at which these changes are taking place? If they can’t, then what does it mean for the overall success of these payment models?

Some have called VBR “fee for service, with footnotes.” In most payment and delivery models, the underlying payments are made using existing payment codes, such as for physicians who are paid under common procedure terminology for services and procedures performed—either in a hospital setting, or outside of one, such as in a physician’s office.

Additionally, based on diagnoses and procedures performed in a hospital, the service or procedure is grouped into diagnosis related groups (DRGs) for inpatient services, or ambulatory payment classifications (APCs).

What VBR brings to the table is an overlay of existing coding and payment mechanisms, with a capped payment or incentive to deliver care more cost efficiently and in a more coordinated manner.

The types of VBRs currently in vogue and growing in popularity include bundled payments, a derivative of DRGs, but with a longer period of time for care and payment, both in and out of the hospital. These offer better care coordination, especially outside of a hospital setting.

Also popular are capitation, offering a fixed amount for care of an individual for a period of time, and risk shared arrangements, when care is provided for a lower amount than projected and the savings are shared between parties.

Medicare is driving VBR due to the fact that health care costs have risen much faster over time than the consumer price index for most other services, with health care costs approaching 18-20% of the U.S. gross domestic product.

Medicare is being asked by politicians and the public to slow down its spending rate. Perhaps what is most interesting about Medicare’s initiatives is that empirical evidence of whether it actually works in reducing spending is missing, or isn’t demonstrative that it does work.

It is ironic that Medicare requires randomized controlled trials for approving new technologies/services when approving them for payment, yet, with VBR payment initiatives around payment, Medicare is moving rapidly forward with minimal to no evidence that any of the VBRs actually work in reducing costs or improving quality.

It seems to be ready, fire, aim rather than ready, aim, fire. Is this what we have come to regarding how health care should be provided?

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