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Value-based payment models don't cut costs at market level, HFMA finds

There was no link found between the penetration of value-based payment models and growth in the total cost of care for Medicare or commercial payers.

Jeff Lagasse, Associate Editor

Value-based payment models don't deliver lower costs of care at the market level, nor do they improve quality outcomes, largely due to a lack of downside risk and a misalignment of incentives, according to a new study from the Healthcare Financial Management Association.

The study found no statistically significant correlation between the penetration of value-based payment, or VBP, models and growth in the total cost of care for Medicare or commercial payers in over 900 markets throughout the U.S. 

Researchers attributed this finding to the limited prevalence of VBP models in many markets, the lack of strong financial incentives for managing the total cost of care, healthcare organizations' preference for an incremental approach to risk, and employers' reluctance to change benefit design, among other factors.

A lot of healthcare providers began to change how they cared for patients during the years of the study, which spanned 2012 to 2015, the authors said, but there was low penetration of VBPs over that time -- not enough to drive market-level changes in cost growth for commercial payers or for Medicare.

There were also some key findings regarding the impact of industry consolidation on Medicare's total cost of care. Markets that were less consolidated, or less aligned vertically, tended to have higher costs. Conversely, costs were lower in markets with well-organized provider networks.

Consolidation in lower-cost markets, meanwhile, had left between two and four health systems with good geographic coverage as competitors within the market. Physicians in lower-cost markets were typically employed by or closely aligned with the health systems, and the market usually included at least one integrated delivery system with a health plan, a hospital and clinician capabilities.

Those findings suggest that the type of competition in a market may be more important than the volume of competition.

The study also sought to identify other market factors -- including disease prevalence, socioeconomic factors, demographics and quality -- that may influence growth in the total cost of care for Medicare. Overall, baseline cost variation was more readily explained than cost growth. The 23 factors identified by researchers explained 82 percent of baseline cost variation, but just 27 percent of variation in cost growth. 

Plus, researchers found that employers in most markets were reluctant to change benefit design or choose health plans that might be perceived as limiting their employees' choice of provider. Some were skeptical about the merits of population-based VBP models.

Most healthcare organization leaders who were interviewed as part of the study agree that changes to payment and care delivery models are inevitable, particularly in Medicare and Medicaid programs, and that these changes will likely include value-based components. It remains unclear when and how far different markets will shift.

The authors recommended that both government and commercial payers move toward population-based models that represent sufficient revenue to incentivize providers to actively manage the total cost of care, while acknowledging that other models may turn out to be more appropriate in some circumstances.

Twitter: @SusanJMorse
Email the writer: susan.morse@himssmedia.com

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