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Value Based Payments. What Does It Mean?

Value Based Payments. What Does It Mean?

The latest hot topic in healthcare seems to be “value-based” payments. What this mean? Does it mean the current/historical payment methodology isn’t value based? If that’s really the case, I’m not the one to dissect all the issues that might entail. I’ve read some accounts that allude to the fact that healthcare is shifting from being volume driven to value driven? Again, I hear the words, but wonder what do they really mean? I can’t believe a profession would over treat just to drive up volume? That would suggest an integrity issue of an entire profession of major proportions. Many years ago the healthcare industry briefly experimented with a payment methodology called capitation. This effectively gave the “risk” of caring for patients to the providers and effectively took it away from the insurers. For a variety of reasons this ended up being a relatively short-lived experiment.

I noticed the other day that McDonalds has “Extra Value Meals.” So I wondered if that’s what healthcare is talking about with value-based payments? Then I noticed that Wendy’s and Burger King also have “value menus.” So I wondered is healthcare going to become more like fast food? This then made me think in the food industry the customer makes the selections and determines what “value” items they want. So in the value-based payment world of healthcare who’s going to be assigned the decision making authority? Some are going to argue the patient isn’t knowledgeable enough to make the decision. Others would argue it doesn’t seem logical to ask the providers to make these decision since they’ve been making them up to this point. So is the default position, the insurers or the government?

In some of the articles I’ve read there seems to be an assumption that less care equates to higher value? This doesn’t seem to fit the commercial model that’s designed for a consumer to get a better price one needs to buy larger quantities. (For those not familiar with the concept, I suggest a visit to Sam’s Club or Costco.) On January 26, 2015, Sylvia Burwell, Health and Human Services Secretary, held a press conference announcing the government’s plans to “shift paying providers based on quality rather than on the quantity of care they give patients.” Wasn’t the shift from cost based reimbursement to DRGs supposed to do just that? It does seem a bit ironic the organization responsible for the recent Veterans Administration debacle and the IRS challenges is now going to determine the quality of healthcare for everyone else.

I’m a bit of a cynic. I don’t think the discussion about value based payments has much to do with quality. I think it has to do with economics. Get ready for capitation 2.0.