The Shift to Value-Based Payments in Anesthesia and Healthcare

By November 9, 2015Health

Healthcare providers and hospitals are in the midst of a significant change to the way they do business in the United States.  The traditional model of fee-for-service payments, under which health care providers are paid for each service rendered (lab test, office visit, procedures), is quickly being replaced with a new approach.  Under what is broadly termed the “value-based payment” model, payments to healthcare providers are tied to patient outcome, rather than simply on volume of services provided. While individual programs may vary in their details, value-based payments incentivize providers to deliver higher quality care and outcomes for their patients by tying payment to performance.

The ultimate goal of any value-based payment program is to reduce wasted health care dollars while at the same time improving patient health.  The U.S. has for some time, spent a greater percentage of its wealth on healthcare than any other industrialized nation; in 2012, nearly 17% of GDP (gross domestic product) in the US was spent on healthcare. Yet, despite spending significant resources on healthcare, the U.S. does not have the healthiest citizens. In one study comparing the U.S. to 10 other industrialized countries, the U.S. was ranked a dismal last place.  In fact, it is estimated that for 2015, the life expectancy in the U.S. will again be below the average for industrialized nations. Modifying the way healthcare is delivered and paid for is one approach being used to improve patient outcome and health in the U.S.

Both private and public health payers are embracing the idea of value driven reimbursement.  The Affordable Care Act (ACA) authorizes health insurance programs to utilize a value-based insurance design. Value-based insurance plans are designed to encourage insured beneficiaries to purchase lower-cost coverage and services, while encouraging providers to stop using wasteful services. More private payers are moving to value-based reimbursement models such as pay-for-performance (P4P) programs, under which providers are rewarded for meeting pre-established measures for quality and efficiency.

Other value-based reimbursement models include the use of Accountable Care Organizations (ACOs) and bundled payments, which are single payments that covers services delivered by two or more providers during an episode of care or during a specified time period. Such “episode of care” payment models are becoming increasingly common. These models require communication and cooperation across disciplines in order to provide quality care efficiently. Anesthesia providers are familiar with working with other disciplines and managing a spectrum of diseases in different settings. As a result, these providers can be particularly useful members of healthcare teams paid under an episode of care payment method and can help increase the value to both providers and patients.

In addition, both federal and state based payment systems are using value-based theories in constructing reimbursement schemes.  The Centers for Medicaid and Medicare Services (CMS) is moving quickly towards a value-based model. One method is known as the “Value-Based Payment Modified Program”. This program adjusts payments under the Medicare Physician Fee Schedule (MPFS) to a physician or group of physicians based on quality and cost of care provided. Adjustments can be positive, negative or neutral; thus, providers who provide high quality care at a lower cost can receive a positive payment adjustment while those providing low quality care at a high cost receive a negative adjustment. Determination of quality and cost is made through standardizing performance measures and creating benchmarks for comparison.

Physicians who receive payments under Medicare plans should be aware of another important value-based model of reimbursement.  Under the ACA, “eligible” healthcare providers (those who provide services under the Medicare Physician Fee Schedule) are incentivized to participate in a CMS qualified Physician Quality Reporting System (PQRS). This system encourages elig