Value-based reimbursement: A model that benefits patients, practices, and payers

Something’s happening in healthcare reimbursements. The change? A shift from traditional fee-for-service models to more nuanced value-based reimbursement models. 

The American Academy of Family Physicians (AAFP) came out with a value-based care survey in 2022 which found that 49% of practices that responded are participating in some form of value-based payment. But the data doesn’t stop there. Another 18% of practices that responded are developing the ability to move to this model. That’s a lot of healthcare providers switching up how they receive reimbursements.

The goal of this transition? To align healthcare provider incentives with patient outcomes and deliver high-quality, cost-effective care. Or at least, that’s the hope. Let’s explore the types of reimbursement models that currently exist, why the shift to value-based from volume-based is happening, and how to manage that shift in your healthcare practice.

Healthcare systems use different types of reimbursement models to compensate healthcare providers for the services they deliver to patients. 

The following are a few of the primary reimbursement models.

Fee-for-service is the most widely used payment model. The 2022 Commonwealth Fund International Health Policy Survey of Primary Care Physicians found that 71% of respondents were receiving FFS reimbursements. In this model, healthcare providers receive payment for each service or procedure they deliver to a patient. Payments are made based on the volume of services provided, encouraging more services and tests, which can potentially lead to increased healthcare costs for patients.

Capitation involves paying healthcare providers a fixed amount per patient for a specific period. It doesn’t matter what services they deliver; providers must offer all of the necessary services within that fixed payment. This model encourages efficiency in care delivery but risks rationing services.

Under bundled payment models, a single payment is made to cover all services related to a specific treatment or condition. This approach aims to streamline costs for a particular episode of care, encouraging collaboration among healthcare providers to deliver cost-effective and high-quality care.

Pay-for-performance models tie reimbursement to metrics or outcomes that a healthcare provider achieves. They receive financial incentives for meeting or exceeding performance measures related to patient outcomes, efficiency, or specific quality benchmarks.

Each reimbursement model has its advantages and disadvantages. Each model also affects how services are delivered because of how they motivate providers to provide care. 

Our main focus in this article is value-based reimbursement models — such as bundled payments and pay-for-performance — because of the massive shift in healthcare towards this model.

The value-based reimbursement model in healthcare focuses on the value and quality of care provided to patients rather than the quantity of services delivered. 

The idea is that value-based reimbursements encourage healthcare providers to deliver high-quality care that improves patient health outcomes — with the added bonus of controlling costs. It motivates providers to focus on preventive care, patient engagement, and delivering comprehensive care that manages chronic conditions.

Some key elements of value-based reimbursement include:

Value-based reimbursement places a huge emphasis on outcomes. Providers are rewarded for achieving positive health results, like improved patient health, reduced hospital readmissions, or better disease management. An example of this is a shared savings model. Providers receive a share of cost savings achieved by delivering high-quality care at a lower cost.

Value-based models often involve the measurement of specific quality metrics or performance indicators. Providers need to meet or exceed these metrics. This can include patient satisfaction scores, clinical quality measures, sticking to best practices, or cost reduction benchmarks. This really lets medical software with comprehensive data analytics like Tebra shine. Strong tools are integral to a value-based system because they’ll help practices track these metrics.

Value-based reimbursement includes risk-sharing arrangements between payers and providers. In a risk-sharing model, providers share financial risks if they fail to meet certain quality or cost targets. This is the epitome of accountability and efficiency in care delivery. Financials on the line are a big motivator for providers. 

Value-based encourages population health management. PHM includes the steps healthcare organizations take to improve the health outcomes of a specific group of individuals. It focuses on preventive care, health education, and proactive management of chronic diseases to improve overall health outcomes and reduce healthcare costs over the long term.

Value-based reimbursement models aim to line up the goals of the providers, patients, and payers. This shift away from fee-for-service models toward value-based care hopes to transform the delivery of healthcare, benefiting both patients and the healthcare system as a whole.

At the most basic level, the fundamental difference between value-based care and volume-based care — or fee-for-service — is their core objective. 

Volume-based care really is about quantity. The more patients a provider sees, the more money they make. This can potentially lead to unnecessary procedures or repeat visits to drive revenue. In fact, in a study of 2,106 physicians, “71% of physicians believe that providers are more likely to conduct unnecessary procedures when they can profit from the services.”

Value-based care, at its core, focuses on outcomes. When a patient has a positive outcome, the doctor receives a financial benefit. In this model, doctors can be more invested in the overall journey of their patients.

The transition from fee-for-service to value-based reimbursement can be a challenge for healthcare providers. If a practice wants to adapt, they have to do it well. That means navigating 3 pillars to transition from FFS to value-based reimbursement: enhanced technologies, new payment structures, and impeccable care coordination between healthcare teams to improve the quality of patient care.

Here are some tangible ways a healthcare practice can begin to make this transition. Remember, making the switch will take time. Tackling these items is a great starting point.

If the new reimbursement model involves being paid proportionate to patients' health outcomes, a you'll need a way to track those outcomes accurately. Technology like Tebra makes it easy for a practice and its patients to collect, revise, and track health data is going to be your best friend.

Some top-line things to think about are:

In value-based reimbursement models, payments are often based on anticipated costs associated with patient care. This can look like population health management. How much does a practice typically bill for treating someone who is, say, diabetic? If a healthcare practice doesn’t know, they need to know.

Working in this value-based model means analyzing historical data and health outcomes to predict the cost of care for a particular patient group. Look at anticipated costs and factor in patient complexity, chronic conditions, and anticipated care needs.

In a risk-sharing or shared savings model, the prediction of these numbers will affect an overall bottom line. Take the time to evaluate these costs, or you may lose money.

On the other hand, fee-for-service doesn’t compensate providers for certain things like follow-up calls. With a value-based reimbursement model, many insurers pay providers for secure messaging with patients. This is something a practice can build into those bundles or packages they’re creating to increase revenue.

While a healthcare practice may have to shift how payments are collected, there are lots of opportunities for revenue growth in this model.

The top goal with value-based reimbursement is — and always should be — patient care. However, quality of care can align with increased revenue when done right. 

Here are some considerations to look out for patients while looking out for the bottom line:

As healthcare continues to evolve, don’t get left behind. Embracing value-based reimbursement models increases patient care quality and optimizes costs. Shifting to quality over quantity will need preparation, technological advancements, and dedication to patient-centric care. But this new model is the way forward. The effort will be worth it.

Tebra offers a complete operating system to help your practice track necessary data, communicate with patients, and collect payments. Learn more.