Burda on Healthcare: Is Value-Based Reimbursement Mostly Dead or Slightly Alive?

One of my favorite scenes in The Princess Bride is when Miracle Max tells Inigo and Fezzik that Westley is “mostly dead,” which means he’s “slightly alive.” There’s hope for a full recovery.

We can say the same thing about value-based reimbursement, if we have as much faith in a few recent VBR status reports as Inigo and Fezzik have in Miracle Max. A full recovery for VBR would be good news for patients whose health insurers would pay providers for outcomes rather than services rendered.

Below is a rundown of five recent status reports that suggest VBR is slightly alive.

Slightly more dollars are flowing through APMs

In December 2021, the Health Care Payment Learning and Action Network released its annual gold standard report on how much public and private payers are reimbursing providers through alternative payment models, or APMs, versus fee-for-service payment models. You can download the 35-page report here. 

The HCPLAN said that in 2020:

• 34.2 percent of provider payments flowed through APMs albeit built on a FFS-based architecture, including shared savings and shared risk APMs, up from 31.8 percent in 2019.
• 6.7 percent of provider payments flowed through population-based APMs, including global budget and capitation APMs, up from 6.4 percent in 2019.

That’s the slightly alive part. Here’s the mostly dead part from the HCPLAN report:

• 39.3 percent of provider payments flowed through FFS models with no link to cost or quality, unchanged from 2019.
• 19.8 percent of provider payments flowed through FFS models with links to cost or quality, down from 22.5 percent in 2019.

Further, 92 percent of payer executives surveyed by HCPLAN for its new report said APM adoption will improve quality of care, and 85 percent said it will make care more affordable. So, what’s the holdup? Payer execs cited providers’ willingness to take on financial risk as the biggest barrier.

Slightly more doctors are accepting value-based payments

In December 2021, the American Medical Association released its biennial report on physician participation in various VBR models and payment mechanisms. You can download the 23-page report here. 

The AMA said that in 2020:

• 44.5 percent of doctors accepted pay-for-performance payments, up from 42.3 percent in 2018.
• 40.1 percent of doctors accepted bundled payments, up from 36.2 percent in 2018.
• 21.5 percent of doctors accepted shared-saving payments, up from 18.9 percent in 2018.

“It just so happens that your friend here is only mostly dead … and mostly dead is partly alive.” —The Princess Bride,  Image from YouTube, FandangoMovieClips

But, on the mostly dead side of things: 

• 23.8 percent of doctors accepted capitated payments, a dip from 23.9 percent in 2018.
• 88.1 percent of doctors accepted FFS payments, up from 87 percent in 2018.

“Overall, this report shows that, notwithstanding the consistency in the average share of revenue from fee-for-service over the 2012 to 2020 period, physicians were in practices that increasingly engaged in APMs,” the AMA said, putting a positive spin on the results. 

Searching for signs of life in outcomes-based contracts

In November 2021, Avalere Health released its annual report on outcomes-based contracts (OBCs) by health plans and pharmacy benefits mangers with drug companies and medical device manufacturers. OBCs link reimbursement by the payers for drugs and devices to specific clinical, quality or utilizations outcomes. You can download Avalere’s four-page report here. 

Overall, 55 percent of the health plans and PBMs surveyed by Avalere last year said they had OBCs in place with drug companies and device makers in 2021. That’s down noticeably from 61 percent and 59 percent who said the same thing in 2020 and 2019, respectively. 

But there are signs of life for such OBCs:

• 12 percent of the payers said they had more than 10 OBCs in place last year, up from 6 percent in 2020.
• 33 percent said that had two to five OBCs in place in 2021, up from 31 percent in 2020.

The results “may be an indication that some plans that have had successful experiences with OBCs are reaching efficiency and scalability and are willing to engage in more OBCs,” Avalere said.

In other words, practice makes perfect when it comes to paying for value, not volume.

Health systems express interest in participating in VBR models

In November 2021, the Guidehouse Center for Health Insights released its analysis of a 2021 HFMA survey of more than 100 health systems CFOs that found that most said they are still interested in seeking value-based payment arrangements this year. You can download the analysis here. 

For example, the CFOs said they are willing to enter into upside/downside risk, professional capitation or global capitation payment mechanisms in:

• Medicare Advantage contracts (59 percent)
• Commercial health plan contracts (52 percent)
• Medicare APMs (49 percent)
• Medicaid managed-care contracts (36 percent)
• Direct contracts with employers (33 percent)

Yet, another survey finding suggests to me that CFOs’ expressed appetite for risk in 2022 may not be as strong as they say. When HFMA conducted this survey in July and August of 2021, 43 percent said they were unlikely to make budget in 2021. That’s when the COVID-19 pandemic appeared to be waning and before the current surge in COVID-related hospitalizations and shutdowns of elective services. You can only handle so much financial risk at a time. 

Providers are putting slightly more revenue at risk

Finally, in August 2021, Numerof & Associates released its annual “state of population health” report that details provider involvement in population health-based reimbursement models. You can download the 42-page report here. 

Here are the reasons to be optimistic:

• 42 percent of the C-suite provider executives surveyed for the report said that more than 20 percent of their organization’s revenue was at risk in 2020 because of VBR contracts, up from 34 percent who said the same thing in 2019.
• 10 percent of the respondents said more than 20 percent of their annual revenue came from capitated contracts specifically in 2020, up from 8 percent who said the same thing in 2019.

And the reason to worry: the percentage of respondents who said their organizations have zero revenue at risk hasn’t changed. It was 14 percent in 2020 compared with 15 percent in both 2018 and 2019. 

“Consistent with past surveys, organizations’ comfort with fee-for-service limits their appetite for risk-based models,” Numerof said in its report.

In the movie, Westley gradually regains his strength, defeats Prince Humperdinck and lives happily ever after with Buttercup. Will value-based reimbursement regain its strength? Will VBR defeat fee-for-service medicine? Will patients live happily ever after, enjoying better outcomes at lower costs?

We’ll see. As these status reports show, VBR is slightly alive. Let’s all hope for a happy ending.

Thanks for reading.