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Survey: Value-Based Reimbursement Will Eclipse FFS by 2020
The adoption of value-based reimbursement (VBR) models is expected to dwarf the fee-for-service (FFS) model by 2020, according to a national survey commissioned by McKesson. Information was collected from 350 hospitals and 115 payers.
Payers reported that they were 58% along the continuum toward full VBR––a 10% increase since 2014. Hospitals weren’t far behind, reporting that they were 50% along the value continuum, up 4% in the past two years.
Among other key findings: Payers estimated that nearly 60% of payments will be a mix of capitation/global payment, pay for performance, and episode of care/bundled payment in five years, with bundled payment growing fastest. Health plans projected that bundled payment will grow 6% over five years, edging ahead of capitation/global payment and shared risk growth. Both hospitals and payers projected that bundled payments will top 17% of medical payments in five years. However, half of payers and only 40% of providers said they were ready to implement bundles, according to the survey.
Network management, a key component of VBR, is also changing dramatically, McKesson found. More than 60% of payers had changed network strategy since 2014, with 53% currently using tiered and 42% using narrow networks. More than 80% said they were more selective about who were in their networks, with care quality the top criteria at 75% of payers. Hospitals said these network strategies were driving up patient confusion, denials, directory inaccuracies, referral-management problems, and network leakage.
The rapid rise of VBR is also intensifying system complexity, as evidenced by the finding that most providers were not meeting their goals, the survey found. Of the metrics in place for measuring VBR success, only 22% of hospitals were meeting their goals to reduce the administrative costs of care; 26% were meeting their goals to lower health care costs; 30% were meeting care-coordination goals; and 40% were meeting goals for improving patient outcomes.
“Payers and providers are clearly beginning to scale VBR,” said Rod O’Reilly, president of McKesson Health Solutions. “The swift pace of change, coupled with the daunting complexity of these payment models, is putting extreme pressure on the healthcare system. As we move beyond pilots, the ability for payers and providers to automate the complexity inherent in these models will be a deciding factor to success.”
The McKesson survey also found that:
- Payers were more optimistic than hospitals about the financial impact of VBR on their organizations. For payers, 61% of those surveyed expected a positive financial impact. For hospitals, 41% forecast a positive financial impact.
- The percentage of hospitals reporting that they were participating in tiered or narrow networks with payers increased 13% since 2014. This year, 60% of hospitals reported they were in tiered or narrow networks with payers.
- For hospitals and payers, improvement in patient outcomes was the most common metric to gauge the success of VBR models. Among hospitals, 63% reported tracking improvements in patient outcomes to assess the impact of VBR. For payers, 74% reported tracking improvements in patient outcomes.
- For both hospitals (77%) and payers (82%), care coordination was identified as the most important capability linked to VBR models.
- For both hospitals (56%) and payers (57%), establishing incentives for patients or health plan members was identified as the least-important capability linked to value-based reimbursement models.
- Providers said that 55% of their payment models were based on FFS, with the remainder of their payment models based on some form of VBR. Providers said that the share of their payment models tied to FFS will decline to 39% within five years.
The data were released at the annual conference of America’s Health Insurance Plans (AHIP). The full report may be accessed at: http://MHSvbrstudy.com.
Sources: HealthLeaders Media News; June 17, 2016; and McKesson; June 13, 2016.