The Shift from Volume-to-Value: Innovating Payment Systems
September 19, 2017 | Blog Post
“With the number of Americans suffering from chronic diseases as high as 45%, the shift value-based healthcare better aligns incentives for all stakeholders to manage patients health more holistically."
The U.S. healthcare system has been facing serious issues when it comes to the quality and cost of healthcare today. These issues have called for a shift from the traditional volume-based care to value-based care. One key factor driving this change is the need for patient-centered care for our current growing elderly population and those with chronic disease [i]. In addition, there is a need for a different type of payment system that won’t punish providers for focusing on keeping people healthy and avoiding unnecessary care [ii]. The last factor is the current payment system contributes nothing to improving health [iii].
"According to a report by the Centers for Medicare & Medicaid Services, the total health spending in the U.S. in 2016 reached nearly 3.4 trillion dollars [iv]."
In addition, 45% of all Americans suffer from at least one chronic disease, which in financial terms turns out to be an average costs of $6,032 annually [v]. The high cost of care can be attributed to the traditional volume-based care (fee-for-service) that promotes profit over quality of care [vi]. This means physicians must focus on volume of patients and getting rewarded for it. As previously mentioned, there are individuals that suffer from serious illnesses that calls for better care on behalf of the providers.
Furthermore, in order to successfully shift to value-based care, the current payment model must be changed to one that incentivizes physicians to promote better care. Physicians aren’t paid for time spent on educating their patients. However, they are paid for coordinating tests [vi]. This ends up hurting patients because physicians aren’t focused on improving patient outcomes but rather making sure that they follow procedures that don’t add much value to patient engagement. The numerous tests and medicine prescriptions are illusions of high quality care. In reality, even though our health care spending is astronomical, millions of Americans are uninsured or receive care that is inadequate.
"To further elaborate on the issues with the current payment system, according to a survey conducted by PwC’s Health Research Institute (HRI), fee-for-service payments make up 53% of a physician’s revenue [vii]."
Therefore, in the initial stages of the shift to value-based, physicians must accept a temporary loss of revenue [viii]. Sure, it’s a hard pill to swallow. However, in order to see change, financial losses at the beginning stages is a reality that must be accepted. It seems that in order to create a balanced system that works for providers and patients, more financial risks have to be incurred by organizations.
In 2017, the topic of healthcare coverage has taken the spotlight under the current administration that aimed to replace the Affordable Care Act (ACA). If there ever were a better time to leverage the use of technology to help reduce certain costs, it would be a great time to do it now. As we know, the healthcare industry is a complex ecosystem where traditional thinking is favorable compared to innovative ideas. Value-based care is innovative to a certain extent and seems promising. In the end, as the health care landscape changes once again, implementing a payment model that aligns with the objectives of high quality and better care is needed.
To further explore these value-based trends, CHI is organizing the 5th Annual Healthcare Executive Roundtable on October 12, 2017, in Manhattan, New York. The Center for Healthcare Innovation’s “Understanding Value in Consumer-Orientated, Patient-Centric Era” Roundtable is an intimate, invitation-only, expert roundtable discussion for healthcare executives, key opinion leaders, and patient groups to discuss how stakeholders throughout the healthcare ecosystem can address critical issues related to healthcare value, quality, and cost. This year’s Roundtable will focus on several key market forces that affect the current state of healthcare in the U.S.
Analyst at CHI
i. From Volume To Value: Achieving Bold Change In Our Healthcare Payment Systems. Forbes. https://www.forbes.com/sites/billfrist/2016/06/30/from-volume-to-value-achieving-bold-change-in-our-healthcare-payment-systems/#65afc8f09c82. Accessed September 7, 2017.
ii. From Volume To Value: Better Ways To Pay For Health Care. Health Affairs. http://content.healthaffairs.org/content/28/5/1418.full#ref-1. Accessed September 7, 2017.
iii. Patient-Centered Care: What It Means And How To Get There. Health Affairs. http://healthaffairs.org/blog/2012/01/24/patient-centered-care-what-it-means-and-how-to-get-there/. Accessed September 7, 2017.
iv. 2016-2025 Projections of National Health Expenditures Data Released. Center for Medicare & Medicaid Services. https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2017-Press-releases-items/2017-02-15-2.html. Accessed September 7, 2017.
v. Why Public Health Is Necessary to Improve Healthcare. National Association of Chronic Disease Directors. http://c.ymcdn.com/sites/www.chronicdisease.org/resource/resmgr/white_papers/cd_white_paper_hoffman.pdf. Accessed September 7, 2017.
vi. From Volume To Value: Better Ways To Pay For Health Care. Health Affairs. http://content.healthaffairs.org/content/28/5/1418.full#ref-1. Accessed September 7, 2017.
vii. Healthcare’s Alternative Payment Landscape. PricewaterhouseCoopers. https://www.pwc.com/us/en/health-industries/health-services/assets/pwc-hri-alternative-payments-2015.pdf. Accessed September 7, 2017.
viii. Patient-Centered Care: What It Means And How To Get There. Health Affairs. http://healthaffairs.org/blog/2012/01/24/patient-centered-care-what-it-means-and-how-to-get-there/. Accessed September 7, 2017.
Joseph Gaspero is the CEO and Co-Founder of CHI. He is a healthcare executive, strategist, and researcher. He co-founded CHI in 2009 to be an independent, objective, and interdisciplinary research and education institute for healthcare. Joseph leads CHI’s research and education initiatives focusing on including patient-driven healthcare, patient engagement, clinical trials, drug pricing, and other pressing healthcare issues. He sets and executes CHI’s strategy, devises marketing tactics, leads fundraising efforts, and manages CHI’s Management team. Joseph is passionate and committed to making healthcare and our world a better place. His leadership stems from a wide array of experiences, including founding and operating several non-profit and for-profit organizations, serving in the U.S. Air Force in support of 2 foreign wars, and deriving expertise from time spent in industries such as healthcare, financial services, and marketing. Joseph’s skills include strategy, management, entrepreneurship, healthcare, clinical trials, diversity & inclusion, life sciences, research, marketing, and finance. He has lived in six countries, traveled to over 30 more, and speaks 3 languages, all which help him view business strategy through the prism of a global, interconnected 21st century. Joseph has a B.S. in Finance from the University of Illinois at Chicago. When he’s not immersed in his work at CHI, he spends his time snowboarding backcountry, skydiving, mountain biking, volunteering, engaging in MMA, and rock climbing.