Value-based reimbursement models have obvious appeal for patients and insurers. Instead of paying a fee for service, they pay for the best care at the lowest cost. Could these alternative payment methods also be good for providers? One possible advantage is that focus on improved quality could reduce liability exposure.
Many models, one fundamental idea
Multiple payment models can be defined as value-based. Although models vary, they share a fundamental idea. Payment is made based on outcomes achieved, not services delivered. Bundled care is one example of a value-based reimbursement model.
Under a bundled payment model, providers for a patient undergoing hip and joint replacement might receive one collective payment for a 90-day block of care that includes preoperative care, surgery, and postoperative care. This requires an integrated healthcare team working together to deliver effective and efficient treatment. If the team succeeds in achieving good outcomes at a low cost of care, the providers stand to make more from the arrangement than they could have under a traditional model.
Evidence that it can work
Part of what makes value-based reimbursement models attractive to patients is also what reduces malpractice risks for providers. Because these models reward good outcomes produced with limited resources, providers are incentivized to deliver quality care as efficiently as possible. When providers are motivated to provide better, more efficient care, everyone benefits.
One instance of this theory put into practice comes from the Centers for Medicare & Medicaid Services (CMS). The Hospital Readmissions Reduction Program penalized hospitals for patient readmissions by reducing payments to hospitals with excessive readmissions. Since the program’s inception in 2012, analysis of the data published by CMS indicates that hospital readmissions have fallen, suggesting the incentive has been effective.
Value-based reimbursement models encourage collaboration as well efficiency. To produce the best outcomes while limiting resources, various individuals involved in care must coordinate their efforts and fully communicate with each other. Effective communication can improve the efficiency of care while reducing the risk of errors and oversights – and thus, the risk of malpractice allegations.
The challenges of change
Value-based reimbursement models are in their infancy. As a result, challenges remain. One of the largest challenges is creating consistent standards and definitions. For example:
  • How exactly do we define the best outcome?
  • How do outcome expectations vary based on the patient’s pre-treatment condition?
  • How can care be delivered in the most efficient way possible, while still achieving excellent outcomes?
  • How can multiple care providers work together seamlessly toward one common goal?
  • How can outcomes be objectively measured?
  • What if patients with poor prognoses are denied care because the risk of a bad outcome is higher?
The issues are complex. To ensure that providers care for the entire population, we must consider the impact of social determinants, such as poverty, which can affect patients’ nutrition and access to resources which influence outcomes.
In addition, patients must be involved in establishing realistic goals and expectations. For example, in a hip surgery, the definition of a good outcome could vary. One patient’s goal may be to walk his daughter down the aisle, while another patient’s goal may be to run a 5K race.
How to take the first step
Despite the challenges involved in transitioning to any new model, value-based reimbursement promises substantial benefits to both patients and providers and is worth the effort.
To start the process of change, providers must assess their own data and compare it to others in the industry, which can be done using reports from CMS. Providers should also identify the best practices used in the highest performing individual providers and organizations and begin quality improvement efforts within their own systems.
Documentation is key. The severity of illness and risk of morbidity and mortality must be documented fully so that outcomes can be measured accurately. Specificity will help with measurement as well as defending care. Additionally, providers should be involved in the development of consensus-based standards and measure development to ensure that measures are meaningful.
A win-win
The goal of value-based payment models is to achieve the highest quality of care at the lowest cost. This is not only good for patients – it’s also good for providers. Value-based payment models inherently require a shift in care provision including thorough documentation, team communication, collaborative decision-making, and outcome-focused treatment. There’s synergy here. Interestingly, all these practices also lead to fewer unexpected outcomes and an improved ability to defend medical liability claims.

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