The concept of value-based payment (VBP) has taken root across the healthcare industry. VBP is a “value over volume” approach. Unlike fee-for-service (FFS) models, which motivate providers to see as many patients as possible, value-based payment (VBP) models incentivize providers to optimize patient care by improving care quality, reducing costs and inefficiencies, and ultimately advancing population health.

This approach benefits both providers and patients. Under FFS, payers typically reimburse practices only for face-to-face patient encounters, and providers often need to pack schedules tightly to generate adequate revenue. Under VBP, providers generate revenue by improving patient outcomes and minimizing unnecessary patient costs. This makes it financially sustainable for practices to dedicate more resources to activities that keep patients healthy and focus less on increasing visit volume.

VBP Priorities

VBP prioritizes value over volume in all aspects of care. VBP emphasizes care coordination: care team members work together to reduce gaps in preventive and chronic care, and ensure patients attend specialist appointments and receive diagnostic testing. VBP allows providers to take a holistic approach: payers incentivize providers to address behavioral and social determinants of health – in addition to physical health – to improve overall patient outcomes. VBP emphasizes preventive care and chronic disease management: patients play a larger role in their own care and spend less on costly procedures. VBP rewards improved population health: providers can take the time to explore opportunities for improving outcomes across their entire patient panel.*

VBP in action: contacting unengaged patients

These workflow changes improved patient and provider satisfaction and reduced ED utilization, which lowered costs. Because Dr. Wu improved quality and lowered costs, his payer disbursed a “quality bonus” and shared the resulting savings with the practice. Under FFS, a payer would only reward Dr. Wu for seeing patients, not for reviewing quality reports or proactively contacting and educating patients. Although Dr. Wu saw fewer patients overall while the practice focused on these workflow changes, he increased overall practice revenue for the year.

VBP Arrangement Principles

Providers who thrive under VBP deliver high quality, team-based, holistic patient care. The specifics of VBP arrangements vary across payers, but these core tenets remain the same:

• Providers are responsible for the quality outcomes of their assigned patient panel. Payers reward providers for higher quality outcomes (e.g. improved diabetes control or blood pressure control).
• Providers are scored on total patient care costs and paid accordingly. Payers may or may not hold practices financially responsible for high costs. Lower costs lead to larger payments.
• Providers are incentivized to improve care coordination, address behavioral health needs and social determinants of health, and deliver more preventive care services.

Payer Approaches

All payers, including the Centers for Medicare & Medicaid Services, are shifting toward VBP. New York State Medicaid plans to cover 80% of primary care services under VBP arrangements by 2020. Most commercial payers already offer VBP arrangements, and New York State is working with payers to align their incentives.

Each payer has a different approach, and many already reimburse providers based on quality outcomes. The Quality Payment Program and the Medicare Shared Savings Program are Medicare’s VBP programs. The Delivery System Reform Incentive Payment Program (DSRIP) was New York State’s first step on the path toward a fully VBP system. Incentives for meeting Healthcare Effectiveness Data and Information Set (HEDIS) measures for any payer are a form of VBP. Payers establish VBP contracts with individual providers or with clinically integrated networks, Independent Provider Associations (IPAs), and Accountable Care Organizations (ACOs).

VBP in action: meeting established goals

VBP in action: investing in care coordination

How to Prepare

Shifting from volume-based to value-based payment goes beyond signing new contracts. Providers need to invest time and resources in practice transformation to implement VBP operations and sustain them in the long term. This requires integrating administrative and clinical teams to align the new approach to patient care with workflows designed to meet VBP requirements. Practices can start preparing now by taking the following steps.

Assess the Practice

• Examine the entire assigned patient panel and consider how new workflows could address common needs across the population.
• Connect to a qualified entity, also known as a regional health information organization, to improve care coordination.
• Review quality incentives in existing payer contracts; payers may include these same quality measures in new VBP contracts.
• Ask your payers, ACO, or IPA how future agreements will incorporate VBP. Contact them as soon as possible. Many new or renewed agreements will include a VBP component.

Learn About New York State Patient-Centered Medical Home (NYS PCMH)

NYS PCMH prepares primary care practices for VBP. The New York-specific PCMH model focuses more on VBP readiness than other PCMH models .

Contact NYC REACH

NYC REACH provides free support with VBP operations and assesses practices individually to determine readiness and identify opportunities for improvement. To learn more, contact pcmh@health.nyc.gov.

Watch the Understanding Value-Based Payment webinar on the NYC REACH resource library at www.nycreach.org (Practice Transformation folder). NYC REACH will continue to develop VBP-related resources and trainings.

*All “VBP in action” stories in this article are fictional examples that demonstrate how VBP works in a typical New York City practice.