Early years of value-based payment (VBP) models did not show a reduction of the total cost of care or improvement in clinical quality outcomes at the market level, according to researchers who analyzed performance results of accountable care organizations and other population-based VBP models. Unlike many other studies, this study focuses on market-level rather than model-level impacts of value-based payment.
The study found no statistically significant correlation between the penetration of VBP models and growth in the total cost of care for Medicare (2012-2015 data) or commercial payers (2012-2014 data) in over 900 markets throughout the U.S.
Researchers attributed this finding to the limited prevalence of VBP models in many markets, the lack of strong financial incentives for managing the total cost of care, healthcare organizations’ preference for an incremental approach to risk, and employers’ reluctance to change benefit design, among other factors.
This study also revealed several key findings regarding the impact of industry consolidation on Medicare’s total cost of care:
- Markets that were less consolidated, or less aligned vertically, tended to have higher costs.
- Conversely, costs were lower in markets with well-organized provider networks.
- Consolidation in lower-cost markets had left between two and four health systems with good geographic coverage as competitors within the market.
- Physicians in lower-cost markets were typically employed by or closely aligned with the health systems, and the market usually included at least one integrated delivery system with a health plan, a hospital, and clinician capabilities.
The study also sought to identify other market factors, including disease prevalence, socioeconomic factors, demographics, and quality, which may influence growth in the total cost of care for Medicare. Overall, baseline cost variation was more readily explained than cost growth; the 23 factors identified by researchers explained 82% of baseline cost variation, but just 27% of variation in cost growth.
Additionally, researchers found that employers in most markets studied were reluctant to change benefit design or choose health plans that might be perceived as limiting their employees’ choice of provider. Some were skeptical about the merits of population-based VBP models.
Most healthcare organization leaders interviewed agree that changes to payment and care delivery models are inevitable, particularly in Medicare and Medicaid programs, and these changes will likely include value-based components. It remains unclear when and how far different markets will shift. Researchers recommended that both government and commercial payers move toward population-based models that represent sufficient revenue to incentivize providers to actively manage the total cost of care, while acknowledging that other models may turn out to be more appropriate in some circumstances. Other action steps for key stakeholders are detailed in the full report, “What Is Driving Total Cost of Care? An Analysis of Factors Influencing Total Cost of Care in U.S. Healthcare Markets.”
The study was conducted by the Healthcare Financial Management Association, Leavitt Partners, and McManis Consulting, with support from the Commonwealth Fund. It used commercial data from 2012-2014, and Medicare data from 2007-2015, to conduct two quantitative analyses: The first examined correlations between the penetration of population-based VBP models and total cost of care for Medicare and commercial payers; the second looked at other market factors related to baseline Medicare costs and cost growth. A qualitative study of nine geographically and demographically diverse markets was also conducted.
