Survey: Payers, Providers Project Value-Based Reimbursement Will Eclipse Fee-for-Service by 2020
According to the results of a new survey, value-based payment has hit the tipping point, with bundled payment projected to grow rapidly in the next five years and as payers’ network strategies are changing, getting narrower and more selective. The survey results also reveal that payers and hospitals are somewhat struggling to scale these complex strategies.
The survey, conducted by ORC International and commissioned by McKesson Health Solutions, aimed to examine the state of value-based payment and how far the needle has moved from an initial study done in 2014. For the survey, titled “Journey to Value, the State of Value-Based Reimbursement in 2016,” ORC surveyed 465 payers and hospitals in March.
The latest survey results collaborated the 2014 study in that payers and providers project fee-for-service will be eclipsed by payment models with measures of value by 2020.
Providers and payers were asked to place themselves along a spectrum from pure fee-for-service (FFS) to pure value-based reimbursement (VBR) models, and the survey findings indicate that there is fast-pace adoption of value-based reimbursement models.
Payers reported much greater progress toward the value-based end of the continuum as they reported 58 percent of their business has already shifted to VBR, which marks a 10 percent increase since 2014. Hospitals reported that they are in the middle of the value-based reimbursement continuum, at 50 percent, which represents a 4 percent increase in the past two years, according to the data from the inaugural study.
Among hospital providers polled, the survey data indicates that 63 percent are now part of an Accountable Care Organization (ACO), an 18 percent increase since 2014. And, among hospitals that are not part of an ACO, nearly half—47 percent—anticipate joining one within five years.
According to the survey report authors, an important take-away from the survey is that the data reinforces the findings of the inaugural study.
“Two years ago, the insight that made headlines was that payment with measures of value would eclipse fee-for-service by 2020, according to payers and providers surveyed. The 2016 research finds this projection remains intact, that the speed of disruptive change in healthcare payment hasn’t slowed, and that the complexity of operationalizing alternative payment models at scale remains a daunting challenge for payers and providers alike,” the survey report authors stated.
According to the survey, payers of all sizes made progress, but those covering between 500,000 to 2 million lives reported the fastest progress, on average reporting that 64 percent of their business is now based on VBR. And, payers in provider-centric and collaborative markets remain farthest along the VBR continuum, which was also true in 2014, “but those in fragmented and payer centric markets are catching up.”
“Meanwhile, only medium-sized hospitals (101-250 beds) and those in provider centric regions, where one or two hospitals have about 50 percent market share, saw a significant shift towards VBR,” the study authors stated.
Overall, the survey authors note, the data underscore the importance of the market payers and providers operate within. “Those in collaborative, provider-centric, or payer-centric regions were further along the continuum to full VBR than those in fragmented regions where there is little or no collaboration.”
A growing number of payers have also changed their network management strategies to align them with value-based reimbursement. Sixty percent of payers changed their network strategy in the past two years, with 53 percent now using tiered and 42 percent using narrow networks. And, more than 80 percent say they’re more selective about the hospitals in their networks, with 75 percent of payers saying care quality is their top driving factor.
And, optimism about VBR momentum is up dramatically as well. Almost twice as many payers (45 percent) said they were ahead of the industry in the transition to a business based on value compared to 2014 (24 percent). At the same time, providers are significantly optimistic about their VBR outlook as well, with 31 percent stating they’re ahead of the pack compared with 22 percent in 2014.
Looking ahead five years, payers expect value-based reimbursement will be a majority of their business, with 60 percent of providers participating and 54 percent of reimbursements paid through VBR models. Today, about a third of reimbursements use measures of value, according to payers, who report that 36 percent of their providers, 32 percent of reimbursements and 32 percent of membership are tied to value-based payment arrangements.
The survey also polled payers and providers about measuring the success of VBR strategies. Both groups tagged improvement in patient outcomes as the most commonly tracked metric.
And, when asked about the capabilities and processes they feel are most important to their organization related to transitioning to value-based reimbursement, both payers and providers highlighted care coordination, standardizing clinical measures, integrating workflows and patient member engagement as the most important measures or processes.
Other trend insights provided by the survey include:
- Bundled payments are the fast-growing model of value-based reimbursement, and both hospitals and payers project bundled payment will account for 17 percent of medical payment in five years.
- Only half of payers and just 40 percent of providers say they’re ready to implement bundles. And only a quarter have the tools in place to automate these complex model.
- Among all payment models within health plans, 59 percent will be a mix of capitation, pay-for-performance, and episode of care in five years.
- Health plans project bundled payment will grow 6 percent over five years, edging ahead of capitation and shared risk growth, which might reflect momentum resulting from the Centers for Medicare & Medicaid Services (CMS) Comprehensive Care for Joint Replacement (CJR) model.
- Almost all payers and providers surveyed (97 percent of payers and 91 percent of hospitals) are now deploying a complex mix of value-based reimbursement and fee-for-service, which is a 7 percent increase for payers and a 10 percent jump for providers since 2014.
- Survey findings indicate providers are struggling to meet their goals—60 percent to 78 percent of providers say they are not meeting their alternative payment and value-based reimbursement goals.
- Payers are more optimistic about the financial impact of transitioning to value-based care, as 61 percent of payers and 41 percent of providers project a positive financial impact on their businesses.