Volume to Value: What it Means for Employers

June 19, 2015

Early in 2015, the Centers for Medicare and Medicaid Services sent a strong signal to the healthcare market by aggressively accelerating the timeline to shift healthcare purchasing from ‘Volume to Value.’ What is ‘Volume to Value?’ In simple terms, it’s about how healthcare providers are paid for their services. Volume refers to traditional fee-for-service payment arrangements, where healthcare providers are paid a fee for the services they provide, without any guarantee of quality, resulting in the incentive to provide more services because “the more you do, the more revenue you generate.” For self-funded employers paying for their group’s healthcare, Benefits Managers must navigate an industry with little to no competitive market forces to influence whether those services are efficient (the right service in the right setting at the right time), effective (did it work?), or priced competitively. It’s an unsustainable economic future, not just for employers but as a nation.

In healthcare, as in most industries, value is defined as the outcomes achieved per dollar spent. For years, quality has sort of been synonymous with value in healthcare. And having quality data is great for comparing the performance of health plans, facilities, treatments, etc., but it unfortunately hasn’t led to predictable costs. Now imagine a world where your costs are based on outcomes and you’re not bearing ALL of the financial risk. Providers would have to achieve quality metrics to receive full payment or in the purest value-based approach, you would be charged a capitated fee for providers to meet certain quality expectations and truly manage your population’s health. All of it. Keep the healthy individuals healthy; reduce individual health risks; keep chronic diseases in-check; and case manage individuals with catastrophic or complex co-morbid conditions.

Wait a minute! Don’t providers do population health management today?! The short answer is NO! The current fee-for-service payment structure, especially outside of Medicare and Medicaid, is based on contracts providers have with provider networks (typically owned by insurance carriers). The vast majority of these contracts are based on the volume of services the network promises to bring to the providers for a certain level of discounts the provider network or carrier can use in its marketing claims. That’s why it’s important for Benefits Managers, or other stewards of their organization’s healthcare spend, to have health management partners in place to ensure their members are getting the right support they need. In some cases, it’s wellness programming to promote a culture of health and well-being,  health coaching to provide clinically-based disease or condition management, or clinical case management to ensure those who need access to significant health plan resources are getting the best care for the money. Relying on the provider network, third-party administrator, or carrier just isn’t enough. Why? The incentives are misaligned.

As the transition from Volume to Value takes place, the rule for Benefits Managers is “buyer beware!” The same organizations that are built for treating episodic care in a transactional approach and paying claims or negotiating provider contracts aren’t wired to keep your people healthy. You (and they) will likely need partners who understand both sides – delivering efficient, effective, and competitively priced healthcare while understanding how to engage and support every individual in your employer-based group.

For More Information:

Click here to read a CMS press release around the new payment models.

CMS has established a Learning and Action network to support the industry in the transition from Volume to Value. Click here to learn more.

 

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