Value-Based vs. Fee-for-Service Healthcare Reimbursement

Introduction to Value-Based Reimbursement

Value-based reimbursement models are becoming increasingly common in healthcare. Value-based models structure reimbursements according to metrics such as efficiency, cost, quality, and patient feedback (Pennic, 2014). Some of the most commonly used value-based reimbursement and payment models include Medicare Quality Incentive Programs, Pay for Performance, Accountable Care Organizations, Bundled Payments, the Patient-Centered Medical Home, and Payment for Coordination (Pennic, 2014). More traditional reimbursement models rely on standard fee-for-service systems, which are woefully inefficient for patients with chronic conditions due to the large number and variety of treatments required (Sanghavi, George, Samuels, et al., 2014). While there is no single preferred approach to reimbursement, value-based models are clearly superior to fee-for-service models.

The Patient-Centered Medical Home Model

One of the most promising value-based reimbursement models is the Patient-Centered Medical Home model. This model tends to be more culturally appropriate than others, taking into account individual and family needs, community diversity, and other contextual variables that may affect patient health outcomes (Pennic, 2014). Like other value-based reimbursement methods, the Patient-Centered Medical Home relies on a team-based, collaborative decision-making process, which requires effective collaboration and communication among all healthcare workers assigned to each patient. The potential drawbacks of miscommunication and lack of coordination can be effectively addressed through the model's core principle of establishing a stable point of care—such as a primary care physician—who ensures continuity of care across multiple platforms. Moreover, the Patient-Centered Medical Home model facilitates the introduction of holistic care and regular checkups that promote preventative health.

Bundled Payments and Episode-of-Care Models

Another patient-centric model that is useful for some, but not all, cases is the bundled payment or episode-of-care model. More suited to patients with one-time needs, the bundled care model covers all procedures for a specific condition under a single rubric. There are clear benefits to bundled care for one-off procedures such as hip replacements, cataract surgery, heart surgery, or pregnancy and childbirth (Valence Health, n.d.). However, cost accounting can become complicated when ancillary services are needed or when complications arise. The bundled care model also does not address long-term needs and does not cover preventative care. That said, some patients may prefer the bundled care option when they are generally healthy and prefer limited engagement with the healthcare system over time. The Patient-Centered Medical Home model, by contrast, does require active patient participation in ongoing healthcare.

Conclusion

While most value-based care models are evidence-based and can be effective for both cost savings and quality improvements, the Patient-Centered Medical Home model may be recommended for the vast majority of patients. The model can account for systemic and chronic health issues, and it provides systematic, comprehensive coverage for families—allowing healthcare workers to understand patterns of health and wellness, communication patterns, and genetic considerations when treating members of the same family.

References

Pennic, F. (2014). 6 most common value-based payment models. HIT Consultant. https://hitconsultant.net/2014/05/29/6-most-common-value-based-payment-models/

Sanghavi, D., George, M., Samuels, K., et al. (2014). The beginner's guide to new health care payment models. USC-Brookings. https://www.brookings.edu/blog/usc-brookings-schaeffer-on-health-policy/2014/07/23/the-beginners-guide-to-new-health-care-payment-models/

Valence Health. (n.d.). Solutions for value-based care. https://www.hfma.org/DownloadAsset.aspx?id=38683