Value Based Purchasing

A recent Healthier Washington webinar shed some light on new ideas for Value Based Purchasing and in the context of our state’s Accountable Communities for Health.

First question: What the heck is value-based purchasing?

 The status quo payment model for health care is “Fee-For-Service”. All services cost a set fee, and the equation is simple: 

“# of service” x “Fee for service” = Cost of care

As we well know there are a few shortfalls with this model. The big challenge being that it rewards for quantity: the more services provided, the higher the cost and the greater the revenue generated by the provider. Providers are paid for the service they administer to the patient and that’s the end of the equation.

But on the patient side the equation is much more complex; what patients need are quality health outcomes. It’s not just about the services provided to them but whether or not those services made them healthier. If the payment model doesn’t include value of services, it doesn’t really include the patient, and does not incentivize providers to be truly invested in their patient’s health outcomes.

Washington is shifting that equation to be more patient centric, aiming to maximize outcomes for costs. In a Value Based Purchasing system, the equation is like this:

Outcomes/Cost = >1

Or for the less mathematically inclined, we want the ratio of Patient Outcomes to Cost to always be positive, making sure the quality of care is always worth the cost.

This system tells us how the provider is performing, and helps them see what is working for patients while creating financial incentives that reward for quality of care. We want both the providers and the patients to know what they are getting out of their payments.  

So why is this better?

Value Based Payments incentivize a lot of the changes we are prioritizing within our ACH work.  

The Fee-For-Service model contributes to our fractured or “siloed” care system. Providers have no incentive to follow up with patients after care, or track their outcomes through the system as they bounce from care point to care point. If payments are based on outcomes, providers have to start thinking about what happens before and after the patient enters the room. Similarly, those providers can’t stay inside their silos to be effective, they have to shift to integrated care in a system that pays for and delivers services that treat the whole patient. This encourages more transparency and accountability for those services as well.

 The fee-for-service system also puts strains on rural communities where accessing services is much harder. Health centers and Critical Access Hospitals are the primary backbone of care for the Apple Health population. In a fee-for-service system, these facilities are paid for each face-to-face encounter with a patient, but in counties with a less dense population beds often go unfilled. The need for those care points is huge, but with fewer patients encounters they have a much harder time generating revenue in a fee-for-service system. In switching to value based service, rural health providers are not dinged for having less patients, but are rewarded for positive outcomes. This also encourages rural health centers to try alternative pathways for care to engage patients, like group visits, tele-visits, and developing Community Health Worker programs.

The Health Care Authority, which currently purchases healthcare coverage for 1 in 3 Washingtonians, has set a goal of moving 80% of state financed care and 50% of commercial market plans to switch to a value based payment model over 5 years, and are currently piloting 4 models throughout the state. If you want a high level overview of those payment test models, you can watch the full webinar here.