Fee-for-Service, Alternative, Value-Based, and Population-Based Payment Models: Definitions for Mental and Behavioral Health Services
A Discussion Paper
By incorporating Healthplan accountability, the Oregon Health Authority (OHA) attempts to ensure that all parties involved in the healthcare system are responsible for achieving the desired outcomes, enhancing the overall effectiveness and efficiency of care delivery in Oregon. The State of Oregon is compelling Healthplans with incentives to slow healthcare growth to 3.49% annually through increase in the value of services and improved outcomes, rather than restricting the volume of services. Restricting services has an effect of increasing the cost of medical care. The federal government proposes 4 models of care; (1) fee-for-service, (2) alternative payment, (3) value-based payment, and (4) population-based payment Models. In Oregon, there are no definitions or descriptions of these models in law.
One Healthplan is offering provider groups a contract model which is not aligned with Federal, State and industry guidance. The contract is ill-defined, misleading, and has a probable to almost certain risk of failing to achieve shared value and outcomes. The Healthplan is insulated from any negative consequence of their “take-it-or-leave it” contact. The contract has tremendous financial value to the Healthplan and will almost certainly be detrimental to patients, provider groups and individual practices.
Legislative definitions that differentiate among contracting options is necessary to protect purchasers, providers and consumers.
Fee-for-Service (FFS)
Definition: Fee-for-Service (FFS) is a traditional healthcare payment model where providers are reimbursed for each individual service or procedure they perform. Payments are based on the quantity of care delivered, such as visits, tests, procedures, or treatments, rather than the quality or outcome of the care provided.
Description: In the FFS model, healthcare providers bill for each service rendered to a patient, with each service having a set fee. This model incentivizes providers to deliver more services, as their revenue increases with the volume of care they provide. While FFS ensures that providers are compensated for every aspect of patient care, it can sometimes lead to overutilization of services, as there is no financial incentive to focus on the efficiency or effectiveness of the care provided. This model can lead to higher healthcare costs without necessarily improving patient outcomes. Because of these limitations, fee-for-service is increasingly being supplemented or replaced by alternative payment models that emphasize value and quality over volume.
Alternative Payment Models (APMs)
Definition: Alternative Payment Models (APM) are payment approaches developed by Medicare and other payers that provide added incentives to clinicians and healthcare providers to deliver high-quality and cost-efficient care. APMs can apply to a specific clinical condition, a care episode, or a population.
Description: APMs shift away from the traditional fee-for-service model, which pays providers based on the volume of care they provide, regardless of outcomes. Instead, APMs aim to improve patient care by tying payments to the quality of care delivered. They encourage healthcare providers to focus on prevention, wellness, and management of chronic conditions, promoting coordinated care across providers and settings. APMs primarily focus on changing financial incentives and payment structures to encourage cost-effective, coordinated care. They involve specific payment models like bundled payments, risk sharing and shared savings, with flexibility in care delivery and financial accountability. APM models often include financial incentives for providers to improve care quality and patient outcomes while reducing unnecessary spending and waste, ultimately aiming to achieve the "Quadruple Aim" of healthcare: enhancing the individual patient experience, improving population health, reducing costs, and improving the work life of healthcare providers. The key principles of value in APMs are designed to shift the focus from volume-based care to value-based care. These principles aim to enhance healthcare quality, improve patient outcomes, and reduce costs.
Key Principles of Value in APMs
"APMs promote innovation in care delivery and encourage provider collaboration to achieve shared savings and improved health outcomes." (Healthcare Policy Research)
Quality Over Quantity
APMs prioritize high-quality care rather than the sheer volume of services provided. Payments and incentives are linked to performance metrics that measure the quality of care, patient outcomes, and overall effectiveness.
Patient-Centered Care
APMs emphasize the importance of tailoring care to individual patient needs and preferences. This includes engaging patients in their care plans, improving patient experience, and ensuring care is coordinated across providers and settings.
Care Coordination
Effective care coordination among healthcare providers is a central principle. APMs encourage the integration of services across different care settings, reducing redundancy and improving the efficiency of care delivery.
Cost Efficiency
APMs aim to reduce unnecessary spending by eliminating waste, such as redundant tests or procedures, and promoting efficient use of resources. This includes encouraging preventive care and early intervention to avoid costly complications.
Shared Accountability
Providers and Healthplans share accountability for patient outcomes and cost management. APMs often involve shared savings or risk arrangements where providers benefit financially from delivering cost-effective, high-quality care.
Data-Driven Decision Making
APMs rely on robust data collection and analytics to inform care decisions, track performance, and identify areas for improvement. Data-driven insights help providers optimize care delivery and achieve better outcomes.
Innovation and Flexibility
APMs encourage innovative care delivery models and flexibility in approaches to meet the specific needs of patient populations. This includes the adoption of new technologies, care pathways, and payment structures that support value-based care.
Value-Based Care (VBC)
Definition: Value-Based Care (VBC) is a healthcare delivery model that emphasizes delivering high-quality and effective care by linking payment amounts to patient health outcomes and the overall individual experience. Providers are incentivized to improve care quality, enhance patient satisfaction, and achieve better health outcomes rather than focusing solely on the volume of services provided.
Description: The main goals of value-based care are to provide a better patient experience, advance health equity, improve health outcomes, reduce healthcare costs, and support the well-being of the healthcare workforce. VBC encourages providers to deliver more preventive, patient-centered, and coordinated care. This approach involves engaging patients as active participants in their care, addressing their specific needs and preferences, and involving them in decision-making processes. VBC relies on data-driven insights to inform care decisions and improve chronic disease management, ultimately aiming to achieve the "Quadruple Aim" of healthcare: enhancing the individual patient experience, improving population health, reducing costs, and improving the work life of healthcare providers. VBC centers on delivering patient-centered, high-quality care that improves health outcomes. It emphasizes patient engagement, prevention, and the use of data to drive continuous improvement, with a holistic view of patient health. In value-based care, providers are rewarded for achieving high performance in these areas, which may include improving patient satisfaction, reducing hospital readmissions, and managing chronic diseases more effectively.
Key Principles of Value in Value-Based Contracting
"Value-based care emphasizes a holistic approach to health, focusing on patient engagement and long-term outcomes." (Healthcare Transformation Studies)
Improved Health Outcomes
OHA focuses on enhancing the overall health of populations by emphasizing preventive care, effective management of chronic conditions, and reducing health disparities. Value is measured by improvements in clinical outcomes and population health indicators.
Patient-Centered Care
Value is defined by the extent to which care is tailored to individual patient needs and preferences. This includes involving patients in decision-making, enhancing their care experiences, and ensuring care is accessible and coordinated across providers.
Cost Efficiency
Achieving better healthcare outcomes at a lower cost is central to OHA's value-based approach. This involves reducing unnecessary services, eliminating waste, and improving care coordination to lower overall healthcare expenditures while maintaining or improving quality. Waste in healthcare refers to the inefficient use of resources that do not contribute to improving patient outcomes or the quality of care. It encompasses activities and expenses that could be eliminated without harming consumers or providers.
Equity and Access
Value is also assessed based on the ability to improve access to healthcare services for all Oregonians, particularly underserved and marginalized populations. OHA aims to ensure equitable access to high-quality care as a core component of value.
Quality Improvement
Continuous improvement in the quality of care is a fundamental aspect of defining value. OHA uses metrics and benchmarks to evaluate provider performance and encourage practices that lead to better care delivery.
Provider and Health Plan Accountability
In value-based contracts, both providers and health plans are held accountable for patient outcomes and cost management. OHA incentivizes providers and health plans to focus on delivering high-value care by linking reimbursement to performance on key quality and outcome measures. Health plans are also responsible for implementing strategies that improve care coordination and patient engagement.
Data-Driven Decisions
OHA emphasizes the use of data analytics to measure performance, identify areas for improvement, and support decision-making processes. Accurate and timely data collection is crucial for assessing the value of care and informing contract negotiations.
Innovation and Integration
Encouraging innovative care delivery models, such as coordinated care organizations (CCOs), is a priority for all Healthplans. These models integrate physical, behavioral, and oral health services to provide comprehensive care and achieve better health outcomes.
Quote: "Value-based care emphasizes a holistic approach to health, focusing on patient engagement and long-term outcomes." (Healthcare Transformation Studies)
A Discussion Outline
Population-Based Payments: Differentiated Analysis for Providers and Healthplans
Definition: Population-based payments involve a payment model where providers receive a fixed amount to manage the overall care of a defined population over a specific period. This model encourages a focus on preventive care, care coordination, and overall population health.
Description for Providers and Healthplans
Providers:
Comprehensive Care Management:
Providers are responsible for delivering a full spectrum of care, including preventive, acute, and chronic services. This holistic approach encourages long-term health management rather than episodic treatments.
Cost Control and Efficiency:
With a fixed payment structure, providers are incentivized to manage resources efficiently, reduce unnecessary services, and improve cost-effectiveness. This promotes a focus on preventing costly complications through early intervention and regular monitoring.
Risk and Accountability:
Providers assume financial risk for the cost of care provided to the population. This risk-sharing mechanism drives providers to improve care quality and efficiency, aligning their incentives with patient outcomes rather than service volume.
Data-Driven Care:
Effective management of population health relies on robust data analytics to identify high-risk patients, track health trends, and implement targeted interventions. Providers leverage data to optimize care delivery and improve outcomes.
Healthplans:
Aligned Incentives:
Healthplans use population-based payments to align financial incentives with the goals of reducing costs and improving care quality. By linking payments to performance metrics, plans encourage efficient care management.
Flexibility and Innovation:
Healthplans promote flexibility in care delivery, encouraging providers to innovate with new care models and interventions tailored to the population's needs. This includes integrating technology and promoting care coordination strategies.
Shared Savings and Risks:
Healthplans may implement shared savings and risk arrangements, incentivizing providers to meet cost and quality benchmarks. This aligns the goals of both providers and payers with the overall health of the population.
Focus on Quality Outcomes:
Population-based payments enable Healthplans to prioritize quality outcomes and patient satisfaction. Plans encourage providers to focus on preventive measures, chronic disease management, and evidence-based treatments, ensuring that care delivery aligns with value-based goals.
Key Principles of Value in Population-Based Contracting
Holistic Care Management:
Comprehensive Coverage: Providers are responsible for delivering a wide range of healthcare services, including preventive, acute, and chronic care, to meet the diverse needs of the population.
Patient-Centered Approach: Care is tailored to the needs and preferences of individual patients, with an emphasis on engaging patients in their own care decisions.
Cost Efficiency and Resource Management:
Fixed Payment Structure: Providers receive a predetermined payment to manage the health of a population, encouraging efficient resource use and cost control.
Waste Reduction: The model incentivizes the elimination of unnecessary tests and procedures, focusing on interventions that add real value to patient care.
Preventive Care and Early Intervention:
Focus on Prevention: Population-based contracting emphasizes preventive care and early intervention to address health issues before they become more serious and costly.
Chronic Disease Management: Effective management of chronic conditions is prioritized to improve health outcomes and reduce the need for acute care services.
Data-Driven Decision Making:
Robust Analytics: Providers utilize data analytics to identify high-risk patients, monitor health trends, and implement targeted interventions that improve population health.
Performance Measurement: Metrics and benchmarks are used to evaluate provider performance and ensure accountability for quality outcomes.
Shared Risk and Accountability:
Financial Accountability: Providers assume financial risk for the cost of care, aligning their incentives with patient outcomes and promoting accountability for quality and efficiency.
Shared Savings Opportunities: Providers may share in the financial savings achieved through effective care management, rewarding them for delivering value-based care.
Care Coordination and Integration:
Integrated Care Delivery: Providers collaborate across different care settings to ensure seamless and coordinated care, reducing fragmentation and improving the patient experience.
Multidisciplinary Teams: A team-based approach to care delivery leverages the expertise of various healthcare professionals to address complex patient needs.
Improving Provider Work-Life Balance:
Provider Well-Being: The model supports the well-being and engagement of healthcare providers by reducing administrative burdens and promoting a sustainable work environment, recognizing that satisfied providers are essential for delivering high-quality care.
References
CMS Key Concepts in Alternative Payment Models: https://www.cms.gov/priorities/innovation/key-concepts/alternative-payment-models-apms
AMA Overview on Value-Based Care: https://www.ama-assn.org/practice-management/payment-delivery-models/what-value-based-care
APM Framework White Paper: https://hcp-lan.org/workproducts/apm-refresh-whitepaper-final.pdf
DISCLAIMER and PURPOSE: This discussion document is intended for training, education, and or research purposes only. The information contained herein is based on the data and perspectives available at the time of writing. It is subject to revision as new information and viewpoints emerge.
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