Value based healthcare is a provider reimbursement model that every health insurer should be conversant with. For many years now governments, providers, insurers and other stakeholders of healthcare across the world have mulled over how to best deliver care. As the population ages. it brings with it the challenges of chronic diseases and spiraling healthcare costs, thus leading to discussions around how to effectively deal with these challenges. The healthcare expenditures are continuously growing, between 2000 and 2017 the global health spending in real terms grew by 3.9% a year while global GDP grew only 3.0%. As the costs continue to escalate, biting off a major chunk of a nation’s economy, stakeholders have been forced to find a better system that will be sustainable for a long time to come. Though, healthcare providers have tried to focus on provisioning of quality care in the current fee-for-service model but so far it has been a shotgun approach. Here emphasis is placed on the quantity of services like investigations, procedures for a patient and different means of financing. Providing excessive care to patients who are often subjected to unnecessary or redundant tests and procedures has burdened the healthcare system more due to the high costs of those services. Consequently the focus on a high quality of medically necessary care to treat patients is gone.
“Value based care” a newer alternative to the current fee-for-service model has now started to emerge throughout the world, in response to rising costs, declining patient satisfaction and a growing demand to reform the system. Even though there are many challenges in this model, that will be required to overcome before its full potential is realized, value-based healthcare can definitely be a sustainable answer to the existing challenges of an inefficient and expensive health system.
What is value based care?
Michael Porter and Elizabeth Olmsted Teisberg, first coined the term “value-based healthcare” (VBH) to describe outcomes of health treatment relative to cost. In contrast to a fee-for-service or capitated approach, where the payment to providers of healthcare i.e. hospitals and physicians is based on the quantum of healthcare services delivered, the value-based healthcare is a model in which patient health outcomes are the basis on which providers are paid. Providers who take initiatives to provide a comprehensive support to patients in improving their health and live healthier lives, reduce the long-term effects and incidence of chronic disease in an evidence-based way are incentivized in the value-based care agreements.
What is driving value based care for insurers and other stakeholders in healthcare?
An ageing population, rising prevalence of chronic diseases, improvisations in medical technology and newer therapies are creating a sustainability pressure on healthcare systems and exposing their main Achilles heel i.e inefficiency. Consequently the systems around the world are witnessing spiraling costs and large variations in outcomes, medical inflation, declining reimbursement and difficulties in delivering high standards of care due to resource constraints. The need for maximizing long-term outcomes is thus driving payors worldwide to establish value-based pricing and reimbursement policies and undergo a progressive transition from procedure-payments to episode-payments. For example Germany and the Netherlands have introduced such a system for chronic diseases such as diabetes that have complex and long-term post-discharge care needs.
How does value based care reduce cost?
Expensive tests and services may not always be unavoidable, but they are no longer the first choice. A value-based healthcare system in its true sense benefits all stakeholders of the health system which are patients, providers, payers, vendors, and the society as a whole.
Most importantly,
Patients achieve better health at a lesser cost: Managing a chronic disease like diabetes, high blood pressure, or obesity can be expensive for patients, more so if preventive services are not covered by insurance. Value-based care models stress upon supporting patients recover from illnesses quickly and prevention of chronic disease or their complications. Better health outcomes lead to fewer physician’s visits, medical tests, and prescriptions as long-term health of the patient improves.
Providers experience improvement in patient satisfaction and higher efficiencies: Prevention-based patient services offset the time providers spend on chronic disease management as better quality and higher patient engagement leads to better outcomes. Irrespective of whether a provider is for-profit or not for profit, higher value per episode of care is incentivized under a value-based care model. For example, based in the US, a provider group implemented a cardiovascular care line in a specialized heart clinic while it transitioned to value-based care from the traditional fee-for-service model. In the first three years of operation, the provider experienced a per-patient cost-of-care savings of $5,500 and an overall cost-of-care savings of $1.7 million for the 321 patients enrolled in the program.
Payers have better control over their costs and tend to gain from reduced risk: As a larger population becomes healthier with preventive care, fewer claims can be expected which translates into cost savings in the insurer’s premium pool. Bundling of payments to provide comprehensive cover for patients with chronic conditions under value-based payment models allows payers to increase their efficiency. A point in case here is of a US based insurer, Aetna.
Aetna joined with Inova, a health system serving more than two million patients in Northern Virginia in 2013 to form a joint venture called Innovation Health. Ever since its inception, IH which is focused on better consumer experience and care coordination, has experienced many improvements, that includes metrics like:
- 14% fewer inpatient admissions
- 9% fewer radiology visits
- 5% generic prescription use
The company has also been able to save as much as $675 per member per year from specific products.
Need for restructuring of healthcare delivery and structured data; the key roadblocks to data driven healthcare
While the transition from a fee-for-service reimbursement model to a value-based model may not be an easy one for providers, it is the future and also a shift that’s there to stay. The fee for service model causes healthcare provider systems to function the way other many other commercial businesses would, i.e. with the objective of maximization of revenues, sell as many products as possible. Consequently, there is less focus on determining the most efficient and effective care strategy for the patient. Thus, one of the most significant challenges in value-based care transition will require a fundamental restructuring of the way health care is delivered and not just incremental improvements.
Difficulty collecting and reporting patient information: When payments are linked to quality and performance outcomes, underlying data should be reliable. Since value-based payment mechanisms mostly rely on complex data capturing of data using electronic health records or a digital form is required, and the data must be accurate, complete, and timely in order to ensure reliable results. Ensuring accurate and reliable claims information and ability to detect improper claims by the payers is also critical. Unavailability of longitudinal patient health information is a huge barrier to provisioning of effective preventive care and easy access to patient records and data is critical for successful transition.
Strategies to embrace value-based care
One of the most important factors of success of value-based care is to align the interests of patients with the care provider. An important mechanism to achieve this objective is by shifting the emphasis of healthcare financing towards the quality of care and clinical outcomes instead of the volume of healthcare services delivered. In a value-based arrangement, a healthcare provider like a primary care physician instead of being paid for the number of times a patient visits them, would be paid based on the outcome of treatment or a procedure for a patient. For example, enabling diabetic patients to manage their own health issues more effectively, achieve a healthy HbA1C and weight. In order to implement this, payers will need to create and enter into newer contracts with their partnering providers that will position providers to meet quality performance benchmarks and the insurers/payers will need to identify the best pay-for-performance strategies.
Bundled payments, accountable care organizations, risk-based contracts and patient-centered medical homes are some of the strategies that payers in the US have adopted while moving away from fee-for-service reimbursement.
Use of digital tools and technologies: An important initiative that insurers can take is to encourage Payers should also encourage the providers in their network to use clinical decision support tools to help reduce their medical waste. In the healthcare systems of today, financial success of system participants does not necessarily equate with patient success. Hence creating a positive-sum competition between providers on value for patients should be a fundamental strategy for health care reforms in any country.
Digital therapeutics are a cost-effective, patient centric, evidence based strategic tool for implementation of value based care
Implementation of value-based care may be challenging not only for providers, but payers too face certain challenges in defining and scoping out the performance metrics for the providers for reimbursements. For example, in case of bundled payments there are specific challenges that payers may face as certain costs may be outside of the control of the provider. For example, outcomes in the case of diabetes are highly dependent on the lifestyle behavior of a patient. So, preventive care and adhering to a wellness plan may not be much under the control of a physician. In such cases payers and providers may have conflict denial of claims. Digital therapeutics can be an effective starting point in implementing value-based care in many such situations.
Digital therapeutics (DTx) deliver evidence-based therapeutic interventions to patients that are driven by high quality software programs to prevent, manage, or treat a chronic disease. They are used independently or in conjunction with medications, devices, or other therapies to optimize patient care and health outcomes. DTx is a globally emerging technology that empowers patients and healthcare providers with intelligent and accessible tools for addressing a wide range of conditions through high quality, safe, and effective data-driven interventions. Being digital in nature, it can act remotely, collect vast amounts of data from which a healthcare professional can draw real-time insights, thereby allowing care to be personalized for better outcomes.
DTx can be a more effective tool in implementing value based care than traditional interventions because:
- It is possible to personalize it for every patient and it is two way interactive
- Information dissemination to the patient can be done in an engaging and rewarding manner
- It is possible to elicit, record and use patient responses for mid-course corrections and refinement of therapy plans
- Real-time adaptation to specific needs of a patient or interventions at vital points during the patient journey is possible with DTx.
- The technology is scalable and can be used for a large population in minimal resources
Patient education and coaching for chronic diseases like diabetes should be tailored to the patient’s needs and daily routines. Digital therapeutics have shown promising results in solving the issue of therapy adherence and behavioral modification because personalization is key to the success of such programs. Scalability of DTx makes it an inherently cost-effective, patient centric strategy for value based care.
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