Value-Based Payments: Pay for Reliable Services, Good Outcomes at Reasonable Costs

Submitted by on Monday, December 16, 2013 - 12:11

What do we even mean by “value-based payments”? Technically, it means we’re paying for value, but what is value? Some have tried a quasi-mathematical approach by dividing quality into cost. However, the numerator is defined in either stars or percentage of quality goals met, while the denominator is defined in dollars. So what does the division of one into the other produce?

Ultimately, what value really means is that the services received are reliable and produce good clinical outcomes, and the cost is reasonable. Hence value is not the division of two numbers, but rather the union of two metrics, quality of care in the context of cost of care. Today’s mostly fee-for-service payment system divorces the two metrics by paying without any consideration of the outcomes of the services delivered. And so “value-based payments” (VBP) are being introduced to establish a link between the two metrics in a formal way that ties the outcomes of care to the payment of services that produce those outcomes. There are different forms of VBP that are being piloted and tested in different parts of the U.S. and time will tell how effective each can be and in what circumstance. While there is often little appetite to innovate with payment models, the shift to VBP must include significant experimentation so that we don’t close doors that could prove even more beneficial than the ones currently being cracked open.

The transformation of the industry will take time, and this phase is the most critical because until payment changes to tying the outcomes of care with the price of services paid, physicians and hospitals will have few incentives to improve their overall performance.

This week, follow us on our Facebook and Twitter pages as we take a closer look at value-based payments and take part in the discussion by using the #VBP hashtag.