Health care in the United States is changing as the industry shifts to a financial model based on value rather than volume. Driving this sea change is what is called the “triple aim" of optimizing the health-care system by simultaneously focusing on patient quality and satisfaction, improving health-care outcomes and reducing the per capita cost of care.
Transforming the massive health-care system is no small task. One of the most important health care trends today is to control costs by keeping people healthy and out of the hospital, notes Deloitte's 2019 U.S. and Global Health Care Industry Outlook.
A New Paradigm
The old fee-for-service model, in which health-care providers generate more revenue when patient volume increases, is being replaced by a value-based model designed around the objectives of the triple aim.
“A value-based model is any payments system that is tied to some kind of an outcome, whether it be clinical or financial, rather than to a particular fee for service," says Eric Olmsted, principal at OHA Consulting LLC, which specializes in value-based analytic solutions. “This runs the gamut from payment for an episode of care, such as a knee surgery, all the way through to full global capitation of provider costs in an accountable care organization (ACO), such as Medicare."
Value-based models are now an inescapable reality, and they're here to stay, adds Dave Wofford, an associate principal at ECG Management Consultants. “That's because the runaway cost growth that we've experienced for decades has resulted, predictably, from our traditional third-party, fee-for-service payment model," he says.
One of the primary goals of the triple aim is to improve population health by focusing on wellness and outcomes. “Population health refers to the practice of thinking and acting proactively to manage health for a defined population of patients," says Wofford. “This is opposed to the traditional model in which care is delivered episodically, when the patient determines that something isn't right."
Properly executed, Wofford adds, the value-based model is much more effective. But, he says, reforming the traditional status quo is “much harder to pull off."
With a value-based system, there is an incentive for providers to be proactive, and to avoid adverse health outcomes that could result in higher costs. Under the new rubric, there is less financial incentive for having a patient end up requiring surgery or hospitalization. “I think the best way to describe population health focus is that it is about taking a proactive approach to health care, as opposed to the reactive approach to health care in the fee-for-service world," says Olmsted.
Shifting the focus of providers, insurers and patients on to better outcomes, rather than on reacting to adverse health issues, is a radical transformation. “It turns the traditional business and care models upside down," says Wofford. “For example, health system executives who used to think in terms of 'getting heads in beds' must learn to regard the hospital as a cost center."
This change in thinking means, in part, that the delivery of patient care is moving toward less expensive non-physician providers, such as physician's assistants and nurse practitioners.
Olmsted says the value-based model also puts more pressure on physicians and health-care providers to consider resource optimization when making treatment decisions. “If you're a surgeon, you have a tendency to think that by performing surgery on a person, they're going to get better," he says. "But, in some cases, surgery doesn't do anything for the patient."
Patients also are increasingly involved in decisions related to their own care, from choosing where to have to surgery to deciding on where to spend their last days. One way that patients are taking more control of their own health care relates to end-of-life decisions. National Healthcare Decisions Day, for example, is dedicated to helping people understand the importance of advance care planning.
The new health-care paradigm means that health-care providers and insurance companies have to work together more closely. “These value-based models invariably involve the provider assuming responsibility for some of the risk that payers have historically borne," says Wofford. “For providers to manage that risk, they need access to cost and outcomes data that often must come from the health plan, particularly when managing costs generated by multiple providers who aren't able to share data directly."
I think the best way to describe population health focus is that it is about taking a proactive approach to health care, as opposed to the reactive approach to health care in the fee-for-service world.
—Eric Olmsted, principal, OHA Consulting LLC
Another impact from the shift to a value-based system is that traditional insurance is being replaced by employers who self-fund their health insurance, and by health-care providers that only take direct payment, not insurance.
Businesses are looking for ways to rein in skyrocketing insurance costs. Olmsted says value-oriented solutions range from small employers working directly with primary care providers to bigger companies transferring all of their risk to a local health system.
While large, self-insured employers have the clout to negotiate bundled-payment contracts with top hospitals, smaller employers need to work with a partner that can give them similar bargaining power. For that reason, businesses are increasingly partnering with companies that can help self-insured employers deliver health-care benefits to their employees by negotiating prices with the provider.
Although the shift from a fee-based to a value-based health-care model is ongoing, it is gaining momentum. “It is imperative for stakeholders across the health-care ecosystem to collaborate around a whole-life approach to funding and delivering sustainable health care," says the Deloitte report. “Collaboration should be key."
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