The healthcare industry seems to be bogged down in a seemingly endless trek from volume to value. Many healthcare stakeholders have been waiting for a reliable, data-based progress report that will tell us whether our efforts to transform healthcare are working. Is value-based payment actually reducing the total cost of care or the growth in healthcare spending?
As the saying goes, be careful what you wish for. A newly released study conducted by the Healthcare Financial Management Association, Leavitt Partners, and McManis Consulting, with support from the Commonwealth Fund, analyzed a variety of factors that may be influencing the total cost of care in healthcare markets across the U.S. We finally have some outcomes data; it's not necessarily the results we hoped for.
In a nutshell, researchers found no correlation between the prevalence of population-based value-based payment models and total cost of care. Furthermore, a higher level of VBP model penetration had no statistically significant impact on quality outcomes. In other words, neither the cost nor the quality of care was affected by the prevalence of VBP, whether penetration was practically nil, or whether it approached 40%, as was the case in some markets studied.
Does that mean we've been on the wrong track? Can we now hold onto fee-for-service with a clear conscience? In a word, no. Value, as a principle, remains as solid as ever. In fact, it's imperative. It's the structures we're experimenting with to deliver value that need work.
Researchers found that most VBP models lack strong financial incentives for managing the total cost of care—that is, little or no downside risk is built into these payment models. Furthermore, we can't point fingers only at the payers who designed the models; providers are in no hurry to move beyond upside-only models. Neither are employers interviewed for the study, who were reluctant to change benefit design or do anything to limit employee choice and thereby risk weakening a recruitment tool. In what is becoming an increasingly tight labor market, that's unlikely to change anytime soon.
Bottom line: All major stakeholders bear some responsibility for our collective lack of progress in improving value. Many of us apparently believe in value in theory, as long as it's not changing the landscape of our own backyards.
This study shed some light on another issue that has generated more heat than light—the impact of industry consolidation on the cost of care. Researchers found that markets that were less consolidated, or less aligned vertically, tended to have higher costs. Independent specialty physician groups, specialty surgical facilities, and hospitals often competed directly with health systems in these markets. Patient care also tended to be more segmented in higher-cost markets, with different income groups receiving care from different provider networks.
Conversely, costs were lower in markets with well-organized provider networks. Consolidation had left between two and four health systems with good geographic coverage as competitors within the market. Physicians were typically employed by or closely aligned with the health systems. And the market usually included at least one integrated delivery system with a health plan, a hospital, and clinician capabilities.
The takeaway message is that when assessing the impact of market characteristics on the cost of care, the type of competition may be more important than how much competition is in the market, per se. So those who start raising the specter of monopoly power as consolidation reduces the number of competitors in a marketplace would be well advised to consider the data.
This study reveals that—when it comes to reducing the total cost of care—the devil is in the details, as it usually is. Not all VBP models are beneficial; nor is all consolidation risky.
Armed with this knowledge, providers and payers can choose to move forward with more effective, risk-based payment models. Policymakers can choose to enable a degree of industry consolidation rather than blocking it. Or we can all continue to spin our wheels, stuck in the middle of a transition that has no end in sight. The choice, as always, is ours.