Understanding Provider Participation in Value-Based Payment

By Kelsey Brykman, Center for Health Care Strategies


Value-based payment (VBP) is an important lever in supporting care delivery transformation, especially for populations with complex health and social needs. VBP models move away from volume-based fee-for-service payment to explicitly incentivize high-quality and cost-efficient care. VBP can better support care delivery models and services that may not be typically or adequately reimbursed through fee-for-service, such as enhanced care coordination, non-traditional health care staff, and partnerships to address health-related social needs. While provider organizations are increasingly adopting VBP, many are reluctant to participate in payment models with downside risk even though these models may provide stronger incentives or flexibility for care delivery transformation than upside-only models. In upside-only VBP models, providers may earn a portion of savings if their costs are below a defined benchmark. In downside-risk models, providers are responsible for paying a portion of the costs above the benchmark if the benchmark is exceeded.  

To support the shift from volume to value-based payment, it is important to understand success factors in adoption and implementation of VBP models that include downside risk. The Playbook recently spoke with Bonnie Blanchfield, CPA, ScD, senior scientist at Brigham Health and assistant professor at Harvard Medical School and Harvard T.H. Chan School of Public Health, and Gregg Meyer, MD, MSc, chief clinical officer at Mass General Brigham Healthcare System and professor of medicine, Massachusetts General Hospital and Harvard Medical School, to learn more about their study that explores how and why five provider organizations across the country decided to participate in a Medicare accountable care organization (ACO) program, what success factors affect VBP performance and spread, and what this means for complex care.

Q: How can the shift from FFS to VBP improve care delivery for populations with complex needs?

A: B. Blanchfield: VBP is the perfect payment model to support care delivery for patients with complex needs because it incentivizes providers to take care of a population’s health. Under VBP, providers will spend money that they would not have spent on these patients under FFS, and patients with complex needs will benefit from more resources.

G. Meyer: One of the wonderful things about the volume to value transition is that it allows providers to focus on the patients who are going to benefit the most and in a way that, frankly, would not happen as much under FFS. It becomes incumbent on providers to do what they can to better support patients so they don’t come into the hospital over and over again.

Q: What challenges do provider organizations face in transitioning from volume to value-based payment?

A: B. Blanchfield: Most organizations receive both FFS revenue and revenue under VBP contracts. This creates constant tension for those who want to “make hay while the sun shines” (keep getting FFS until they can’t) and those who want to get ready for VBP. If effective, VBP reduces utilization and FFS income or shifts utilization to lower cost settings, also reducing FFS income. Organizational leaders need to recognize this and align incentives to motivate providers to shift behavior and provide value-based care. For example, an integrated health system can create physician compensation plans, such as shared savings or bonuses, to make it easy for physicians to do the right thing — to promote health, even if it is not high revenue generating.

G. Meyer: Another challenge is that in many regions of the country, FFS is the dominant payment model and still works for many provider organizations. The fact that it is not working for patients — particularly high-cost, high-need patients — is not necessarily front and center on organization agendas. A barrier is that one person's cost savings opportunity is another person’s revenue, which makes the transition state tough to manage.

Q: What factors did you find to be most important in driving provider organizations to pursue risk-based VBP models? Did any key findings surprise you?

A: B. Blanchfield: We had assumed that organizations that engage in VBP would need to have financial reserves to invest. VBP requires providers to have the infrastructure for population health management, including building up services that providers are not billing for. I entered this study assuming hospitals with more financial resources would be more likely to do VBP than those not as financially robust, but we did not find that to be the case. While finances were somewhat important, we did not find it to be the major driver to enter into VBP. It was a surprise to both of us that the motivating factors for VBP participation were more varied.

G. Meyer: Leadership commitment was clearly important. Leadership had to believe that VBP is the right thing to do and that they could make it work financially for the organization. At some point, providers will also recognize that VBP is the right thing to do and it will make their lives better. I’ll give you a concrete example. A typical schedule includes seeing a high volume of patients and reacting to what happens. There is always a patient who doesn’t just have high blood pressure, diabetes, cancer, or depression, but has all of the above. As a provider, I look at my schedule and know I’m going to spend all my time with this patient, may not be able to meet their needs, and will also be late for everyone else. It feels lousy because I know as a doctor that this patient needs me the most. VBP can allow a way out of this situation by bringing additional resources to bear to deliver better care in a way that would not make financial sense under FFS. So now, under VBP, I’m not managing that patient alone. I can get my care manager to help coordinate their care, make sure they get their medications, and connect them with a social worker. That momentum is powerful.

The local context is also a factor. One organization in our study basically said, “we felt like we had to do it because everyone else was.” That explains some of the clustering effect in VBP adoption — how we see clusters of activity in some parts of the country. In some locations, there is really no one stepping up and starting the move down the VBP path.

Q: How might VBP adoption vary for different types of provider organizations?

A: G. Meyer: There is no easy path to transition from FFS to VBP. Every organization is going to go through a transition state where they are in multiple payment models. We found that some provider organizations had resources upfront and were able to invest in things like integration, care management, and electronic health records. These types of organizations will not get financial return on investment (ROI) until they take on significant risk, and initially they will lose money because they are reducing FFS revenue.

Other organizations that did not have resources upfront for investments took on risk without really having the capability to manage patients in a risk model and would lose money for that reason. The hope was that they would make some money in risk arrangements and be able to invest in capabilities later. The key learning for us is that either way, provider organizations will go through a state where they may lose money.

B. Blanchfield: Organizations need to have patience because there is not going to be an ROI in year one. Providers entering into VBP need to be willing to wait 18 to 24 months before seeing the benefits. You cannot exit quickly, and you’ve got to give it some time.

Q: In what ways does the COVID-19 context create new challenges or opportunities for VBP adoption, particularly for supporting populations with complex needs?

A: G. Meyer: I think COVID-19 is going to be an accelerant. Organizations that were largely reliant on FFS during the shutdown saw their revenues plummet whereas organizations that were more value-based, especially in capitated arrangements, continued to get their payment, and actually did very well. Even organizations in shared saving arrangements are going to be able to recoup some of their losses. I think organizations that were sitting on the sidelines for VBP are going to have some real incentive to jump in. I also think some of the capabilities provider organizations rapidly developed during COVID, such as virtual care, serve organizations really well under VBP models.

Q: Are there any other opportunities for VBP to support care delivery innovation for populations with complex needs?

A: B. Blanchfield: I would like to see public policy push more in the direction of VBP. I think some regions of the country will need to have more mandates before providers are willing to consider VBP. If the public payer side mandates it, then the commercial side will follow. I also think home-based care such as remote patient monitoring and clinicians delivering care in the home make sense with VBP. Providers are dipping into this and hopefully as VBP programs spread, we will see more innovation and more patient-centered values in how and where we deliver care.