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Payers, Hospitals Report Value-Based Payments Will Hit 60% in 5 Years
Amidst the fast-paced changes in health care payments, payers and hospitals now report that value-based reimbursement strategies will be used for the majority of payments in the next 5 years.
The progress towards value-based reimbursement was related in a new report commissioned by McKesson, titled Journey to Value: The State of Value-Based Reimbursement in 2016. A total of 465 payers and hospitals were surveyed by ORC International as a follow up to a 2014 study by McKesson that established a baseline for health care’s transition to value. In the 2014 report, McKesson concluded that use of value-based reimbursement strategies was rapidly increasing, and the 2016 report found that this trend has not slowed.
The report projects that, in 5 years, of all payment models within health plans, payers estimate that 59% will be a mix of capitation, pay for performance, and episodes of care or bundled payments. Bundled payments are estimated to grow the fastest, at a rate of 6% over the next 5 years, and will account for 17% of medical payments. Only about half of payers and just 40% of providers are ready to implement bundle payments, however, and only one-quarter have tools in place to automate the complex models.
Network management, another key component of value-based reimbursement strategies, has also seen a dramatic shift. Since 2014, more than 60% of payers have changed their network strategy, with 53% using tiered networks and 42% using narrow networks. More than 80% of payers say they are more selective about hospitals in their networks, with 75% of payers identifying care quality as a top driving factor. The majority of hospitals surveyed (63%) are now part of an Accountable Care Organization (ACO), an 18% increase since 2014. Participation in an ACO is a strong indicator of alignment with value-based care strategies.
Due to the speedy rise of the system complexity associated with value-based reimbursement, providers reported that they are struggling to meet their goals. Roughly 22% of hospitals are meeting their goal to reduce administrative costs, 26% are lowering health care costs, and only 30% are meeting care coordination goals. However, 60–78% of providers say they are not meeting their value-based reimbursement goals.
“Payers and providers are clearly beginning to scale [value-based reimbursement],” explained Rod O’Reilly, president of McKesson Health Solutions, in a press release. “The swift pace of change, coupled with the daunting complexity of these payment models, is putting extreme pressure on the health care system. As we move beyond pilots, the ability for payers and providers to automate the complexity inherent in these models will be a deciding factor to success.”
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