Value-based care is a health care delivery model in which providers, including hospitals and physicians, are paid based on patient health outcomes. This changing mindset serves as an important shift from the traditional fee-for-service payment model – where providers are compensated based on the volume of health care services they deliver, such as the number of visits and tests ordered for a patient. In contrast, value-based care aligns payments with the quality of care patients receive and achieving desired outcomes of better health. Ultimately, this shift to value-based care delivery systems supports better care for patients, better health for populations, and more efficient and effective spending.

While the move toward value-based care continues to be pursued in the private sector, the signals were mixed, at best, for Medicare which accounts for 20 percent of all health care spending. The Obama Administration promoted value-based care and actively pursued a goal for Medicare to eventually pay providers more for quality of care instead of quantity. However, during their first year in office, the Trump Administration sent mixed signals about whether or not this pursuit of value-based care solutions would remain a priority for Medicare.

For example, in September of 2017, the Centers for Medicare & Medicaid Services (CMS) released a Request for Information seeking input on the future direction of the agency’s Innovation Center, which develops and tests different types of payment models, including value-based care models. Just two months later, however, CMS also canceled the mandatory hip fracture and cardiac bundled payment models, which would have transitioned away from fee-for-service to value-based care by paying multiple providers with a single lump-sum payment for a complete episode of care.

However, as we start 2018, value-based care supporters have reason to feel good that the Trump Administration will continue to pursue value-based care payment structures in Medicare, thanks to the confirmation of Alex Azar as Secretary of the Department of Health and Human Services (HHS). In his Senate confirmation hearing, Azar outlined four goals for his tenure, one of which included value-based care:

…we must harness the power of Medicare to shift the focus in our health care system from paying for procedures and sickness to paying for health and outcomes. We can better channel the power of health information technology, and leverage what is best in our programs and in the private, competitive marketplace to ensure the individual patient is at the center of decision making and his or her needs are being met with greater transparency and accountability.

With this public statement of support, we can expect 2018 to be a year of renewed focus by both HHS and CMS on the shift to value-based care in Medicare. Medicare Advantage Plans, offered by private companies approved by Medicare, could also see broadened value-based insurance design models available for participants in the coming year. 

However, value-based design is still in its infancy, and there are three big challenges that will need to be addressed to enable further progress – agreeing on a definition of “value,” standardizing data reporting, and investing in infrastructure.

First, the health care system needs to come to an agreement on the definition of “value” so there is uniform understanding on what quality patient care really is. Unlike the fee-for-service traditional model, value-based care is driven by data, and there is an array of measures that providers currently report to different payers – for example, hospital readmissions or adverse events. However, there are currently no universally agreed upon measures for what constitutes value and, as CMS has said, there are too many measures, most of which focus on process and not on outcomes. Ultimately, the government needs to align around a shared definition of “value” to enable further development of value-based payment models – and we should expect to see CMS work to better define “value” in 2018.

The second challenge for CMS will be standardizing outcomes reporting requirements. Currently, providers are required to submit data in different formats from different payers. This can result in inefficiencies and added costs for providers and ultimately takes time away from patient care. 

Third, in addition to streamlining measures and standardizing submission, a move to value-based care will also require investments in infrastructure, including electronic medical records and analytics software, and a continued shift from the CMS Innovation Center to test new demonstration models that focus on outcomes and patient care. 

With renewed federal support in 2018 thanks to Azar, the shift to value-based care will continue in the Medicare program. This year, we can expect to see CMS work to tackle these challenges and, as a result, to continue their pursuit of value-based design models that will reimburse providers based on the desired outcome of better health.

Brittney Manchester
Brittney Manchester

Brittney Manchester, a health policy and communications expert, is a senior associate director in APCO Worldwide’s health care practice. She is based in the firm’s Washington, D.C. office. Read More