How COVID-19 Has Helped Us Move Toward Value-based Care

COVID-19 has demanded a heavy price from us all, and the healthcare industry has been no exception. If there is a silver lining to the pandemic, it is that the pandemic has uncovered important new evidence about the movement toward value-based care. In fact, over time, this information may revolutionize the way organizations approach patient care.

The Facts

In 2019, KLAS worked with CHIME to compile a report about the state of value-based reimbursement in the US. 93% of healthcare organizations were still using a fee-for-service payment model, and only 26% of healthcare revenue was coming from alternative payment models.

However, most organizations believed that value-based reimbursement would eventually outpace fee-for-service revenue. In fact, the majority of respondents believed this would happen within three to five years.

In 2020, we measured again the payment models that organizations are participating in. Fee-for-service had only decreased two percentage points, and two payment models showed the greatest percentage increases, each by 3%.

As you can see in the chart above, one model to see the greatest increase was the pay-for-performance model, which holds the least amount of risk. That news was not surprising.

Another payment model was capitation, which holds the greatest amount of risk. This piece of data is very encouraging. For years, organizations have hesitated to take on downside risk. So why would that appeal to any healthcare organizations during a worldwide pandemic?

The Silver Lining

Here we come to one of COVID-19’s silver linings. It turns out that healthcare organizations that participate in capitation payment models have fared much better during the pandemic than fee-for-service organizations. How can that be the case?

Yes, capitation is high risk. After all, it means that organizations are doing business in a completely different way than they would in a fee-for-service environment. But capitation is also predictable. Organizations on a fully capitated plan know exactly how much money they are going to make each month. There is no guesswork required. Healthcare systems don’t have to worry about how much CMS is going to reimburse them or what kind of revenue they can make from a particular procedure.

It is a well-known fact that many elective surgeries had to be canceled due to the rampant spread of the COVID-19 virus. And I can’t count how many conversations I have had with people worrying that their organizations would be millions of dollars in the red. Though many hospitals were overloaded with COVID-19 patients, the healthcare industry as a whole was suffering—perhaps just as much as the small businesses in the country that had to temporarily close their doors.
 
 But the smaller percentage of health systems that were fully participating in capitation experienced business as usual. The same amount of money that had always come in was still coming in. Even those who only partially participated in capitation did better than those that participated exclusively in a fee-for-service model.

Perhaps a few healthcare organizations have already caught onto this pattern and have started to capitalize on the virtues of capitation. Perhaps that is why we saw that percentage increase, however incremental that may have been.

The Future of Value-based Care

Once more healthcare organizations catch on to the monetary value of downside risk and value-based reimbursement, I predict that we will see an accelerated movement toward alternative payment models. KLAS is doing some research that we believe will facilitate that movement.

On June 22nd, we will be publishing an overview of the capabilities of all the major players in the population health sector. This will help organizations track important data about their patient population as they brave the transition to value-based care.

In August, we will be publishing a report detailing case studies of leading healthcare organizations who have successfully taken on downside risk, as well as the vendors who helped them get there. These details will help other organizations follow in the footsteps of brave healthcare pioneers.

Photo credit: David Pereiras, Adobe Stock