Healthcare Essay Example: Value-Based Payment in Managed Care

Published: 2022-09-23
Healthcare Essay Example: Value-Based Payment in Managed Care
Type of paper:  Essay
Categories:  Healthcare
Pages: 4
Wordcount: 1018 words
9 min read

As the cost of healthcare continues to increase and stakeholders concentrate on enhancing the quality of care and health outcomes, payers are focusing on value-based payment as one of the many approaches to inject value into healthcare delivery. Health insurers, including Medicaid, are working toward enhancing provider accountability for quality and cost of care, as well as leveraging managed care programs in creative ways for the achievement of the before mentioned objective (Berkman & Harootyan, 2003). The article explores value-based payment as a remuneration alternative for physicians. It is argued that the overreaching objectives of the value-based programs are to foster improved care for the population and individual health while lowering per capita costs.

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For nations within the Organisation for Economic Cooperation and Development (OECD), patients continue to be covered by providers, who meet their costs through conventional payment mechanisms, such as fee-for-service, fee-for-time, and capitation. Fee-for-service is a scenario where providers pay a fixed fee for the healthcare service delivered. Capitation is a mechanism where payers pay a fixed amount whereas fee-for-time is an arrangement where physicians received fixed income or salary on a regular basis.

In the OECD countries, fee-for-service remuneration accounts for over seventy percent of clinical payments, with the remaining comprising the alternative fee-for-service (Dlugacz, 2013). On the contrary, these conventional payment mechanisms have significant limitations and hardly support the success of the present health-system priorities. These mechanisms tend to generate undesirable outcomes, such as under-provision and over-provision of healthcare services. Apart from increased costs, the fee-for-service plan is not linked to quality outcomes and discourages physicians from working in teams. Capitation is also not tied to quality measures aimed at improving patient outcomes. Reforms on physical payment mechanisms are aligning with the changing needs of the population, such as the prevalence of disability, aging population, and chronic conditions, as well as in response to the widespread health-system objectives. One of the visible changes to the physician payment mechanisms is in respect to value-based aspects, which are centered on the quality of service.

According to Blobel et al. (2010), the healthcare industry is undergoing a transformation with reimbursement payment models taking the center stage. The traditional model for fee-for-service reimbursement is gradually being supplanted by the value-based concept, an approach that challenges the volume-based approach, which is closely linked to the fee-for-service. The methodology encourages providers of healthcare to deliver quality care at the most practical cost to improve the overall value of and access to healthcare. The most conventional remuneration model, the fee-for-service mechanism allows the reimbursement of physicians by third-party payers (government and insurance agencies) based on the volume of service offered, or the number of procedures completed. Reimbursements are unbundled and remunerated separately, and so third-party payers are billed per visit, test, procedure, consultation and so forth, despite the possibility that some operators may not be necessary or backed by evidence-based data. Such limitations are what the value-based alternative sought to address.

As a health-care philosophy, value-based care is achieved when physicians deliberately consider the quality of care delivered, and the general patient care outcomes subject to cost-efficiency. In the model, specialists and doctors regard best practices when handling patients, because their reimbursements are based on efficiency and quality offered. Value-based care models foster an all-inclusive team approach to healthcare, demanding communication and coordination between physicians. When successful, teams are awarded incentive payments for the provision of quality care to patients at a lower cost. Juggling between outcomes and cost is well-illustrated in the lens of Hospital Value-Based Purchasing (VBP) within the frameworks of Medicare. The program rewards high performing facilities with incentive payments while penalizes lowly-performing hospitals. The approach is a potential loss as few facilities can support its implementation and may threaten the long-term sustainability of hospitals, in financial terms.

The VBP program, formulated under the Affordable Care Act, supports a pay-for-performance methodology for the remuneration system, accounting for the largest health care spending. The approach affects payment of inpatient stays, and in the U.S. it accounts for over three thousand hospital stays throughout the country. Performance metric under the value-based system is based on the performance of each measure and comparative evaluation of the current facility's performance relative to the baseline period. Measures of the value-based program are classed on the basis of quality domains, which vary periodically. These categories include patient experience, clinical care process, efficiency, patient outcomes, and patient safety, which are based on the use of achievement benchmark and threshold to ascertain clinical effectiveness.

On the overall performance, Saul, and Somerville (1999) assessed industry practice, which is that evidence-based data on healthcare at the bedside enhances both patient outcomes and hospital performance, translating relatively to better scores and higher ratings. According to Saul and Somerville, recent evidence-based nursing procedures coupled with real-time systematic guides for competence had a tremendously higher performance in comparison to national mean when financial data and value-based program were compared.

In conclusion, the value-based approach encourages physicians to regard quality in service delivery. The methodology prevents unwarranted procedures that contribute to increased cost for third-party payers. Highly performing organizations have demonstrated great performance in comparison to entities that do not employ evidence-data at the bedside. These revelations support value-based payment, which centered on evidence-based care, critical in informing clinical decisions at the immediate point of care. The approach not only contributes to improved patient outcomes but also reduces costs and increases profitability for third-party payers.


Berkman, B., & Harootyan, L. K. (2003). Social work and health care in an aging society: Education, policy, practice, and research. New York: Springer.

Blobel, B., Hvannberg, E. T., Valgerdur, G., European Federation for Medical Informatics., European Federation for Medical Informatics., & IOS Press. (2010). Seamless care, safe care: The challenges of interoperability and patient safety in health care : proceedings of

the EFMI Special Topic Conference, June 2-4, 2010, Reykjavik, Iceland. Amsterdam: IOS Press.Dlugacz, Y. D. (2013). Value based health care: Linking finance and quality. San Francisco, Calif: Jossey-Bass.

Saul, J. R., & Somerville, M. A. (1999). Do we care?: Renewing Canada's commitment to health: proceedings of the First Directions for Canadian Health Care Conference. Montreal [Que.: McGill-Queen's University Press.

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