Another Voice: Value-based health care will help control costs

By Larry Zielinski

Earlier this month, the Trump administration took a step away from value-based health care by canceling or scaling back three innovative bundled payment models. It was an unfortunate step backward.

Most experts agree that one of the basic, underlying reasons for our high costs and resultant high health care insurance premiums is the way we pay our doctors and hospitals. Fee-for-service medicine incents doctors and hospitals to do more – more tests, more procedures – and the more expensive those are, the more we pay for them.

The Affordable Care Act – Obamacare – primarily focused on establishing national health insurance standards and increasing coverage rates. A less discussed portion of the Affordable Care Act began to deal with changing the way we pay for care.

Accountable care organizations (ACOs) are networks of hospitals, doctors and other providers that are responsible for the total cost of care for a designated population of patients. Over 30 different quality indices are measured to ensure care isn’t rationed. If an ACO is successful in providing care below budget and quality measures are achieved, the network shares in the savings. There are over 500 Medicare-sponsored ACOs operating in the country. The private market has copied the initiative so that over 900 ACOs exist today, covering 10 percent of the population.

The Affordable Care Act also encouraged the growth of bundled payment models, where hospitals and affiliated providers are paid for the total cost of a procedure, like joint replacement, over the entire episode of care rather than for each individual interaction with the health system. Providers have to keep costs under the bundled amount, so it discourages the use of high-cost procedures and supplies and encourages more rational spending. There are over 1,000 bundled payment models in use today.

Initial results from these new models are mixed. Overall quality has improved, but costs are only down marginally, and many of the new networks are struggling to hit targets. That is not surprising; in a system as complex as U.S. health care, changes like these will need to be continually improved over decades, not a few years.

In an overwhelming bipartisan vote, Congress also passed the Medicare Access and CHIP Reauthorization Bill of 2015 (MACRA), which is changing the way physicians are being reimbursed in a similar fashion. MACRA will encourage doctors to participate in advanced payment systems like accountable care organizations.

Value-based health care is here to stay in America, and we should all be appreciative of the seeds laid by the Affordable Care Act and MACRA to make it happen.

To finally deal with the underlying reason for high medical costs, it is up to Congress and the administration to strengthen these nascent payment systems, and get us off fee-for-service medicine once and for all.

Larry Zielinski is executive in residence for health care administration at the University at Buffalo School of Management Jacobs Management Center.

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