Value-Based Payments: But Is There Any Value for Doctors?

Leigh Page


October 08, 2015

In This Article

What's the Impact on Hospital-Employed Physicians?

Hospital-employed physicians have their own perspective on value-based payments. Unlike independent physicians, they have to wait for their employers to make a move, and at that point, they'll notice a change in their compensation formulas.

Phyllis Floyd, MD, senior advisor at BDC Advisors, a healthcare strategic consulting firm based in Miami, helps hospitals make the switch to value-based approaches. This switch, she says, reduces the impact of productivity on compensation formulas while raising the role of value-based measures—for example, patient satisfaction, process-oriented targets, and such targets as lower readmissions and use of the emergency department.

Dr Floyd says many hospitals have been slow to make these changes, but there's also a danger in moving too quickly. "Moving too fast toward value-based payments would ignore the need to ensure high productivity in the meantime," she says.

She recommends altering payment formulas in stages, on the basis of the proportion of services that are in value-based contracts. "The switch must be done in steps to keep employed physicians aligned with the health system," she says.

Dr Floyd also helps hospitals sponsor clinically integrated networks (CINs), which are commercial ACOs. She says this is a high-growth area. "We've done a lot of work helping hospital systems form CINs," she says.

CINs have more leeway than Medicare ACOs in setting savings targets and keeping patients in the network. But because they bring together competitors, including independent doctors, CINs fall under antitrust laws that require use of value-based approaches and limit how much doctors can be paid, Dr Floyd says. Even though a hospital is often the sponsor, the CIN must operate as a separate entity with a separate governing board.

Within CINs, Dr Floyd says, employed physicians work alongside independent physicians on agreed-upon goals. She adds that the CIN's ability to bring together a wide variety of providers makes it possible to sponsor bundled payments. In a bundled payment for hip surgery, for example, the orthopedic surgeon shares a set payment with other parties, such as a rehabilitation facility and the hospital or ambulatory surgery center running the operating room.

How Will Specialists Be Affected?

Right now, specialists aren't the focus of value-based arrangements, but they may have a greater role in the future.

A 2014 study[4] surveyed ACO leaders and found that although their current focus is on primary care physicians (PCPs) and such issues as taking care of chronically ill patients, they eventually want to turn their attention to surgeries, where they might try to reduce the number of inappropriate surgeries. The study reported that surgery represents almost one third of healthcare expenditures and one half of hospital expenditures.

However, there are many obstacles to applying value-based concepts to surgery, according to the lead author of the study, James M. Dupree, MD, a urologist at the University of Michigan Health System and an assistant professor at the university.

Dr Dupree says there's no reliable performance measure on the number of surgeries for a given population. "Surgical utilization is a pretty tough measure to know what the right number is," he says. "Even appropriateness of surgeries is hard to be specific about." Instead, he says, surgeons might be measured for the quality of their outcomes or their communication with PCPs.

Some observers believe that many specialists—from surgeons to internal medicine subspecialists—will remain on FFS payments.

Some specialists, however, can function like PCPs in value-based arrangements. Oncologists, for example, are getting value-based payments for managing cancer patients in a patient-centered specialty home or a specialty ACO.

Keegan adds that large employers, such as Walmart, are signing contracts for surgery with large practices, such as the Cleveland Clinic, to provide care for a specific rate in a value-based arrangement. These providers can show better surgical outcomes than the national average and charge a flat rate that's competitive with a local surgeon's rates, even when airfare is factored in.

Although ACOs aren't expected to reward specialists with a great deal of shared savings, they can offer them more referrals from PCPs. Dr Damle says PCPs will look for specialists with higher value-based scores and work more closely with them than in the past. "In the new ACO, we're going to look for high-quality, efficient specialists," he says, adding that plans are also barring specialists with low value-based scores from participating in narrow networks.


Miller says that the basic notion of value-based care is sound, but there are still a lot of flaws in the approach. He recommends learning about value-based techniques and even starting to practice them, but holding off on investing a lot of money or signing up for many of the programs. "Many things can go wrong," he says.

Dr Hughes, the Kansas general surgeon, agrees that value-based medicine isn't just a passing fad, but he believes it will take more time than proponents anticipate to create viable programs. "Value-based medicine does seem to be working at a few institutions, like the Cleveland Clinic and Kaiser Permanente, which have learned how to systematize medicine," he says. "But that's not something other organizations can do overnight. It could take many years."

Keegan also acknowledges flaws in the approach, but urges physicians to start familiarizing themselves with it. "If you start now, you'll be farther along on the learning curve," she says. "Even if there are still no value-based opportunities in your market, you can begin to understand how to use cost and quality metrics when they're needed."


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