This article is the third in a multiple-part series exploring the intricacies of value-based care in the U.S. healthcare system.

Financial Models Driving Value-Based Care

This article is the third in our series on Value-Based Care. In our previous articles, we explored the disincentives faced by advocates and the history and current state of Value-Based Care and how its role in transforming the healthcare landscape by emphasizing patient outcomes and cost efficiency rather than traditional fee for service. Now, we will delve into the various revenue models within Value-Based Care, highlighting their pros and cons.

Full Schedules

The easiest revenue incentive related to Value-Based Care is a good process that can lead to higher patient volumes. While this may seem counter to the overall objectives, these increased encounters tend to be related to less acute needs such as follow-ups and routine care designed to intervene with patients before they present with complications related to higher poor outcomes. There are no changes needed at the facility or revenue cycle level. However, there is potential patient frustration if they cannot see their provider in a timely fashion.

Capitated Payment per Patient by Payors

Capitated Payments is a revenue model in which healthcare providers receive a fixed amount of money per patient from payors, regardless of the number of services provided. This model focuses on preventative care and provides immediate and predictable revenue, but it may generate less revenue overall and create incentives to withhold care from patients. Further, without a well-thought-out plan for outliers, a few high-cost patients can disrupt the model.

Traditional Billing for CPTs

This model includes billing for Chronic Care Management (CCM), Transitional Care Management (TCM), Principal Care Management (PCM), Remote Patient Monitoring (RPM), and Care Coordination & Care Planning. This is an easy revenue model as it works with the current revenue cycle and billing process, and revenue is guaranteed. However, there may be reluctance among providers, especially specialists, to participate. Further, different payors may reimburse differently, if at all, and the reimbursement rates tend to be low.

Shared Savings

A Shared Savings model is a revenue model that allows providers and payors to share the savings achieved from reducing healthcare costs while maintaining or improving the quality of care. This model has a potentially strong upside as everyone has a stake in the game, and metrics are well defined. However, revenue is not guaranteed, and there is a need to verify results reported between partners. Additionally, agreeing on a baseline that does not change over time can be challenging, and a few high-cost patients can disrupt the model.

Bundled Payments

Bundled Payments is a revenue model that encourages efficiency by providing a single payment for all services related to a specific episode. However, revenue is not guaranteed, and there can be a long tail on revenue, especially with retrospective bundles. It can be challenging to determine what constitutes an episode as well as what services are included as part of that episode. Further, distributing the bundle effectively to all caregivers, and as patient choice cannot be subverted, it may be difficult to encourage patients to see participating providers. Additionally, there is a need to remain vigilant about avoiding Stark violations and, like other models, a few high-cost patients can disrupt the bundle.

Conclusion

Each revenue model within Value-Based Care offers unique advantages and challenges. Healthcare providers must carefully evaluate these factors to determine the best approach for their practice. By understanding the nuances of each model, providers can make informed decisions that align with their goals of improving patient outcomes and achieving cost efficiency. Ultimately, the success of Value-Based Care depends on the ability to balance these models effectively and adapt to the evolving healthcare landscape.

About the Author

Patrick Kelly is the President and CEO of 4th Season Consulting. With over 20 years of experience in value-based medicine, population health, and care management, Patrick has led numerous successful initiatives in the healthcare industry. His expertise spans various roles, including CIO/CTO at Phytel, Loopback Analytics, and MPOWER Health, as well as Vice President of Information Systems at Catalyst Health Group.

About 4th Season Consulting

4th Season Consulting specializes in the unique needs of the healthcare industry by providing a wide range of consulting services including business intelligence, custom development, IT support, cloud infrastructure, HIPAA and compliance consulting, and digital marketing. The 4th Season Consulting team brings a depth of expertise tailored to the unique needs of healthcare providers, from solo practitioners to large organizations. All without contract minimums or long-term obligations.