Payment and Delivery-System Reform — The Next Phase

After nearly a decade of experimentation with value-based payment (VBP), U.S. health care payers, providers, and purchasers are confronting uneven adoption of new care guidelines, modest early results, and stillunacceptable gaps in spending and quality. In determining what comes next, we believe it’s important to extrapolate from the lessons of these experiences to guiding principles for designing new approaches. It’s also essential to recognize that to truly redesign a system, one has to take a holistic approach and move multiple levers in concert, rather than fiddling with individual factors serially and hoping for a coordinated effect. Though we focus on tactics for private payers to consider, many of these principles and a holistic strategy could also be adapted to Medicare or Medicaid contexts.

We have observed, for example, that providers vary greatly in their commitment to VBP, appetite for financial accountability, and capability to improve care.1 Average results for a given VBP program therefore offer only limited information about the potential impact of initiatives involving partnering with selected providers. Payers and purchasers would do better to identify high-value providers with consistently strong performance and both favor them through mechanisms to increase their patient volume — such as narrow- or tiered-network products — and reward and ensure their continued participation by devising a sustainable business case within VBP arrangements. Unlike most current high-value networks that focus nearly exclusively on unit prices, value-based networks could favor providers on the basis of both quality and management of total health care spending. Smartly allocating resources and attention to high-performing providers, combined with exerting consistent pressure on fee-for-service prices and regulations, could induce greater competition and motivate lower-performing providers to focus and improve. Moreover, the risk in not differentiating among providers is that high-value providers who have taken political risks and made substantial management and infrastructure investments in valuebased payment may question those investments if they don’t see proportionate returns. Relying solely on providers’ instincts for “doing the right thing” cannot be the long-term strategy for reform. 

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