The financial strengths of value-based care

Kristin Russell, M.D., MBA

Associate VP, Clinical Transformation

Bio

Dr. Russell is a senior physician executive who leads a team focused on developing an enterprise-wide approach to health measurement designed to drive innovation and organizational alignment in the service of improving consumer-centric health outcomes. Prior to joining Humana, Dr. Russell was a faculty member at Harvard Medical School and a practicing psychiatrist.
The COVID-19 pandemic will forever be defined by intense struggle. That struggle, of course, runs the gamut of care delivery, from access to outcomes to satisfaction.

The financial struggle among healthcare practices became just as evident, but not for all. Not for those in value-based payment models, where capitated payments provided a steady source of income that enabled practices to fend off job cuts and shuttering businesses.

To help solidify the financial footing at the pandemic’s height in 2020, Humana accelerated value-based and quality recognition payments. Reducing fiscal concerns helped practices keep their focus on patient well-being, which is at the heart of any clinical approach.

Practices’ adaptability amid adversity to maintain critical connections and monitor their patients contributed to higher frequencies of preventive care and lower usage of acute care services among Humana MA members cared for by value-based physicians. Additionally, value-based primary care physicians reduced avoidable hospitalizations (those that, without successful management, might require hospitalization) by 11% over their non-value-based colleagues, keeping such hospitalizations to 37 per 1,000 members.1

The combination helped lead to an estimated medical cost savings of 13.4% compared to Original Medicare. That percentage amounts to a $3.1 billion reduction in medical costs that would have been incurred by value-based members during 2020 had they been enrolled in Original Medicare.10

Proportion of healthcare spending paid to primary care physicians1

 

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Claims and capitated payments (in cents per dollar)1

Why it matters:

The financial trajectory of the traditional non-value-based care model is widely considered to be on a downward spiral. Its descent is driven by poor patient health, high-cost procedures to diagnose and treat often-preventable conditions and operational inefficiencies. Those factors helped spur development of alternative payment models such as value-based care that emphasize quality over quantity of care.

The success of value-based care hinges on effective progression from one step in the care-delivery model to the next. Increased access leads to improved outcomes, which fosters satisfaction and drives down costs to the healthcare system as a whole.

In turn, savings are spread among members in the form of added primary care practice and plan benefits—such as home and lower premiums. Value-based physicians receive shared savings for the quality care they provide; 75% qualified for such payments in 2020.1

In fact, physicians in value-based contracts with Humana receive more of the overall healthcare dollar—encompassing medical claims and capitation, bonus and surplus payments—earning 17.5 cents of every dollar spent compared to 6.7 cents for non-value-based physicians.1 Just 4.88 cents of total Medicare spending is dedicated to primary care nationwide, according to a RAND Corp. study.14

The way forward:

The healthcare industry has seen value-based care in action throughout the pandemic.

The crisis punctuated its need and relevance. Now, a year and a half of turbulence has many practices reconsidering the path forward. Some that had wavered on entering into value-based agreements or had just begun their journey put that work on pause as the pandemic hit.

In recent months, and in light of how value-based practices navigated the public health emergency, a number have renewed efforts to convert their clinical models, according to the Medical Group Management Association, the nation’s largest organization of healthcare executives.