By Robert Evans, National Director of Network Solutions, Rising Medical Solutions
Despite fewer claims, workers’ comp costs continue to rise. In their 2015 Annual Issues Symposium, NCCI reported (PDF) that the average medical cost per lost-time claim increased by 4 percent in 2014 and that claim severity increases have begun to outpace inflation measures for both medical costs and indemnity.
State-mandated controls, such as UR and fee schedules, are proving insufficient measures to counter rising costs. Regulatory reforms often fix one problem but cause another, or simply don’t go far enough. Given the current climate, as well as some cues from the group health side, the time is right for workers’ comp to more fully embrace value-based care and their corresponding reimbursement models.
First, let’s clarify that “value-based care” is referred to in many different ways—value-based reimbursement, bundled payments, bundled pricing, bundled care, episode-based care, medical case rates, etc.—but the unifying definition for each of these concepts is a single price for all treatment associated with an episode of care. For instance, the Centers for Medicare & Medicaid Services (CMS) describe their Bundled Payments for Care Improvement (BPCI) model as “payment arrangements that include financial and performance accountability for episodes of care.”
While the traditional fee-for-service model has provided the basis for payment in the healthcare industry for many years, its emphasis on individual patient/provider interactions does not support care coordination or emerging trends such as telehealth, which could prove useful tools in our industry. In short, it encourages neither efficiency nor quality of care, only volume of services and higher costs.
Value-based care, on the other hand, presents a more rational approach in a historically irrational healthcare marketplace and addresses some of the fee-for-service deficiencies. In the value-based care model, providers typically agree to a single payment for all or the majority of services associated with a course of treatment. In the case of a surgery, for example, there may be a single bundled charge for the surgeon(s), facility, anesthesia, and post-operative care.
Under the model, payers or managed care entities can pre-negotiate reasonable rates with quality, credentialed providers. Providers are incented to provide effective and timely care in an optimal setting, with the best possible outcomes, so that costs don’t exceed the agreed-upon reimbursement. Multiple providers may need to coordinate to ensure a successful episode of care. It is easy to see how both quality and savings can be improved. So why has workers’ comp struggled to embrace value-based care? And why should we embrace it now?
Value-based care is certainly not a new concept. Over the course of my 35-year career on both the payer and provider sides of healthcare, I have seen bundled payments used since the mid-eighties. Medicare would occasionally dip a toe in the value-based payment pool, but with the announcement of their BPCI initiative in 2013, Medicare took what appears to be their first step towards serious implementation of a bundled payment approach. CMS’ evolution towards more holistic models illustrates the direction the industry has been heading for the last 30 years. However, evidence suggests that the rate of this evolutionary reimbursement change has picked up considerably over the last three to five years. Healthcare as a whole is beginning to accept and embrace value-based care payment models. For instance, Modern Healthcare’s CEO Power Panel, a survey of the nation’s top healthcare leadership, reports that more than 75 percent support the move toward value-based payment systems.
The reasons why workers’ comp is now ripe for value-based healthcare purchasing are varied. Payers have more robust data and sophisticated modeling tools that can support payment methodologies beyond the standard fee-for-service approach. With a shrinking workers’ comp market, we are in a much more competitive environment, and innovative programs and cost-saving measures are more critical than ever.
Providers today are more willing and eager to enter into such arrangements, as the uncertainty has worn off and the concept is more accepted. In a recent interview, Kaiser Permanente’s CEO discussed the need for provider incentives to be tied to patient outcomes rather than quantity of services. Concerns about costs are shared by all facets of the healthcare industry. And with rampant consolidation among providers, competitive advantages are vital.
In addition to the improved care coordination, better efficiencies and lowered costs that value-based models offer, they can also have other key advantages. For instance, upfront knowledge of episode-based costs provides reserving predictability and a single bill for an entire episode’s services reduces the administrative burden and processing costs for both payers and providers.
But like any payment model, value-based care has its hurdles as well. The model could incent providers to avoid high-risk patients or cases they feel might exceed average costs. In some states, regulations concerning direction of care could pose challenges. And considerable investments in tracking and monitoring resources may be needed to identify those cases that would be appropriate for a value-based care program.
Still, it seems clear that the cost-saving benefits of a value-based payment methodology are superior to that of the traditional fee-for-service model. While we may be years away from completely replacing the fee-for-service payment standard, I think we do a disservice to the industry to not consider where value-based care can serve us today.
About Robert Evans
Bob has 30-plus years of experience in the areas of: strategic provider solutions, network program optimization, provider contracting, rate and discount analysis and medical economics. At Rising Medical Solutions, Bob is responsible for developing cost-effective, quality-driven relationships with hospitals, physicians and ancillary providers across the nation. Prior to Rising, he worked at Coventry Health Care (formerly First Health/HealthCare Compare) for 21 years, where he was most recently Vice President of Network Development. There, he built and managed a provider network that profitably supported commercial risk and non-risk, network lease, workers’ compensation, Medicare Advantage and specialty lines. Bob developed his foundation in the business at Evanston Hospital Corporation, where he worked for 10 years, negotiating and managing hospital and physician group risk and non-risk contracts. Bob has a Bachelor’s degree in Business Administration and Psychology from Illinois State University.
Rising Medical Solutions is a national medical-financial solutions firm that provides medical cost containment and medical care management services to the workers’ compensation, auto, liability, and group health markets.