The Centers for Medicare & Medicaid Services (CMS) continue to emphasize the shift from the fee-for-service (FFS) reimbursement model that rewards quantity over service quality to value-based care (VBC) payment models that emphasizes the value of service and quality care. While providers are dedicated to delivering the best care to their patients, there also continues to be natural concern about what the VBC payment model may mean for long-term financial outcomes.

Let’s look at some key considerations to keep in mind as healthcare organizations adopt the new payment model and how it will impact on financial forecasting for providers. 

Understanding the VBC payment model

The FFS model is not only unsustainable for patients, including Medicare and Medicaid recipients; it’s also unsustainable to the healthcare industry. Considering how payers will afford rising costs associated with the aging population’s medical care in addition to the uptick in chronic diseases is crucial. It pushes forth the need for a payment model that is cost-effective and can be implemented by providers over time.

The VBC payment model is designed with quality care in mind. It refocuses the healthcare industry on the type of care patients receive rather than the number of patients served. Here are 4 issues providers should be considering as they advance the shift:

#1: Organizational budget

Establishing and maintaining budgets for their clinics and facilities is a constant concern. With the VBC model, there may be a period of trial and error. Putting a “stronger emphasis on positive patient outcomes,” providers can budget using a “process to evolve and address the challenges experienced by today’s healthcare organizations.”

That may very well mean using an approach that focuses on forecasting with flexibility to needs of their organizations. Such an approach might include:

  • improvements to forecasting accuracy with statistical methods
  • streamlined approach that moves budgeting from an annual event
  • enhanced collaboration and buy-in that includes multiple departments

An incremental approach that weighs the historic with changes to operational performance and organizational need can offer a more clear picture ahead and can allow providers to change course as needed.

#2: Bundled payment solutions

Bundled payment, or sometimes referred to as episode payment, allows providers to offer a single cost for an entire episode of care. The goal with this solution is to “increase quality and care coordination at a lower cost to Medicare.”

In the event that a patient needed a complex treatment plan, “CMS is fostering an affordable, accessible healthcare system that puts patients first.” This solution combines the payments for provider services into a single bundled payment amount and calculates that amount on the expected costs during an episode of care. Providers may find they benefit from this payment option if their rates can come in under budget. 

#3: Utilization rates 

Because the focus of value-based care is to ensure that patients receive desired outcomes more effectively, some providers may be concerned about reduced utilization of certain medical services.

However, many of the VBC programs give “physicians the support and data they need to focus more on prevention and reduce acute care episodes.” This approach often encourages patients to seek regular care to help avoid more complex medical issues in the future.


#4: Referral retention

Providers may better understand patient referral patterns with VBC financial and performance analytic tools. This concept can help providers gain a better understanding of referral patterns and can help them improve outcomes and budget time and resources accordingly. 

Looking ahead for your organization 

There is no one-size-fits-all approach to navigating the shift to value-based care. But there are common targets that providers should keep in mind:

  • know your target patient
  • understand your patient population’s medical needs and levels of risk
  • have a behind the front line team ready to help you evaluate your VBC approach

We’re dedicated to delivering population health and reimbursement professionals who are experts in helping you do just that. 

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