Understand how we got here — and how to move forward.


October 18, 2019

Do value-based payment programs work?

Daily Briefing

    Since the Affordable Care Act (ACA), Medicare has increasingly emphasized value-based programs, but nearly a decade later, experts are still weighing whether these value-based initiatives work, health economist Austin Frakt writes for the New York Times' "The Upshot."

    4 'elephants in the room' hindering health care's drive toward value

    Historically, Medicare paid for health care with an emphasis on volume of services, not value, Frakt writes. But former President Barack Obama's administration set its sights on changing that practice. The administration worked to pass the ACA, which enabled Medicare to launch a number of programs to test new payment models. The administration then set a goal of having 90% of Medicare payments to hospital and doctors tied to quality measures by 2018.

    According to the Health Care Payment Learning and Action Network, Medicare met the goal, but as Frakt writes, that doesn't mean the mission was necessarily accomplished.

    The trouble with measuring 'value'

    As Frakt explains, Medicare has not adopted a single definition of value, so measuring success become difficult.

    For instance, he notes that different programs, including Medicare's Hospital Readmissions Reduction Program (HRRP) and the Hospital Value-Based Purchasing (VBP) Program, have different definitions for value.

    With HRRP, Frakt writes, "The key is whether programs like this improve health care quality or reduce health care spending." Meanwhile, the Hospital VBP Program, which rewards or penalizes hospitals based on mortality rates, infection rates, and 18 other quality measures, is considered to have a more "broad" definition of value, according to Frakt.

    What the data reveals about success

    The results of these programs also are unclear—or unflattering.

    For instance, Frakt writes that initial analyses of HRRP suggested the program reduced hospital readmissions and saved Medicare billions of dollars per year, but later studies found the numbers in the reports were overstated.

    "What is clear is that the program has had a smaller impact on hospital readmissions than originally thought," according to Frakt.

    Meanwhile, a study examining the Hospital VBP Program found "no effect from financial incentives of the program on quality of care," Frakt writes, while another study found no differences in changes in mortality rates between hospitals in the program versus hospitals exempt from it.

    But that's not to say all value-based programs are a wash, Frakt writes.

    He asserts that there is stronger evidence that "Medicare has achieved greater success with programs that have raised the stakes—ones that have put hospitals and health care organizations at greater risk of financial loss or have offered prospects for larger financial gain," Frakt writes.

    One of these approaches is "bundled payments," whereby providers are paid a set amount for all of the care related to treating a certain condition within a period of time, Frakt writes. "The evidence suggests [the bundles] encourage hospitals to treat patients more efficiently, although the cost savings are at least partly offset by extra payments to hospitals to reward them for saving money in the first place," according to Adam Sacarny, assistant professor with Columbia University's Mailman School of Public Health.

    There's also evidence that ACOs reduce spending without lowering quality, according to Frakt, but the amount varies by program design. "We've found that ACOs that are physician groups as opposed to big hospital systems have produced more savings," according to Michael McWilliams, a professor at Harvard Medical School. 

    Are value-based programs making an impact?

    "So over all, is Medicare moving toward higher value?" Frakt asks.

    Sherry Glied, a health economist, and dean and professor at the Wagner School of Public Service at New York University, said, "There has been some progress, but even the most generous read of the evidence is very far below the projections made by fans of value-based payment before the ACA."

    Similarly, Robert Berenson, a fellow at the Urban Institute, said, "Value payment overemphasizes performance measurement, but even so, it's been disappointing." He added, "We simply lack good metrics that can't be gamed or evaded by most targeted providers."

    Some experts, such as Michael Chernew, a health economist with Harvard Medical School, said the biggest wins have yet to come. "The successes are more like singles than home runs," he said. "Despite the modest results, I think some approaches, like ACOs, are a foundation for future improvements" (Frakt, "The Upshot," New York Times, 9/23).

    Have a Question?


    Ask our experts a question on any topic in health care by visiting our member portal, AskAdvisory.