What is Value-Based Reimbursement?

What is Value-Based Reimbursement?

A Value-Based Payment Modifier, also called a Value Modifier, provide for differential payment to a provider, or group of physicians, under the Medicare Physician Fee Schedule (PFS). The Value Modifier is based on the quality of care given compared to the cost of care during a performance period.


The Value-Based Modifier is an adjustment made to all Medicare payments regarding services and items under the PFS. Beginning in 2018, it is applied to certain non-physician eligible professionals who bill under the Taxpayer Identification Number (TIN), as well as being applied at the TIN level to physicians.


CMS, MSSP, and the Bundled Payments for Care Program Initiative


The Centers for Medicare and Medicaid Services (CMS) began moving toward value-based reimbursements (VBRs) in 2006. The CMS introduced the Physician Quality Reporting System (PQRS), which offered incentives to physicians and other providers for reporting on quality measures. This incentive is 2% of estimated total allowed charges for covered Medicare Part B Physician Fee Schedule (PFS) services. In 2015, negative payment adjustments replaced the incentive payment plan. Over the past 10 years, there has been a shift from fee-for-service (FFS) to value-based reimbursement.


CMS also has introduced the Medicare Shared Savings Program (MSSP), which allows providers to share losses and savings (relative to established benchmarks) related with identified Medicare beneficiary populations. CMS started accepting applications from physicians to participate in the Bundled Payments for Care Program Initiative in 2011. This program gave a set reimbursement amount for a defined episode of care, and it encouraged physicians to focus on the most beneficial cost-effective care. According to CMS, 85% of Medicare FFS payments are linked to value and quality. In addition, 20% of Medicare payments are based on an alternative delivery method.


Commercial Payers


Recently, a group of commercial payers joined forces and formed the Healthcare aetnaTransformation Task Force. This organizations plans to have 75% of their businesses operating under VBR models by the year 2020. Included in this is Aetna, Blue Cross Blue Shield of Massachusetts, Ascension Health, Partners HealthCare, Trinity Health, Providence Health & Services, Advocate Health Care, and Dignity Health.


In 2014, the Catalyst for Payment Reform found that 40% of all commercial in-network payments were value-oriented, which mean they were either related to performance or designed to eliminate waste. The other 60% were traditional FFS, capitated or partially capitated methods, and bundled payments. Capitated and bundled payments are tied to quality, so the total percentage of commercial payments linked to quality is around 55% or more.


Claiming Your Earnings and VBR


What drives a healthcare organization to seek population health management solutions is a revenue issue. When reimbursement is down, problems occur with staffing, purchasing, and other financial aspects of the facility. Revenue problems are often created by a shift to value-based payment models. The shift can affect the organizations revenue by:


  • The PQRS program reduces FFS payments by 2% for not reporting quality measurements on Medicare populations.
  • The impact of the value-based modifier includes increases in payment for low-cost, high-quality providers by around 5%, and reduction for others around 1%.
  • Most P4P programs involve financial incentives that depend on the meeting or exceeding of quality measurement thresholds.
  • Bundled payments cap a hospital, provider, or organization’s revenue for certain procedures and services. Successful bundled payment methods can increase capacity, volume, revenue, and margin.
  • Global risk (partial or full capitation) is a logical extension of a shared savings program. This allows for more responsibility on the organization to manage certain populations, promote primary care, and deliver appropriate care to improve outcomes, reduce cost of care, and maintain the population health.
  • Shared savings programs usually represent upside risks, but successful execution can lead to significant bonus payments to the healthcare organization.
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