Value Based Payment Reform and What You Need to Know

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Healthcare reform has been a hot topic even before the roll out of The Affordable Care Act in 2014. One of the latest ideas to take hold is Value Based Payment, quite different from the current system – Fee for Service.

Under the Fee for Service model the costs are rising so quickly, that the average American can no longer keep up. It’s become a choice of seeking medical care for ongoing health issues or being able to pay rent. Both the government and  healthcare providers know that the current system is broken and that there is a dire need to replace or fix the current healthcare models.

It’s important to understand how the Fee for Service method works. There is no incentive to consider the cost or the outcome of the actual treatment. A service is provided, and the provider is paid for delivering it. If a physician is unsure as to the cause of a patient’s issue, they can choose to order more tests and perform more procedures – costing both the patient and the insurance company thousands and thousands of dollars. The physician is neither penalized or incentivized for their actual quality of service and finding the cause of the problem. They receive payment regardless of the outcome.

However, patients and insurance companies alike can no longer sustain the rising costs of all the tests, procedures, and office visits. Enter the Value Based Payment System or Pay for Performance as it’s also known. The idea is simple, Value Based Payment will provide incentives for providers to deliver quality care efficiently, instead of solely rewarding quantity, which will reduce both costs and improve patient outcomes. 

With Value Based Payment,  providers must meet certain quality thresholds, while containing costs, in order to get paid. This puts far more pressure on physicians to look for root causes of issues, learn more about their patients’ health and family history, and take more notice of signs and symptoms.

From the patient perspective, Value Based Payment healthcare looks to be a safe and more effective way of receiving care with the value placed on their wellbeing and not just the service. For physicians and hospitals, it requires using evidence-based medicine and proven treatments and techniques. The days of performing test after test may be ending, as more physicians take a Dr. House approach to patient care. Patient’s wishes and preferences will also be more of a focal point than in the past.

It’s hard to say for sure if a Value Based Payment system will be the solution to healthcare reform, but many people see it as taking a step in the right direction. Providers will no longer be incentivized to earn more money by performing more services. Providers will instead be rewarded for their quality and cost containment outcomes and penalized for failing to meet certain quality and cost benchmarks.

With new physician’s offices and urgent care centers popping up on every corner, healthcare reform won’t be taking a backseat any time soon.

Margret K. Warner
Vice President, Commercial Lender
Director of Business Services

Author: Margret Warner

Margret Warner started her career at Litchfield Bancorp in 2000 as Branch Manager in Washington Depot and has subsequently served as Branch Manager of the Litchfield office, Business Development Officer and is currently a Commercial Lender based in the Watertown market. With over 25 years of banking experience, Margret brings her extensive knowledge of the financial services industry to area businesses. Margret resides in Torrington and is committed to the communities where she works and lives as a member of the Watertown Rotary and advisor of Leadership NW. In addition, she serves on the board of the Watertown/Oakville Chamber, the United Way of Northwest Connecticut, VNA Northwest, Inc., and the NW CT Chamber of Commerce. She is a graduate of the esteemed ABA Stonier Graduate School of Banking, and holds a BBA in Accounting from Hofstra University.