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Value-Based Payments Are Crucial to Improving the Value of U.S. Healthcare

The U.S. spends more on healthcare but yields poorer health outcomes


March 23, 2023 – A recent Commonwealth Fund study analyzing healthcare systems in 11 advanced countries shows that the U.S. spends the most on healthcare but ranks last in terms of outcomes. Looking at issues like access to care, affordability, and outcomes show that the United States healthcare system has work to do. 

One potential solution to addressing the issues is to shift towards value-based payments (VBP). Value-based payments incentivize healthcare providers to prioritize patient outcomes and quality of care over the volume of services provided. This approach can help improve healthcare outcomes and reduce costs by promoting preventative care, encouraging collaboration among healthcare providers, and prioritizing patient-centered care.

In this blog, we will take a deeper look at the at the Commonwealth Fund study and then delve into how value-based payment models can be used to ensure that consumers are getting the care that they deserve. 

Recent Study Shows US Spends More on Healthcare with Worse Outcomes

The Commonwealth Fund report compared healthcare systems in 11 industrialized countries, including the United States. The report found that the US spends more on healthcare than any other country but ranks last in terms of healthcare outcomes. This is not good news. 

The study analyzed a range of indicators, including access to care, affordability, and health outcomes. The US ranked last in overall healthcare outcomes, with higher rates of infant mortality, obesity, and chronic diseases compared to other countries. Additionally, Americans have higher rates of preventable deaths, indicating that the US healthcare system is not effectively addressing health issues.

The report also found that the US has the highest healthcare spending per capita, with healthcare costs comprising 17.7% of the country’s gross domestic product (GDP) in 2020. However, despite the considerable financial investment, the U.S. struggles to ensure access to care for all its citizens. Nine percent of Americans remain uninsured, whereas most peer countries provide universal healthcare coverage. Consequently, a significant portion of the population may face challenges in accessing necessary healthcare services. This is especially true for Americans living in rural areas.

The Commonwealth Fund study also highlights inefficiencies in the American healthcare system, as evident by the high administrative costs and relatively low levels of care coordination. This finding suggests that there is ample room for improvement in streamlining healthcare processes and reducing unnecessary expenditures. Not only will this lower costs but can improve overall quality of care. 

In the realm of health equity, the United States faces substantial challenges. The study reveals significant disparities in healthcare outcomes based on income, race, and ethnicity. This inequality emphasizes the need for targeted efforts to address systemic barriers and ensure equitable healthcare access for all Americans.

Based on the results of this study, it is clear that the US healthcare system needs improvement. But what can be done to increase quality of care and lower healthcare costs?

Value-Based Payments Can Help Improve Health Outcomes and Reduce Costs

The traditional fee-for-service (FFS) model, where healthcare providers are reimbursed based on the volume of services provided, has dominated the healthcare landscape for decades. However, this approach has led to rising healthcare costs and inconsistent quality of care. Consumers are falling through the cracks and dealing with poor quality of care or limited access to necessary services. 

Value-based payments are a potential solution to that. In VBP models, healthcare providers are paid based on the value of care they provide to patients so healthcare providers are incentivized to focus on patient outcomes and quality of care over the volume of services provided.

Value-based payment models are designed to improve patient outcomes while reducing costs, but how do they achieve this ambitious goal? Let’s take a closer look at the mechanisms that make these models effective.

1) Shifting the Focus to Outcomes: Value-based payment models emphasize patient outcomes as the primary measure of success. Providers are rewarded for meeting specific quality metrics, such as reduced readmission rates, improved patient satisfaction scores, and better management of chronic conditions. This shift in focus encourages providers to deliver more personalized care.

One example of this is that VBP models can help reduce readmissions and hospital admissions. By incentivizing healthcare providers to focus on patient outcomes, it encourages providers to provide follow-up care to patients after being discharged from the hospital and ensure that they have the necessary support and resources to remain home. For individuals transitioning back home after a hospital stay, this can help reduce the risk of complications and readmissions and allow them to remain living comfortably at home. 

2) Promoting Preventative Care: Another benefit of value-based payments is that they promote preventative care. By aligning financial incentives with patient outcomes, value-based payment models encourage healthcare providers to prioritize preventive care. 

Preventive measures, such as regular screenings, vaccinations, and lifestyle modifications, can help detect and address health issues early on, reducing the need for costly interventions later. This emphasis on prevention promotes a healthier population and can ensure that consumers achieve their optimal health outcomes.

3) Encouraging Care Coordination: Value-based payments also encourage collaboration among healthcare providers, including primary care physicians, specialists, and other healthcare professionals. This collaborative approach fosters better communication and information sharing, ensuring that patients receive the right care at the right time. 

For example, if a patient with a chronic condition sees multiple specialists, value-based payments can incentivize those specialists to work together to develop a comprehensive integrated care plan that addresses all the patient’s health issues. The result is a more streamlined healthcare experience, reduced duplication of services, and improved outcomes.

4) Prioritizing Patient-Centered Care: Value-based payments prioritize patient-centered care, which means that healthcare providers have an incentive to focus on the needs and preferences of individual patients. This approach can lead to more personalized care.

A patient-centered approach to care may involve taking the time to understand a patient’s lifestyle and preferences when developing a treatment plan. To achieve optimal health outcomes, providers need to consider things like behavioral health and social determinants of health in conjunction with medical needs. Doing this helps ensure that the patient is receiving care that is tailored to their specific needs and that addresses all of their issues. 

5) Fostering Innovation: Lastly, value-based payment models drive innovation in healthcare delivery. By rewarding providers for improving patient outcomes and reducing costs, these models create an environment that encourages the development and adoption of new technologies, treatments, and care strategies. Instead of only focusing on the number of services delivered, the providers can look for new ways to reach consumers and try new strategies for boosting outcomes. This ongoing innovation can lead to breakthroughs that enhance the quality and efficiency of care. 

Shifting the Healthcare Industry to VBP Is Already Yielding Positive Results

Ultimately, value-based payments can help improve patient outcomes by incentivizing healthcare providers to focus on patient outcomes and quality of care instead of just the number of services provided. By focusing on preventative care, encouraging collaboration among healthcare providers, and prioritizing patient-centered care, value-based payments are the future of the U.S. healthcare system. 

In fact, value-based payment models are already making waves in the healthcare industry. For instance, the Medicare Shared Savings Program (MSSP), which incentivizes accountable care organizations (ACOs) to lower healthcare costs while meeting quality benchmarks, has shown promising results. In 2020, MSSP ACOs generated over $1.1 billion in net savings for Medicare while delivering high-quality care to millions of beneficiaries.

The Home Health Value-Based Payment (HHVBP) program has also shown promising outcomes in terms of care quality and cost efficiency. Hospital readmissions decreased by 3.6% over the first three years of the program, emergency department visits without hospitalization decreased by 4.9% during the same period, and average improvement in quality scores among participating HHAs increased by 6.2%. Improved health outcomes weren’t the only benefit. The program achieved an estimated net savings of $141 million for Medicare over its first three years, indicating improved cost efficiency. Based on these results, CMS expanded the program nationwide

As you can see, there are many benefits to implementing value-based payment models and this just might be the key to improving the value of the U.S. healthcare system. 

Advocates Perspective

The comprehensive analysis provided by the Commonwealth Fund indicates that while the U.S. excels in certain aspects of healthcare, there is still much work to be done in terms of access, efficiency, and equity. Value-based payments are a potential solution to reducing healthcare costs and improving health outcomes for consumers. By promoting preventative care, encouraging collaboration among healthcare providers, and prioritizing patient-centered care, value-based payments can help improve healthcare outcomes and reduce costs. As the healthcare system continues to evolve, value-based payments may become an increasingly important part of the healthcare landscape. However, as these models are being tested and tweaked, it is important to ensure that all stakeholders are involved in the process and that consumers across the country are accounted for. 


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About the Author

Fady Sahhar brings over 30 years of senior management experience working with major multinational companies including Sara Lee, Mobil Oil, Tenneco Packaging, Pactiv, Progressive Insurance, Transitions Optical, PPG Industries and Essilor (France).

His corporate responsibilities included new product development, strategic planning, marketing management, and global sales. He has developed a number of global communications networks, launched products in over 45 countries, and managed a number of branded patented products.

mandy sahhar

About the Co-Author

Mandy Sahhar provides experience in digital marketing, event management, and business development. Her background has allowed her to get in on the ground floor of marketing efforts including website design, content marketing, and trade show planning. Through her modern approach, she focuses on bringing businesses into the new digital age of marketing through unique approaches and focused content creation. With a passion for communications, she can bring a fresh perspective to an ever-changing industry. Mandy has an MBA with a marketing concentration from Canisius College.