Value-Based Care Growing As a Way to Reduce Employer and Employee Health Costs

Providers, namely hospitals and large regional health care systems, are increasingly being asked by payers to accept at-risk reimbursement, where payment is heavily influenced by the quality and outcome of patient care.

How and where health care is delivered, paid for, and consumed will change over the coming years, particularly as budget constraints force a shift from volume-based to value-based reimbursement—payment for the value one gets from health care products and services, according to UBS Wealth Management’s Corporate Health Report.

This shift will have far-reaching consequences for payers and health providers, but also for patients and their employers. “While value-based care (VBC) is not yet pervasive, its influence will be among the key elements to control health care costs over the coming years amid increased longevity, in our view,” UBS says. A recent survey found about 40% of employers are taking advantage of value-based benefit design.

The report notes that in the U.S., partly as a consequence of health care cost inflation, but also due to changes in employer health plans, employees have been saddled with a greater share of health care costs. In an attempt to moderate costs, U.S. employers have encouraged employees to enroll in high-deductible health plans (HDHPs). However, this growing trend has had unintended consequences, with increasing evidence that more Americans are delaying medical treatment because of the high cost of care. While avoiding or deferring treatment may reduce costs in the near term, it is likely to be sub-optimal from a medical perspective and could in fact lead to higher future medical costs, UBS notes.

According to the report, an evolving solution to this growing problem has been the emergence of new payment models to better align the interests of payers and providers. Increasingly payers are linking the price paid for treatment to health outcomes, rather than simply paying for the volume of services provided, the so-called fee-for-service (FFS) model. By changing the provider payment model, payers hope to reduce waste and duplication, spread clinical and operational best-practice, and ultimately achieve higher quality patient outcomes for a better price. Broadly, this is referred to as a shift to VBC.

In the U.S., VBC is already changing how health care providers and product companies are reimbursed for products and services. Providers, namely hospitals and large regional health care systems, are increasingly being asked by payers to accept at-risk reimbursement, where payment is heavily influenced by the quality and outcome of patient care.

How Value-Based Care Is Working

UBS says the move to VBC is affecting suppliers to the health care system. Biopharmaceutical companies, particularly those with high priced drugs, are beginning to enter into value-based contracts where they only receive full reimbursement from payers if a drug meets pre-specified metrics, such as heart attack prevention or other medical outcomes. Similarly, the reimbursement of medical devices is being influenced by VBC, as well as “bundled” reimbursement, whereby payers reimburse providers with a pre-established bundled payment for a given procedure (e.g. hip or knee implant), rather than FFS reimbursement or an explicit payment for the device. Bundled payments will also be based on patient outcomes, requiring devices to become progressively more cost effective if they are to remain competitive.

UBS says the shift to value-based care also places more emphasis on preventative treatment and wellness, and technology acts as an enabler. For example, the report says, remote monitoring of vital signs could allow earlier intervention where a patient’s underlying disease is worsening, but before they begin to feel worse. Similarly, tracking data over the whole period between visits gives a doctor more information to work with than the one-day snapshot currently captured on the day the patient visits the doctor

As reimbursement shifts closer to a model in which a health care provider is given a fixed amount of money per person to manage each patient’s health, the value of preventative medicine grows. UBS says an employee who does not become sick will also gain from the health benefits, as well as the economic benefit of lower total system costs.

According to the paper, full implementation of VBC is likely to require a complete re-think of health care provision, and a change in behavior on the part of patients. UBS expects insurance policies, and increasingly corporate wellness programs, to use financial incentives to encourage better health awareness. The hope is that these measures can contain the growth of future health care costs.

Financially, employers should benefit directly where they are the ultimate payer, but they should also benefit through having a healthier, more engaged workforce, UBS concludes.