August 17, 2022


Health for a better future

Let COVID Be a Catalyst for Ditching Fee-for-Service Medicine | Healthiest Communities Health News

Is the COVID-19 pandemic a death knell for fee-for-service medicine? Many health care industry executives who feel an ethical responsibility to provide affordable, high-quality coverage and care are asking this question daily. We call on policymakers to engage with us in resuming the pursuit of value-based care, which rewards quality of care over the quantity of procedures performed.

Research consistently demonstrates that when we pay for care differently, quality and outcomes improve – and our health dollars stretch further. Yet our industry continues to practice volume-based medicine. Even before the pandemic, health spending was growing annually, reaching $3.8 trillion in 2019, according to data from the Centers for Medicare & Medicaid Services.

COVID-19 cannot merely be a nudge along a slow, obstacle-ridden path to value-based care. America needs it to be the impetus for real and lasting change.

Systemic Failures, Further Stressed by the Pandemic

The COVID-19 crisis cast a harsh spotlight on the extraordinary systemic failures of a fee-for-service system: Too often, taxpayers and consumers are forced to foot the bill for the waste created when the health system pays for volume of care. What’s more, when that volume plummets, as it did in 2020, clinicians working in fee-for-service face losses.

Photos: America’s Pandemic Toll

Registered traveling nurse Patricia Carrete, of El Paso, Texas, walks down the hallways during a night shift at a field hospital set up to handle a surge of COVID-19 patients, Wednesday, Feb. 10, 2021, in Cranston, R.I. Rhode Island's infection rate has come down since it was the highest in the world two months ago, and many of the field hospital's 335 beds are now empty. On quiet days, the medical staff wishes they could do more. (AP Photo/David Goldman)

A 2019 JAMA study found that the American health care system wastes up to an estimated $101.2 billion a year in overtreatment or low-value care, and up to $78.2 billion a year for failing to coordinate care. That’s nearly $180 billion that Americans could be saving – or that we could be using to provide better care and better outcomes for more people, including by addressing yawning disparities.

This overtreatment and low-value care continues when providers are paid based on the number of services they perform. During this pandemic, practices that were largely reliant on such a fee-for-service payment model struggled – or shuttered altogether. But providers operating under value-based models – receiving a flat rate to care for a patient no matter the number of services provided – fared differently. Secure in their monthly revenues, regardless of how many patients they saw in person, these practices were generally able to weather the storm, expand care delivery through telehealth and continue to provide essential care.

Build on What Works Today: Medicare Advantage

While there are those who might wish to see the health system wipe the slate clean and create an entirely new government-run, value-based health care system from scratch, a more measured approach would build on something that is already working. Today the best value example we have is Medicare Advantage.

Under Medicare Advantage, private health insurers contract with the federal government to provide the benefits of traditional Medicare plus additional benefits such as vision, dental and prescription drug coverage all in one comprehensive, coordinated health plan.

By aligning the incentives of both the health plan and the provider through set payments, these plans drive quality and efficiency. They also foster creative approaches that ensure the best outcomes for patients, with quality measures that are clear and well known. That approach incentivizes providers, health plans and others to continually improve care, coordination and outcomes for patients.

Policymakers Can Hasten the Transition to Value-Based Health Care

Americans deserve better than what we have seen before and during the COVID-19 pandemic. Now is the time to pick up the pace and make the changes necessary to prioritize value in health care.

Brad Smith, former director of the Center for Medicare & Medicaid Innovation at CMS, recently wrote in The New England Journal of Medicine that “value-based care will achieve its promise only if the federal government and stakeholders take more aggressive action to prioritize models that can truly achieve savings and improve quality.”

Value-based models work. It is time to move beyond pilots to examine efficacy and instead focus on creative new ways to deliver the highest-quality care within those models. When given the freedom to design and implement custom approaches to value, we have provided more benefits at a better cost than volume-based care – just look at Medicare Advantage and accountable care organizations as proof.

If providers and health plans work together, we can meet or exceed the goal of the Health Care Payment Learning & Action Network, a group of public and private health care leaders focused on changing the way we pay for health care in order to lower costs and improve both the patient experience and health outcomes: To achieve value-based payment by 2025, ensuring 100% of Medicare and Medicare Advantage is in value-based care, which involves both potential savings and potential financial responsibility for providers. To do so, we need policymakers to support initiatives for a system that:

  • encourages value-based care models and provides flexibility to tailor models based on the community
  • increases opportunities to test these models in the commercial and individual market – where more than 150 million people obtain coverage
  • prioritizes and promotes data-sharing and transparency
  • takes a collaborative approach to encourage health plans and clinical teams to develop and test new solutions together

America spends more on health care per capita than any industrialized nation. We are overdue for a system that substantially reduces low-value, unnecessary and often dangerous care. It’s time for policymakers to spend our limited resources wisely. We have a roadmap in Medicare Advantage from which to start building a truly innovative health system that rewards value over volume, and quality over quantity.

Ceci Connolly is president and CEO of the Alliance of Community Health Plans (ACHP).

George Halvorson is chair and CEO of the Institute for InterGroup Understanding and former chairman and CEO of Kaiser Permanente.