The early idealism that attracts many to the field of health care can quickly be overwhelmed by practical considerations when financial incentives are misaligned with patients’ best interests. For a long time now, fee-for-service reimbursement has rewarded volume rather than value. Dysfunctional financial incentives have produced a system where patients and families struggle to navigate across fragmented care silos, and in order to survive, providers must work to maximize utilization.
Over the past few years, there have been many pilots and demonstration projects experimenting with new value-based payment models. Nevertheless, most health care spending is still based on a pay-for-volume framework. Health care providers have taken a slow and measured approach to adopting a pay-for-value approach because much of their financial success is still tied to a pay-for-volume system.
That is about to change. 2016 will mark a new inflection point, hastening the pace at which health care organizations move to value-based reimbursement models. CMS, the largest buyer of health care services, has now set a goal of tying 30 percent of traditional (fee-for-service) Medicare payments to quality or value through alternative payment models, such as Accountable Care Organizations (ACOs) or bundled payment arrangements. They aim to achieve this goal by the end of 2016, with plans to tie 50 percent of payments to these models by the end of 2018.
Bundled payments require providers across the care continuum to coordinate more effectively. Instead of a payer separately reimbursing for each health care service, a single bundled payment includes the initial hospitalization and all related services within 90 days following the hospital discharge. CMS got everyone’s attention when they recently announced that, starting in January 2016, they will require hospitals in 75 Medicare Service Areas (MSA) to accept a single bundled payment for Comprehensive Care for Joint Replacements (CCJR).