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How value-based payments reduce costs for payers and self-insured providers

Published Date
Author Azra Cosic

What is value-based care? 

Value-based care (VBC) rewards health care providers for improving the quality, accessibility, and affordability of patient health care. The Economist Intelligence Unit defines VBC as, “The creation and operation of a health system that explicitly prioritizes health outcomes which matter to patients relative to the cost of achieving this outcome.” 

VBC has helped providers make the transformational shift from a fee-for-service system, which focuses on the number of services offered, to a value-based system, which focuses on the health outcomes of patients.  

Perhaps, we can better uncover the crux of VBC by exploring its major building block. The Triple Aim, which was created by the Institute of Healthcare Improvement (IHI) in 2008, serves as the foundation on which VBC was built. The Triple Aim was implemented as a means to improve the overall U.S. health care system through three specific pathways: 

  • Improving the experience of care (user experience) 
  • Improving the health of populations (clinical outcomes) 
  • Reducing per capita costs of health care (reduced costs) 
  • A brief history of value-based care 

In 2008, the Centers for Medicare & Medicaid Services (CMS) initiated value-based care in the U.S through the Medicare Improvements for Patients & Providers Act (MIPPA). The goal for MIPPA was to cover additional preventive services, including body mass index and initial preventive physical examinations.  

Following MIPPA, in 2010, the Affordable Care Act (ACA) — also known as the health care reform law or “Obamacare” — was implemented to make affordable health insurance available to more people, expand the Medicaid program, and support innovative medical care delivery methods that could lower health care costs.  

A few years later, after realizing the need to reward healthcare professionals on the quality and effectiveness of care, congress signed the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) into law with bipartisan support on April 16, 2015. One of the initiatives of MACRA is to streamline multiple quality programs under the new Merit-Based Incentive Payments System (MIPS).  

All of these laws created an environment for VBC to thrive within the U.S. healthcare system. Insurance companies and self-insured providers began to appreciate the benefits of VBC, especially the reduced health care costs that came with it.  

How value-based care reduces costs for payers 

Since VBC focuses on preventative health, patients are healthier overall. Ultimately, VBC reduces admissions and readmissions to hospitals, which reduces costs for payers. Insurance companies end up paying less money for services when their subscribers visit their doctors less frequently. 

To decrease costs, providers implement programs such as value-based purchasing (VBP) or pay-for-performance, accountable care organizations (ACOs), and bundled payments. VBP or pay-for-performance is defined as fee-for-service with payments adjusted up or down based on value metrics.  

Medicare is a leader in VBP programs. CMS implemented the Hospital Value-Based Purchasing (VBP) program for adjusting payments to hospitals based on the quality of care they deliver. For the 2021 Fiscal Year, CMS applied these quality domains and weights to adjust funds for hospitals: 

  • Clinical outcomes (25%) 
  • Person and community engagement (25%) 
  • Safety (25%) 
  • Efficiency and cost reduction (25%) 

VBP programs are considered low-risk compared to other value-based reimbursements, and yet, they contain the essentials of value-based incentives: 

  • Quality metrics 
  • Performance improvement 
  • Payment incentives and risks  

According to Chee et al., VBP programs could be a “critical transitional step to allow organizations to adopt more advanced payment models involving greater potential financial risk and benefit, such as shared savings models for ACOs.” 

Barry Arbuckle, President and CEO of MemorialCare Health System, has said, “Delegated or assigned networks with strong, well-defined value-based alignment — including clinical quality, patient experience, contained cost — will prove to be superior to the consumer and the U.S. health care system.” 

Self-insured providers can also benefit from reduced costs through value-based care 

Self-insured providers are employers who use their funding to cover their employees’ medical claims. Just like insurance payers, self-insured providers can benefit from reduced costs through value-based care models.  

Recently, we’ve seen the rise of partnerships between self-insured providers and accountable care organizations (ACOs) to reduce costs and share savings. Notably, in December 2019, ValueH Association LLC, the parent company of Florida Association of ACOs (FLAACOs), proudly announced the official launch of its ValueH High Performing Network (ValueH Network), which plans to collaborate with various small to medium-sized self-insured employers. The goal of ValueH is to partner with a network of high-value providers to keep costs low while maintaining a high quality of care for users. According to research, they could reduce premiums by as much as 5 percent to 20 percent or more compared with broad network plans.  

Digital health platforms contribute significantly to value-based care

The accessibility of digital health platforms such as SilverCloud® by Amwell® has contributed significantly to VBC.  

Here are some reasons why: 

Digital health platforms improve the user experience

In alignment with reduced hospital visits in a value-based care model, digital health platforms offer Internet-delivered treatments, also known as online interventions, web-based interventions, e-therapy, e-health, and internet-delivered cognitive behavior therapy (iCBT).  

Within mental health services, iCBT interventions have become popular for the dissemination of established evidence-based treatments for a broad range of mental health difficulties including depression and anxiety disorders.  

Digital health platforms reduce healthcare costs

With digital health platforms, health providers can focus on providing preventative care, which leads to value-based payments as opposed to fee-for-service.  

Digital health improves access to health care and reduces inequalities in health

Low-income communities typically have limited access to high-quality healthcare. However, with the constantly increasing convenience of digital health platforms, underserved populations will have improved access to a wide range of health services.

Digital behavioral health platforms can be delivered via web browsers or apps, which means that patients do not have to travel to a site to get the same level of care. Digital mental health provides on-demand access anytime, anywhere, and when people need it. 

SilverCloud® by Amwell® supports payers and self-insured providers with value-based care models 

SilverCloud is the leading global provider of evidence-based behavioral and mental health solutions by granting access to technology that addresses the needs of users. Both payers and self-insured providers can offer programs through the SilverCloud that can be scaled across their organizations.  

A 2020 study published in the American Journal of Emergency Medicine showed that from 2015 to 2019, mental-health-related emergency department visits increased by 41% for adults. Remarkably, SilverCloud users have reported lower costs compared to providing face-to-face therapy, with the potential of 13% savings according to data analysis.   

For the past 20 years, organizations have pushed for value-based care to reduce healthcare costs. It’s time to focus on lowering the cost of care for patients, payers, and self-insured providers.