How to Implement Value-Based Healthcare Through Financial Incentives

One of the biggest current trends in the medical industry is value-based healthcare. Value-based healthcare seeks to treat patients in a safe, cost-effective manner that addresses patients’ wishes, needs, and concerns while at the same time maximizing efficacy and improving outcomes. Proponents of value-based healthcare seek to upend the “fee-for-service” (FFS) model, which incentivizes physicians and healthcare providers to do more simply for the sake of doing more: order more tests, conduct more procedures, and prescribe more medications – even when these actions are unnecessary. The argument against FFS is that patients receive care they may neither want or need, which often results in a lowered quality of life and a strain on financial resources. Value-based healthcare seeks to shift this paradigm by promoting evidence-based techniques for diagnosis and treatment tailored to patients’ wishes and financial situation, while at the same time rewarding physicians for achieving outcomes based on the quality of the care they’ve provided and the efficiency with which that care was provided. The following are financial methods through which value-based healthcare can be implemented to replace outdated FFS methods of care:

Payment Structure

In the FFS model, each healthcare service is billed and paid for individually; meaning physicians and care centers are paid for each test and procedure ordered for a patient. This model incentivizes physicians and care centers to do more for their patients, even if that means providing patients with unwanted and unnecessary care. Value-based healthcare models rely on different pay structures, such as global or bundled payments, in order to combat the over-ordering of unnecessary treatments and tests. These payments can be distributed to each provider involved in a patient’s care and reward those providers for prioritized, coordinated care – as opposed to the FFS model, in which each provider would be paid separately with no cause to coordinate with other providers involved in the patient’s care. Global and bundled payments place coordinated care, which benefits the patients’ outcomes greatly, as a top priority by ensuring providers are concerned with patient care instead of payment.

Create Financial Incentives

In order to shift from fee for service to value-based healthcare more easily, financial incentives should be put in place to help change provider behaviors. In order to truly incentivize value-based healthcare, there should not be any rewards attached to a single, particular goal besides effective patient care and collaborative efforts across providers. These collaborative efforts can in fact be used to create other financial motivations, as physicians on the frontlines have been shown to create meaningful incentives that will have a true effect on them and the way they provide care. This, in conjunction with steady communication between physicians and hospital administration as to what issues or conflicts of interest may arise, is a key component for promoting value-based healthcare initiatives.

For more information about implementing value-based healthcare initiatives, please download part one of our free white paper, Understanding Value-Based Healthcare.

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