Value-based provider payment: towards a theoretically preferred design

Abstract

Worldwide, policymakers and purchasers are exploring innovative provider payment strategies promoting value in health care, known as value-based payments (VBP). What is meant by ‘value’, however, is often unclear and the relationship between value and the payment design is not explicated. This paper aims at: (1) identifying value dimensions that are ideally stimulated by VBP and (2) constructing a framework of a theoretically preferred VBP design. Based on a synthesis of both theoretical and empirical studies on payment incentives, we conclude that VBP should consist of two components: a relatively large base payment that implicitly stimulates value and a relatively small payment that explicitly rewards measurable aspects of value (pay-for-performance). Being the largest component, the base payment design is essential, but often neglected when it comes to VBP reform. We explain that this base payment ideally (1) is paid to a multidisciplinary provider group (2) for a cohesive set of care activities for a predefined population, (3) is fixed, (4) is adjusted for the population’s risk profile and (5) includes risk-mitigating measures. Finally, some important trade-offs in the practical operationalisation of VBP are discussed.

Using machine learning to assess the predictive potential of standardized nursing data for home healthcare case-mix classification

“…It is for this reason that reform of the payment system to include prospective elements is high on the policy agenda. A robust case-mix system that adjusts for client differences will be vital when payments for home healthcare providers are set prospectively [6,35]. We conclude that the existing Dutch case-mix system differentiates between client needs to a certain extent, but not sufficiently.…”

Value-Based Provider Payment Initiatives Combining Global Payments With Explicit Quality Incentives: A Systematic Review

“…This contributes to fairness in payment, reduced incentives for risk selection, and protection against excessive random variation in spending. Apparently, the importance of these two VBP design features is not only recognized in theory (Ash & Ellis, 2012;Cattel et al, 2018) but also in practice. Regarding risk adjustment, initiatives typically use existing diagnoses-based algorithms that were originally developed in the context of health plan payment.…”

“…Recent papers have attempted to explicate the relationship between what a health care system ideally pursues in terms of value and what is required in terms of the design of provider payment systems (e.g., Cattel et al, 2018;Eijkenaar, 2013a;Scott et al, 2018). After reviewing existing descriptions of value and arguments used in the societal debate on what stakeholders in health care ideally aim for, we conclude that value is a multidimensional concept.…”

“…In this review, we analyze VBP initiatives combining global base payments with explicit quality incentives in terms of design and impact on value. For this purpose, we use two existing conceptual frameworks: one for the global base payment (Cattel et al, 2018) and one for the explicit quality incentives (Eijkenaar, 2013a). Although other frameworks made important contributions to the VBP literature, they are not suited for thoroughly describing and comparing key design features of payment models adopting the two-component structure described above.…”

A Value-based Steering Model for Healthcare

“…The literature on VBHC and steering has focused mostly on economic means of steering. Cattell et al [22] design a theoretically preferred way of paying for value, focusing on the base payment. Roberts et al [23] nd that value-based payment may skew the system toward exacerbating healthcare disparities.…”